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behavioral science

The science behind collective lying: How and why employees cheat

Roxanne Bauer's picture

It’s well understood that everyone has the capacity to be dishonest and almost everyone cheats— even if it’s just a little. Sometimes we fill our water cups with soda, we take the pens from the credit union, or we may speed when we’re running late. But what is going on when institutional deception, involving multiple people, occurs?

As most of us are now aware, Wells Fargo recently received a $100 million penalty from the Consumer Financial Bureau of the United States after it was uncovered that its employees were engaging in illegal banking practices. This brought the bank's total bill for these infractions to $185 million and coincided with the firings of about 5,300 Wells Fargo employees. According to reports, the 5,300 employees who were allegedly involved secretly issued credit cards that customers never requested, set up fake bank accounts that resulted in customer fees, created fraudulent email accounts to sign up customers for additional services, and actually transferred customers' money between accounts— without permission.
Such an outrage might remind you of the Volkswagen scandal last year in which the German car manufacturer admitted that it had used sophisticated software to trick emissions regulators. If a car was being tested, the emissions controls would operate as they should, but if the car was not undergoing a test, the emissions controls would switch off, resulting in cars that emitted 40 times the legally sanctioned levels of air pollutants.  Volkswagen has since has admitted that 11 million vehicles worldwide were equipped with the program that duped emission testing and had to recall a total of 8.5 million diesel vehicles in Europe alone.
How in the world did that many people get involved with such unscrupulous behavior? How could over 5,000 Wells Fargo employees engage in such obviously deceptive and fraudulent behavior? And how could so many Volkswagen employees, from software technicians to senior management, go along with blatantly circumventing the rules? How does a group of people end up lying together?

Does superior information make us more discerning? What Uber drivers can teach us about learning and rationality

Roxanne Bauer's picture

In 1957, Herbert A. Simon (Nobel Prize in economics 1978) introduced the concept of bounded rationality that recognizes that in decision making, human rationality is limited by the information we have, our own cognitive biases, our training and experience, and the finite amount of time we have to make a decision. Individuals and firms do the best they can with the information they have, and since they don’t have time to evaluate and rationally pick the optimal solution, they simplify their choices and go with one that is satisfactory rather than rationally optimal—this is called stastificing.

Behavioral economics accounts for this by attempting to incorporate psychological insights. While most economists agree that there are some limits to the reasoning capabilities of individuals and firms, there has been much discussion about where and how to account for bounded rationality.  On the spectrum between perfect rationality and the total absence of it, where are humans?

To explore this question, let’s take a look at cabdrivers and Uber drivers.

Do social factors determine “who we are” as well as the choice sets we have?

Karla Hoff's picture

The World Bank’s conference on “The State of Economics, the State of the World” was an opportunity to take stock of the emergence of new paradigms for understanding economic development.  Following Ken Arrow’s talk on the history of the neoclassical model and Shanta Devarajan’s comments on this model’s centrality in the Bank’s work, I had the opportunity to discuss two paradigms of how individuals make decisions that have recently emerged in economics, drawing on psychology, sociology, and anthropology.

The things we do: How we might address political polarization by looking inward

Roxanne Bauer's picture

If there’s one common theme that resonates across Western democracies this past year, it’s a rejection of the status quo. Some outsider politicians have ridden this wave of populism to political office or to strong second-place finishes, stretching the boundaries of political expression. Frustration, anger with the status quo, globalization and the tradeoffs that come with it, and inequality are all basic concerns of the voters catapulting these politicians to power.

Globally, it also seems that fault lines have been erected between cultures, religions, genders, and so on.

Regardless of where the frustration comes from, though, polarization along ideological lines and negative rhetoric are pervasive. While polarization is a complex issue (and not something we can explain in its entirety in a blog post), how people process information is a significant factor.
If people are not open to other viewpoints or do not think critically about the negative rhetoric they encounter— which often involves self-reflection— then how can change really be achieved?  How can the frustration fueling the polarization be addressed if we cannot compromise?

The things we do: Can computer games contribute to HIV prevention?

Roxanne Bauer's picture
Also available in: Español

Preventing and controlling HIV is essential to ensuring that everyone can lead healthy, productive lives. It is essential to address this disease if everyone is to share in global prosperity.  The international community has made significant gains in fighting the spread of HIV as well as in increasing the survival rate of those already infected.

However, women- and in particular young women- remain vulnerable to contracting the disease.  According to The Gap Report from UNAIDS, adolescent girls and young women account for one in four new HIV infections in sub-Saharan Africa.  Globally, there are about 16 million women aged 15 years and older who are living with HIV, and 80% of them live in sub-Saharan Africa.  Within this region, women acquire HIV infections at least 5–7 years earlier than men, primarily through heterosexual transmission. While there is some research that younger women are more physiologically vulnerable to HIV, the evidence also points to several non-physiological factors that help account for gender inequalities, including inequalities in education and economic opportunities, vulnerability to intimate partner violence, and women having sex with older men.

The things we do: What the World Humanitarian Summit says about human nature

Roxanne Bauer's picture

Discussions of who mankind is usually begin with stories of small bands of hunter-gatherers roaming the savannah and struggling for survival under the African sun, of great feats of strength at the Olympics, or of monumental hurdles overcome to land on the moon.  They do not usually start like this: hundreds gather in a Mediterranean city to schmooze and discuss the fate of millions of others.  But this event is a quintessential story of who we are as human beings.  The World Humanitarian Summit demonstrates the very human characteristics of cooperation and competition.

Michael Tomasello, Director at the Max Planck Institute for Evolutionary Anthropology in Germany and author of Why We Cooperate, has explored the distinctiveness of human nature for decades.  He and his colleagues suggest that one of the defining characteristics of humans is that we cooperate.  Many species, from ants to dolphins and primates, cooperate in the wild, but Tomasello has identified a special form of cooperation that is truly human. In his view, humans alone are capable of shared intentionality—the ability to intuitively understand what another person is thinking and act toward a common goal.

The things we do: Why those who see the world differently are always wrong

Roxanne Bauer's picture

Have you ever been in an argument that ended badly, after which you expected to receive an apology? Did the apology come or was the other side also expecting one?  Have you ever done an audit or technical assessment and wondered how a team of professionals could have come to such seemingly erroneous conclusions?  How can that be?  How is that people can have such different views of the same thing?  

One reason misunderstandings occur is that people tend to be naïve realists. That is, we believe that we see social interactions as they truly are. Anyone else who has read what we have read or seen what we have seen will naturally perceive them the say way as we do… that is, assuming they’ve pondered the issue as thoughtfully as we have. In short, our own reality is true, so those who disagree with us must be uninformed, irrational, or biased.
However, one of the most enduring contributions of social psychology is the understanding that two people can interpret the same social interaction in very different ways, based on their own personal knowledge and experiences.
Tim Harford, the Undercover economist at the Financial Times, recently wrote about naïve realism, calling it the, “seductive sense that we’re seeing the world as it truly is, free of bias.”  He goes on to say that this is such an attractive illusion that whenever we meet someone that contradicts our own view, we instinctively believe we’ve met someone who is deluded rather than question our own rationale.

The things we do: Why thought suppression doesn’t work

Roxanne Bauer's picture

Don't Think sign, LondonA colleague of mine recently told me a story about a friend of hers with a very long beard who was asked one day, “How do you sleep with all that hair?”  The man, who had never given it much thought, shrugged at the question. However, he later confessed to my colleague that since the question was posed he was losing a lot of sleep.
This man has fallen into a common mental trap: once a thought occurs to you, it’s very difficult to suppress it, and trying to suppress it may make the thought stronger.
This mental trap has a long-running history in our social consciousness.  Leo Tolstoy once said he tried to play a game in which he would, “get into a corner and endeavor, but could not possibly manage, not to think of the white bear.”  This was later echoed by Fyodor Dostoyevsky who lamented that “Try to pose for yourself this task: not to think of a polar bear, and you will see that the cursed thing will come to mind every minute. So how is it to be done?  There is no way it can be done…"
These observations would later inspire social psychologist Daniel Wegner, PhD at Harvard University. Wegner is considered to be the founding father of thought suppression research, and was inspired to look into thought suppression after reading Dostoyevsky's quote more than 25 years ago.

The things we do: Why (some) women are less competitive than men

Roxanne Bauer's picture

Students arriving for first classes of the day at a high-school, CasablancaWhy do women tend to make less money and occupy fewer management positions than men? Do social influences affect the competitive spirits – or lack thereof – women?  Or could it be that women are simply less competitive than men?

With support from the National Science Foundation, Uri Gneezy Kenneth L. Leonard, and John A. List, set out to test assumptions about biologically based competitiveness in two of the most culturally different places on the planet: the ultra-patriarchal Masai tribe of Tanzania and the matrilineal Khasi people of northeast India.  The researchers conducted experiments in both environments to see what they could unearth regarding the competitive spirit of women across extremely different societies that held women in diametrically opposite roles.  

The things we do: The high price of cheating a little

Roxanne Bauer's picture

"A Fool and His Money" by David Goehring Dishonesty is usually something we think about at the individual level.  Lies are errant, definite actions that individuals perform at specific moments. 

But lies are also important in aggregate because the effect of many small lies taken together can be devastating.

Dan Ariely, a Professor of Psychology and Behavioral Economics at Duke University, and his collaborators, starting in 2002, conducted a series of studies called “The Matrix Experiments”. In this experiment, the team gave participants, men and women from different age groups, 20 simple math questions. They asked them to solve as many questions as they can in five minutes and promised to reward the participants $1 for each problem solved. After five minutes, the participants are instructed to count how many problems they solved, insert their answer sheets into paper shredder machines, and report their results to one of the test supervisors to receive their cash. They did not need to show their answers as a proof. What the test takers did not know was that Ariely’s team programmed the shredders in such a way that they only shredded the margins of the papers while the main body of the page remained intact.

In the end, Ariely and his colleagues found that very few people lie a lot, but almost everyone lies a little.  They tested over 40,000 people and found that only a few dozen were “big cheaters” who claimed to have completed many more problems than they did.  Conversely, more than 28,000 people, or nearly 70 percent, were “small cheaters” who, on average, solved four problems but reported to have solved six.

What is interesting to note is that the sum of the team’s losses to so-called big cheaters was a total of $400.  Compare this to the few dollars each that “small cheaters” stole. Together, these small transgressions added up to a whopping $50,000, causing a much higher impact than the few bad apples.