‘Behavioural economics’ is basically the study of how humans really act, as opposed to how we think we act, or think we should act.
Most of Western philosophy and social science (including law) is based on the notion that we are ‘rational’ people, who behave in a predictable way. The fundamental legal notion that we are ‘responsible for our own actions’ is premised on the belief that we can rationally and positively control our own actions. What Dan and other behavioural economists enjoy pointing out to us is that this is not in fact true – and that a lot of what we do is based on hard-wired instinct, and our interaction with our environment.
Following on from his bestselling book Predictably Irrational, Dan’s latest book looks at the issue of ‘honesty’. He explores how honest we are to others, but more importantly, how honest we are to ourselves.
The premise of this book is that we are all dishonest, but only to the extent that we can convince ourselves that we are still good people. There is both a natural tendency to cheat (in almost all things), but also a counterbalancing natural tendency to limit this cheating to a personal and socially acceptable level.
He goes about proving this theory by means of a series of ingenuous social experiments. This is really what I like about Dan’s books. They are not theoretical or academically derivative. He starts with a simple yet counter-intuitive hypothesis, comes up with ingenuous experiments to test the hypothesis, and then presents his objective findings in a cohesive and entertaining way.
Two experiments that he uses throughout the book are what I call the ‘puzzle test’ and the ‘dot estimate test’.
In the puzzle test he gives people a number of complex puzzles to solve. He then varies the conditions that allow the people to cheat, and measures how many they claim to solve against a control group where cheating was not possible. There is usually a monetary reward for the number of puzzles solved.
In the other experiment he divides a square into two triangles, and then asks the participants to estimate which triangle has the most dots in it over a range of several hundred examples. Sometimes it is obvious which triangle has more dots, but most of the time it is difficult to guess. He then only rewards the person when they estimate that the right-hand triangle has more dots. What this does is biases the person to estimate that there are more dots in the right triangle – even when it is more likely that there are more dots in the left triangle. The extent of the bias is a proxy for their propensity to cheat.
Another experiment I particularly liked involved people’s ability to make good decisions under stress or pressure. In this experiment, he gave half the participants a 2-digit number to remember, and the other half a 7-digit number to remember. They had to walk down the hall and tell another person their number. On the way they had to choose a small reward. On their return they could collect their reward and leave. The reward choices involved some fruit and some chocolate bars. Those trying to remember the 7-digit number chose the unhealthy but tempting chocolate significantly more than the 2-digit participants. It appears that our mind only has so much ‘energy’ for making good and honest decisions.
Another example involved a vending machine that Dan had wired to return both the food and the customer’s money. As it turns out, on average people only took three free items, whereas they could have emptied the machine. They each had a justification for their cheating, for example, they had been ripped off by vending machines in the past and were ‘restoring the balance’. People would also go and grab their friends to get some free food, which gave an element of social acceptability to the dishonesty.
Following along the theme that we are only dishonest to the extent that we can convince ourselves we are still a good person, he correlated how much people will cheat with how ‘creative’ they are. The theory was that more creative people will cheat to a greater extent because they will be more creative in how they convince themselves they are still honest. He had people in an advertising agency take the cheating tests, and plotted the results against the level of creativity in their job. Applying the dot estimate test, the ‘creatives’ were the most dishonest, with the accountants and clerks being the most honest.
The other thing Dan explored was the ‘social element’ of dishonesty, including how ‘infectious’ dishonesty was. The theory being that we will cheat more if it is seen as socially acceptable – if other people are doing it. When Dan used an actor to demonstrate to the test participants that cheating was possible and socially acceptable, more people cheated. When he allowed people to work together and share the proceeds, more cheating arose – even though both people were aware of each other’s cheating. The level of cheating also increased the better the people knew each other.
The key premise to most of Dan’s work is that people behave in irrational ways, but through careful objective study we can very accurately predict this irrationality, i.e. it is possible to understand how humans will act in a given scenario, it just may not be what we expect.
Why do I see these books as ‘self help’? The idea is that armed with a more realistic understanding of ourselves, we can make adjustments to our environment (the pre-conditions of our actions) to promote the outcomes we are after. Or failing that, we can be a little more ‘honest’ to ourselves about our ‘dishonesty’…
Rating: I give this book ‘3.5 Stars’ out of 5. Well worth a read.
For more information on this book, or to learn about Dan Ariely, visit: http://danariely.com/