Social production of moral indifference - 7b

Economics 101 is increasingly shaping people’s behaviour and the structure of organizations. Some research has suggested that the study of Econ 101 tends to encourage self-interested behaviour. The model of the economic agent as a self-interested, rational, autonomous individual utility-maximizer can make “looking out for number one” seem reasonable. In economics classes, it is found that  increasingly students were willing to behave opportunistically, on the reasoning that if they don’t take advantage of a situation, someone else will. They are quite unapologetic about it, believing that this is simply the way the world works, and that to do otherwise would be foolish.

In a study where subjects played a one-shot public-goods game, subjects were given differing lengths of time to decide how much money they would contribute to a common pot (versus keeping it for themselves, to everyone else’s detriment). And the faster the decision required, the more cooperative people were. If subjects are told  to “carefully consider” their decision, or prime them to value reflection over intuition, they’d be more selfish. The more time to think, the more time for rationalising their actions - what the authors called “calculated greed.”

When facing moral dilemmas of resisting selfishness, our rapid intuitions are good, honed by evolutionary selection for cooperation in small groups. Regulating and formalizing the behaviour (i.e., moving it from the realm of intuition to that of careful thought) can be counterproductive. Nothing shows this better than the study of economics. Beyond attracting self-interested people, studying economics can alter us too, reshaping who we think we are and how we should behave. By encouraging us to expect the worst in others, it brings out the worst in us.

Learning that cooperation is irrational in some situations is making students less cooperative. The economist Robert Frank says, 'We become what we teach.' In experiments using Prisoner's Dilemma games, first year economics students, and students doing disciplines other than economics, overwhelmingly chose to cooperate. But 4th year students in economics tended to not cooperate. Ideological differences between lower-level economics students and upper-level economics students are found to be similar in kind to the measured differences between the ideology of economics students as a whole and their peers. 

Upper-level students are even less likely to support egalitarian solutions to distribution problems than lower-level students, suggesting that time spent studying economics does have an indoctrination effect. When comparing students in political economics and business economics, economists found that “the willingness to contribute decreases dramatically for business students.” The late Stanford professor Hal Leavitt lamented that business education distorts students into “critters with lopsided brains, icy hearts, and shrunken souls.”

In Israel, third-year economics majors rated altruistic values – such as helpfulness, honesty and loyalty – as far less important in life than did their freshman equivalents. After taking a course in economic game theory (a study of strategy which assumes individual self-interest in its models), US college students behaved more selfishly, and expected others to do so as well. Economics majors and students who had taken at least three economics courses were more likely than their peers to rate greed as “generally good,” “correct,” and “moral.” In one experiment, the researchers wrote that the “meaning of ‘fairness’… was somewhat alien for this group.”

Exposure to economic words might be enough to inhibit compassion and concern for others, even among experienced executives. In one experiment, the researchers recruited presidents, CEOs, partners, VPs, directors, and managers who supervised an average of 140 employees. They randomly assigned them to unscramble 30 sentences, with either neutral words like [green, tree, was] or economic words like [economy, growing, our]. Then, the executives wrote letters conveying bad news to an employee who was transferred to an undesirable city and disciplining a highly competent employee for being late to meetings because she lacked a car. 

Their letters were then rated for compassion. Executives who unscrambled sentences with economic words expressed significantly less compassion. After thinking about economics, executives felt less empathy — and even when they did empathize, they worried that expressing concern and offering help would be inappropriate. In real-world environments, honesty, integrity, intrinsic job satisfaction, and peer recognition are powerful motivators, leading to better results for the financial bottom line than reliance on material incentives alone but economic theory ignores them. 

Economists believe that without a penalty or a reward system there is no motivation to commit anonymous acts of altruism. But that this is not how people in Japan behaved after the Fukushima Daiichi nuclear power plant disaster in 2011 led to a sudden fall in the electricity base-load. When called upon to make a personal sacrifice to avoid brownouts, people willingly sweltered in indoor temperatures of over eighty degrees Fahrenheit. Without duress or reward, people willingly turned down the air-conditioning in their homes even when no one could see them doing so.

So people’s tendency to avoid costs and act only in their self interest - often considered major obstacles to action on climate change — can be overruled by a sufficiently strong appeal to group identity and a visible social norm. The energy crisis in Japan was given visibility with posters and reminders on all media, and even large billboards above major crossings flashed daily rates of power consumption and the likelihood of a blackout. People were actively seeking ways to make a personal contribution, just as they do in wartime when they are brought together in the face of a common enemy.

Along with directly learning about self-interest in the classroom, because selfish people are attracted to economics, students end up surrounded by people who believe in and act on the principle of self-interest. Extensive research shows that when people gather in groups, they develop even more extreme beliefs than where they started. Social psychologists call this group polarization. By spending time with like-minded people, economics students may become convinced that selfishness is widespread and rational ― or at least that giving is rare and foolish.

Experimental research in Germany found that economics students were more likely than other students to be corruptible – willing to give a biased answer – if it led to a personal payout. Research in the US likewise found that economics majors were more approving of their own and others’ self-serving behaviour. Another study found that economics students are less likely to consider a vendor who increases the price of bottled water on a hot day to be acting “unfairly.”  Moreover, economics students valued personal achievement and power more than their peers while attributing less importance to social justice and equality. 

Our prosocial impulses depend largely on external social cues. When the social cues favour prosociality, behavioural scientists can elicit universal or near-universal unselfishness. Conversely, when subjects are told to act selfishly, believe others would act selfishly, and believe selfishness is not too costly to others, they exhibit near-universal selfishness. Economics promotes the idea that much of the time, cooperation and consideration of other's perspective are irrational and thus are best avoided. Institutions pass on to a new generation the ideas of a minority which they accept as  something “given”, “unalterable” and “self-evident”.

Social production of moral indifference - 7a

True economics never militates against the highest ethical standard, just as all true ethics to be worth its name must at the same time be also good economics. - Gandhi 

In 1930, the British economist John Maynard Keynes gave a curious lecture in Madrid titled “Economic Possibilities for our Grandchildren.” By 2030, Keynes predicted, economists would play only a minor role, “on a level with dentists.” But this dream now seems farther off than ever. Economists dominate the arenas of media and politics. And since they have the ears of the powers that be, the social world is increasingly structured along their vision of human nature. David Sloan Wilson writes in Evolution for Everyone: 

It is humbling to contemplate that the concerns typically voiced about religion need to be extended to virtually all forms of human thought. If anything, non-religious belief systems are a greater cause for concern because they do a better job of masquerading as factual reality. Call them stealth religions.

The best example of a stealth religion today is the discipline of economics. The importance of the ethical approach has weakened as modern economics has evolved. Today, it is hard to find a serious discussion of the possibility that we might encourage or discourage particular behaviours by appealing not to selfishness, but instead to the force of conscience. Many modern experts would be amused at the very idea. Conscience is viewed as the concern of religious leaders and populist politicians, not lawyers, businessmen, or regulators.

Economists defined our species as the homo economicus: always intent on personal gain, like selfish, calculating robots that are separated from society and human emotions, and from ethics and interdependence. They often assume that people respond only to punishments and rewards, and can’t be trusted to do a good job. The common belief is that people can't refrain from lying, cheating and stealing unless given the right “incentives.” This mode of thinking will often have the perverse and unintended effect of promoting opportunistic, even illegal, behavior. 

A leading theorist of libertarianism in the US, James Buchanan, says that an economic system should be constructed so as to conform to human nature. That makes sense. And what’s human nature? According to him, every person’s highest ideal is to be the master of a world of slaves. This means that we have to design a society so everyone is free to pursue this fundamental human nature as fully as possible. When you impose these external constraints, it does affect things. As Marcel Proust said, ‘Our social personalities are a creation of the thoughts of others.’

The belief that the pursuit of self-interest, rather than the overcoming of it, was what really worked to the benefit of all has been attributed to Adam Smith. But this supposedly 'Smithian' view of self-interested behaviour has been overstated. Although he believed self-interest was, ‘of all virtues that which is most helpful to the individual’, Smith also believed it was far from the most admirable of our traits, knocked off that top spot by our ‘humanity, justice, generosity and public spirit … the qualities most useful to others’. 

He said, ‘How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.’ It is the narrowing of the broad Smithian view of human beings by modern economists that is related to the distancing of economics from ethics. If we internalise the idea that most people are mostly selfish and that selfishness must be the cause of prosperity, then we start believing that the more selfish we are, the more prosperous we all become. 

For the ‘Rational Economic Man’ or ‘Homo Economicus’ dreamed up by mainstream economics, we have to blame an apple. Not any apple but the one that fell on Newton’s head. This apple led to his ground-breaking discoveries. Craving the authority of science, economists then mimicked Newton’s laws of motion in their theories and gave rise to this imaginary individual that is anything but a human. Humans are not like billiard balls acted on by simple, measurable forces that produce predictable results. William Blake summarised his critique of the Newtonian vision:

May God us keep

From single vision and Newton's sleep.

Self-interest does play quite a major part in a great many decisions. But there are motivations other than self-interest which also play a major role in many decisions. The mixture of selfish and selfless behaviour can be seen in a wide variety of group associations varying from kinship relations and communities to trade unions and economic pressure groups. Extensive empirical evidence from behavioural economics, social psychology, and evolutionary biology proves that, far from being rare and quirky, unselfish prosocial behaviour is not only common, but highly predictable.

People are far more capable of acting unselfishly than the homo economicus model admits. The evolutionary biologist David Sloan Wilson says that popular discourse on the economy is almost totally disconnected from serious academic discourse. But despite these criticisms, the assumption of purely self-interested behaviour remains the standard one in economics and is the basis of much of what is taught to students of introductory economics. 

Social production of moral indifference - 6b

No brain operates in a vacuum. Our social and physical environments unconsciously shape our behaviour.  The wealth of information streaming into the brain influences the likelihood of pro- or antisocial acts. You cannot distinguish between aspects of a behaviour that are “biological” and those that would be described as, say, “psychological” or “cultural.”  For example, there is one hormone that is commonly tied to aggression, namely testosterone but it is far less relevant to aggression than is usually assumed. 

Do differences in testosterone levels among individuals predict who will be aggressive?  Initially the answer seemed to be yes but after extensive investigation, scientists conclude that the brain doesn’t pay attention to fluctuations of testosterone levels within the normal range. When there are higher than normal levels – eg. athletes and bodybuilders using anabolic steroids - risk of aggression does increase. Aggression is typically more about social learning than about testosterone.

Testosterone does subtle things to behaviour.  It makes people less adept at identifying emotions by looking at people’s eyes. It also increases confidence and optimism, while decreasing fear and anxiety. But it makes people overconfident and overly optimistic, with bad consequences. In one study, testosterone made subjects more likely to think their opinion was correct and to ignore input from their partner. It makes people cocky, egocentric, and narcissistic and boosts impulsivity and risk taking, making people do the easier thing when it’s the stupid thing to do.

What is important to note is that testosterone’s effects are hugely context dependent. This context dependency means that rather than causing X, testosterone amplifies the power of something else to cause X. It does not create new social patterns of aggression; it exaggerates pre-existing ones. A person being aggressive in the future depends less on testosterone and more on social learning.

Testosterone rises in humans in both individual and team sports competition, including basketball, wrestling, tennis, rugby, and judo. There’s generally a rise in anticipation of the event and a larger one afterward, especially among winners. What is even more interesting is that watching your favourite team win raises testosterone levels, showing that the rise is less about muscle activity than about the psychology of dominance, identification, and self-esteem.

When testosterone rises after a challenge, it doesn’t prompt aggression. Instead it prompts whatever behaviours are needed to maintain status.  What happens if defending your status requires you to be nice? This was explored in a study at the University of Zurich. Participants played the Ultimatum Game where you decide how to split money between you and another player. The other person can accept the split or reject it, in which case neither of you gets anything.

Prior research had shown that when someone’s offer is rejected, they feel rejected and subordinated, especially if news of that carries into future rounds with other players. In other words, in this scenario, status and reputation rest on being fair. And what happens when subjects were given testosterone beforehand? People made more generous offers. What the hormone makes you do depends on what counts as good reputation. This indicates that testosterone is sensitive to social learning. 

The study contained a important additional finding that further separated testosterone myth from reality. The subjects got either testosterone or saline, without knowing which. Subjects who believed it was testosterone (independent of whether it actually was) made less generous offers. So, testosterone doesn’t necessarily make you behave in a disagreeable manner, but believing that it does and that you have got it rather than saline makes you behave in a disagreeable manner.

Additional studies show that testosterone promotes pro-sociality in the right setting. In one, under circumstances where someone’s sense of pride is dependant on honesty, testosterone decreased men’s cheating in a game. In another, subjects decided how much of a sum of money they would keep and how much they would publicly contribute to a common pool shared by all the players; testosterone made most subjects more prosocial.

What does this mean? Testosterone makes us more willing to do what it takes to attain and maintain status. And the key point is 'what it takes'. Engineer social circumstances right, and boosting testosterone levels during a challenge would make people compete like crazy to do the most acts of random kindness. In our world riddled with male violence, the problem isn’t that testosterone can increase levels of aggression. The problem is the frequency with which we reward aggression. In Behave, Robert Sapolsky writes:

. .  there are few clear-cut causal agents, so don’t count on there being the brain region, the neurotransmitter, the gene, the cultural influence, or the single anything that explains a behaviour. Instead of causes, biology is repeatedly about propensities, potentials, vulnerabilities, predispositions, proclivities, interactions, modulations, contingencies, if/then clauses, context dependencies, exacerbation or diminution of preexisting tendencies.'

Social production of moral indifference - 6a

 “It is all too evident that our moral thinking simply has not been able to keep pace with such rapid progress in our acquisition of knowledge and power.” - The Dalai Lama 

Free will is the capacity for agents to choose between different possible courses of action unimpeded. Experiments seem to suggest that humans don’t have free will. For eg. suppose a scientist asks a subject to choose a random moment to move a finger and measures the build-up of an electrical signal called the readiness potential. The readiness potential reliably preceded the physical action. It is found that the unconscious brain activity of the readiness potential leading up to subjects' movements began approximately half a second before the subject was aware of a conscious intention to move.

This suggests to some that unconsciously the brain has made the decision before the conscious mental act to do so. Some believe the implication is that free will was not involved in the decision and is an illusion. One of the most heated debates in biology is that of "nature versus nurture", concerning the relative importance of genetics and biology as compared to culture and environment in human behavior. The view of many researchers is that many human behaviours can be explained in terms of human brains, genes, and evolutionary histories. This point of view raises the fear that such attribution makes it impossible to hold others responsible for their actions. 

The chorus of neuroscientists saying, point blank, that free will is an illusion is echoed by psychologists and physicists. Could so many brilliant scientists be wrong?  The philosopher Dan Dennett says in Intuition Pumps and other tools for Thinking that the scientists have typically been making a rookie mistake: confusing the actual scientific image with what we might call the folk ideology of the scientific image. For example, when scientists say that a solid is mostly empty space, they are factually correct but that doesn’t mean that the folk image of a solid, which reflects lived experience, is wrong.

Dennett says that he agrees with the scientists' view that the sort of free will that they are talking about is an illusion, but that doesn’t mean that free will is an illusion in any morally important sense. But, 'some of the scientists who now declare that science has shown that free will is an illusion go on to say that this “discovery” matters, in a morally important sense. They think it has major implications for morality and the law: nobody is ever really responsible, for instance, so nobody ever deserves to be either punished or praised. They are making the mistake people make when they say that nothing is ever solid, not really.'

He devices a thought experiment to make his point. It has been shown that deep brain stimulation by implanted electrodes is showing striking effects in treating obsessive-compulsive disorder (OCD). Imagine that a brilliant neurosurgeon said to a patient on whom she had just performed an implantation that the device controls his every decision, thanks to a master control system, which maintains radio contact with his microchip twenty-four hours a day i.e. 'I’ve disabled your conscious will; your sense of free will henceforth will be an illusion.'

'In fact she had done no such thing; this was simply a lie she decided to tell her patient to see what would happen. It worked; the poor fellow went out into the world convinced that he was not a responsible agent, but rather a mere puppet, and his behaviour began to show it: he became irresponsible, aggressive, and negligent, indulging his worst whims until he got caught and put on trial. Testifying in his own defence, he passionately protested his non-responsibility because of the implant in his brain. The neuroscientist, when called to testify, admitted what she had said, and added, “But I was just messing with his head — a practical joke, that’s all. I never thought he’d believe me!”'

What happened in the trial is irrelevant. The fact is that her ill-considered assertion robbed  him of his integrity and crippled his power to make decisions. In fact, her false “debriefing” of her patient actually accomplished non-surgically much of what she claimed to accomplish surgically: she disabled him. Dennett writes:

. . . the neuroscientists currently filling the media with talk about how their science shows that free will is an illusion are risking mass-production of the same harm to all the people who take them at their word. Neuroscientists, psychologists, and philosophers need to take seriously their moral obligation to think through the presuppositions and implications of their public pronouncements on these issues with the same care that is demanded of people who hold forth on global warming or impending asteroid strikes. . . What would it be . . . [to] have scientists “discovered” that nobody is, or could be, wired right for moral responsibility?

The influence of what some call neurolaw is growing. In those cases, neuroscientific evidence has been admitted to show everything from head trauma to the tendency of violent video games to make children behave aggressively. Lawyers routinely order scans of convicted defendants' brains and argue that a neurological impairment prevented them from controlling themselves. Stephen J. Morse, professor of law and psychiatry at the University of Pennsylvania calls this “brain overclaim syndrome” and says, ‘The only thing different about neuroscience is that we have prettier pictures and it appears more scientific.’

He says that if adolescent brains caused all adolescent behaviour, “we would expect the rates of homicide to be the same for 16- and 17-year-olds everywhere in the world — their brains are alike — but in fact, the homicide rates of Danish and Finnish youths are very different than American youths.” Morse agrees that our brains bring about our behaviour and says “So what if there’s biological causation? Causation can’t be an excuse for someone who believes that responsibility is possible. Since all behaviour is caused, this would mean all behaviour has to be excused.” . . . “Some people are angry because they had bad mommies and daddies and others because their amygdalas are mucked up. The question is: When should anger be an excusing condition?”

To suggest that criminals could be excused because their brains made them do it seems to imply that anyone whose brain isn’t functioning properly could be absolved of responsibility. And since all behaviour is caused by our brains, wouldn’t this mean all behaviour could potentially be excused? Popular writers prefer to simplify things by describing lives either in Hobbesian terms or by stressing their friendly side, but in fact it’s never one or the other. Which nature dominates depends on the socialisation process in the society. Trust no one who says “it is human nature to do [any single thing].”

Social production of moral indifference - 5e

The incentive structure in banks is often unethical, rewarding employees for steering customers to financial products that aren’t in their best interest. Many times, behaviour might seem over the top, but we often take comfort when our actions fall in line with the social norms of those around us. In The Honest Truth about Dishonesty, Dan Ariely quotes a letter that he received from a young consultant:

I graduated a few years ago with a BA degree in Economics from a prestigious college and have been working at an economic consulting firm, which provides services to law firms. The reason I decided to contact you is that I have been observing and participating in a very well documented phenomenon of overstating billable hours by economic consultants. To avoid sugar coating it, let’s call it cheating. 

From the most senior people all the way to the lowest analyst, the incentive structure for consultants encourages cheating: no one checks to see how much we bill for a given task; there are no clear guidelines as to what is acceptable; and if we have the lowest billability among fellow analysts, we are the most likely to get axed. These factors create the perfect environment for rampant cheating.

The lawyers themselves get a hefty cut of every hour we bill, so they don’t mind if we take longer to finish a project. While lawyers do have some incentive to keep costs down to avoid enraging clients, many of the analyses we perform are very difficult to evaluate. 

Lawyers know this and seem to use it to their advantage. In effect, we are cheating on their behalf; we get to keep our jobs and they get to keep an additional profit.  Here are some specific examples of how cheating is carried out in my company:

• A deadline was fast approaching and we were working extremely long hours. Budget didn’t seem to be an issue and when I asked how much of my day I should bill, my boss (a midlevel project manager) told me to take the total amount of time I was in the office and subtract two hours, one for lunch and one for dinner. I said that I had taken a number of other breaks while the server was running my programs and she said I could count that as a mental health break that would promote higher productivity later.
• A good friend of mine in the office adamantly refused to overbill and consequently had an overall billing rate that was about 20 percent lower than the average. I admire his honesty, but when it was time to lay people off, he was the first to go. What kind of message does that send to the rest of us?
• One person bills every hour he is monitoring his email for a project, whether or not he receives any work to do. He is “on-call,” he says.
• Another guy often works from home and seems to bill a lot, but when he is in the office he never seems to have any work to do.

These kinds of examples go on and on. There is no doubt that I am complicit in this behavior, but seeing it more clearly makes me want to fix the problems. Do you have any advice? What would you do in my situation?

Sincerely yours,

Jonah

Unfortunately, the problems noted in the letter are commonplace. One tends not to notice them because they are an accepted part of 'business as usual'. The people think of themselves as highly moral people because their actions are relatively small and, most important, several steps removed from my pocket.  Biased incentives can—and do—lead even the most upstanding professionals astray. When the rules are somewhat open to interpretation, when there are grey areas, people are tempted to cheat and most people cheat by small amounts. 

A common example of an area where people easily tempted into indulging in unethical behaviour is accounting. It has a vaguely titled body of suggestions — known as Generally Accepted Accounting Principles (GAAP) — that accountants are supposed to follow. These guidelines are so general that there’s considerable variation in how accountants can interpret financial statements. (And often there are financial incentives to “bend” the guidelines to some degree.) 

For instance, one of the rules, “the principle of sincerity,” states that the accountant’s report should reflect the company’s financial status “in good faith.” What does it mean? Toward whom is this good faith directed? The people who run the company? Those who would like the books to look impressive and profitable (which would increase their bonuses and compensation)? Or should it be directed toward the people who have invested in the company? Or is it about those who want a clear idea of the company’s financial condition?

The behaviours mentioned in the letter are the the result of the negative view of human nature that is widely held. When a communal ethos has been replaced by a view of humanity as competing individuals, the result is indeed the survival of the fittest. This view regards people as basically thieves and shirkers who need to be constantly monitored in order to keep them in line. This results in proliferation of contracts, rules, and regulations. A paradox of the individualist ideology is that it invariably results in an excess of interference.   

The moral degeneration in modern life is illustrated by the statement by the economist John Maynard Keynes that “For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not.” (It is fantastic to assume that after a century of internalizing this norm, society will magically revert to one populated by do-gooders.) The Western political tradition relies upon external rather than internal restraints and on institutional rather than self-imposed ethical limits to control those who are in power. 

This has given rise to different types of ethics in different fields: bioethics, media ethics, medical ethics, contract ethics, care ethics, etc. As a result of this proliferation, a Kafkaesque bureaucracy has sprung up from which no one can escape, and codes and regulations are running rampant. The frustrations we experience from a host of petty regulations cause us to focus more on observing the rules and lose sight of the true significance of ethics. 

Social production of moral indifference - 5d

Ethical blindness describes the risk that over time and under the pressure of their context, individuals lose the ability to see that what they do is wrong. It is important because it is the driving force behind big scandals. We all know why bad people do bad things. However, we will never understand large scale systematic and systemic cases of immoral and illegal behaviour if we do not understand why and under what conditions good people are vulnerable to such behaviour. The fascinating question is, why you and me, under certain circumstances, would have done what managers did at Volkswagen, Boeing, Purdue or Wells Fargo.

The various cases of corporate fraud - Enron, Worldcom, the 2008 financial crisis, etc. - leads to a fundamental question: Is dishonesty largely restricted to a few bad apples, or is it a more widespread problem? If the problem is not confined to a few outliers, that would mean that anyone could behave dishonestly at work and at home — you and I included. This is the problem that Dan Ariely seeks an answer to in The Honest Truth about Dishonesty. He shows that the rational cost-benefit forces that are presumed to drive dishonest behavior often do not, and the irrational forces that we think don’t matter often do. 

In rational economics, the prevailing notion of cheating comes from the economist Gary Becker, a Nobel laureate who suggested that people commit crimes based on a rational analysis of each situation. He  noted that in weighing the costs versus the benefits, there was no place for consideration of right or wrong; it was simply about the comparison of possible positive and negative outcomes.  According to this model, we all seek our own advantage as we make our way through the world. Whether we do this by robbing banks or writing books is inconsequential to our rational calculations of costs and benefits.  

In The Honest Truth about Dishonesty, Dan Ariely writes that if this theory is correct, then the response should be to a) increase the probability of being caught (through hiring more police officers and installing more surveillance cameras, for example); b) increase the magnitude of punishment for people who get caught (for example, by imposing steeper prison sentences and fines). This is the model that is generally followed and accepted by policy-makers and the public. 

Ariely’s experiments suggest that we don’t cheat and steal as much as we would if we were perfectly rational and acted only in our own self-interest. Cheating is not necessarily due to one guy doing a cost-benefit analysis and stealing a lot of money. Instead, it is more often an outcome of many people who quietly justify taking a little bit of cash or a little bit of merchandise over and over. Essentially, we cheat up to the level that allows us to retain our self-image as reasonably honest individuals.

Our behaviour is driven by two opposing motivations. On the one hand, we want to view ourselves as honest, honourable people. We want to be able to look at ourselves in the mirror and feel good about ourselves (psychologists call this ego motivation). On the other hand, we want to benefit from cheating and get as much money as possible (this is the standard financial motivation). Clearly these two motivations are in conflict. How can we secure the benefits of cheating and at the same time still view ourselves as honest, wonderful people?

This is where our amazing cognitive flexibility comes into play. Thanks to this human skill, as long as we cheat by only a little bit, we can benefit from cheating and still view ourselves as marvellous human beings. This balancing act is the process of rationalisation, and it is the basis of what he calls the “fudge factor theory.” All of us continuously try to identify the line where we can benefit from dishonesty without damaging our own self-image. The question is: where is the line?

The fudge factor suggests that if we want to take a bite out of crime, we need to find a way to change the way in which we are able to rationalise our actions. When our ability to rationalise our selfish desires increases, so does our fudge factor, making us more comfortable with our own misbehaviour and cheating. The other side is true as well; when our ability to rationalise our actions is reduced, our fudge factor shrinks, making us less comfortable with misbehaving and cheating. There are various environmental forces that increase and decrease honesty in our daily lives, including conflicts of interest, counterfeits, pledges, and simply being tired.

If we increased the psychological distance between a dishonest act and its consequences, the fudge factor would increase and our participants would cheat more.  People are more apt to be dishonest in the presence of non-monetary objects than actual money — you are more likely to take paper or pencil from the office than money from the petty cash box. When you take money, you can't help but think you're stealing. When you take a pencil, there's all kinds of stories you can tell yourself. You can say this is something everybody does. Or, if I take a pencil home, it's actually good for work because I can work more. 

The situation changes our ability to rationalise. When rationalisation increases -- for example, when we say things like everybody does it; or when we say we are doing it for a good cause -- we cheat to a higher degree. Non-monetary exchanges allow people greater psychological latitude to cheat – leading to crimes that go well beyond pilfered pens to backdated stock options, falsified financial reports, and crony deals. Ariely writes:

From all the research I have done over the years, the idea that worries me the most is that the more cashless our society becomes, the more our moral compass slips. If being just one step removed from money can increase cheating to such degree, just imagine what can happen as we become an increasingly cashless society. 

Could it be that stealing a credit card number is much less difficult from a moral perspective than stealing cash from someone’s wallet? Of course, digital money (such as a debit or credit card) has many advantages, but it might also separate us from the reality of our actions to some degree.

If being one step removed from money liberates people from their moral shackles, what will happen as more and more banking is done online? What will happen to our personal and social morality as financial products become more obscure and less recognisably related to money (think, for example, about stock options, derivatives, and credit default swaps)?'

Again the idea is that once we get distanced from money it is easier for us to feel that we are honest but nevertheless be dishonest. Moreover, you aren’t dealing with real cash; you are only playing with numbers that are many steps removed from cash. Their abstractness allows you to view your actions more as a game, and not as something that actually affects people’s homes, livelihoods, and retirement accounts. As Auden said in Letter to Lord Byron, ‘Today, thank God, we’ve got no snobbish feeling /Against the more efficient modes of stealing.’

The creation on Wall Street of mortgage-backed securities made it harder to be a good person. When being not such a nice guy suddenly gets more profitable, it becomes harder to resist temptation.  People didn’t get greedier, but the gains from dishonesty rose, so we got more dishonesty. And when you're surrounded by all these people who think the same way, it's very hard to think differently. Every time you reward someone’s dishonesty you are encouraging others to do the same.

Social production of moral indifference - 5c

Although the benefits of cooperation are shared equally among all members of the group, the costs are borne privately by each cooperator. The tension between “public goods—private costs” results in what is sometimes known as the Cooperator’s Dilemma. It turns out that a group consisting entirely of rational agents motivated solely by greed and fear is incapable of cooperation. But it is cooperation that underlies the ability of human groups - whether economic organizations, firms and corporations, or political organizations, such as states. 

In the years since  the publication of The Selfish Gene, lots of work has been done exploring  human-specific mechanisms for fostering cooperation. For eg., take the idea of open-ended play. Two individuals play the Prisoner’s Dilemma, knowing that after a single round, they’ll never meet again. Rationality decrees that you defect. What about two rounds? It requires noncooperation for the same reasons the single-round game does - the game defaults to a single-round game where the rational strategy is to defect. 

Three rounds? The same. In other words, playing for a known number of rounds biases against cooperation, and the more rational the players, the more they foresee this. Cooperation flourishes when games have an uncertain number of rounds. This produces the shadow of the future, where retribution is possible. Here our reputations precede us and produce a sense of obligation and reciprocity. The Nobel Prize–winning economist Kenneth Arrow has concluded, 'Virtually every commercial transaction has within itself an element of trust, certainly any transaction conducted over a period of time.' 

A gene-centric theory is unable to explain such obvious features of human social life as morality, sympathy, and generosity. As the evolutionary biologist David Sloan Wilson explains in Does Altruism Exist?, “. . . group-level functional organization evolves primarily by natural selection between groups.” Groups have multiple-round games and the means to spread news of someone being a jerk. On the other hand, when rational calculations enter into the equation, they tend to undermine ultrasociality. We know them as “nepotism” and “cronyism.”

In Evolution for Everyone, David Sloan Wilson writes that an animal breeder at Purdue University, William Muir, tried to figure out how to make chickens produce the most eggs. He bred two groups of chickens. In both cases, he housed the hens in cages,  which is standard practice in the poultry industry. In the first method he did what the 'rank and yank' system does - he picked the hardest working, most productive hen within each cage to breed the next generation of hens and put all of those in one group. The second method involved selecting the most productive cages and using all the hens from those cages to breed the next generation of hens. 

Thus same trait (egg productivity) is selected in both cases although in the second group, the whole cage is selected when even the best cage might have some individual duds. The first method caused egg productivity to perversely decline, even though the most productive hens were chosen each and every generation. The second method caused egg productivity to increase 160 percent in six generations.

The first method favoured the nastiest hens who achieved their productivity by suppressing the productivity of other hens. After six generations, Muir had produced a nation of psychopaths, who plucked and murdered each other in their incessant attacks. No wonder egg productivity plummeted! In the second approach, he selected the most productive groups and because they were already a group that worked well together, they included peaceful and cooperative hens.

Why was each superstar the prime egg producing champion in her original group? Because she would aggressively peck subordinates enough to stress them into reduced fertility. Put all these mean champions together, and a group of subordinated chickens, who are now in peace, will outproduce them. This is the circumstance of a genetically influenced trait that, while adaptive on an individual level, emerges as maladaptive when shared by a group. Thie “rank and yank” system is a recipe for disruptive self-serving behaviors. 

Even the smartest person can be misled by a false view of human nature. In the long term, the success of the individual is  inextricably bound up with the success of the group. Reciprocity is made up of a series of acts each of which is short-run altruistic (benefiting others at a cost to the altruist), but which together typically make every participant better off. The loss of the capacity to feel guilty and the consequent loss of a sense of responsibility may be the biggest problems facing the world today. 

Economists have recently discovered that trusting communities, other things being equal, have a measurable economic advantage. This is probably because when individuals cooperate, what economists term “transaction costs” — the costs of the everyday business of life, as well as the costs of commercial transactions — are reduced. Moreover, students of public health find that life expectancy itself is enhanced in more trustful communities. Honesty and trust smoothen the inevitable frictions of social life.

Putting all one's faith in a legal system, complete with courts and law enforcement provides only a partial solution. If we needed legal advice and a police presence to formulate and enforce the simplest agreement,  escalating transaction costs would prevent much mutually beneficial cooperation. As Diego Gambetta, a student of trust (and of the Mafia), points out, “Societies which rely heavily on the use of force are likely to be less efficient, more costly, and more unpleasant than those where trust is maintained by other means.” In Bowling Alone, Robert D. Putnam writes:

. . . social capital greases the wheels that allow communities to advance smoothly. Where people are trusting and trustworthy, and where they are subject to repeated interactions with fellow citizens, everyday business and social transactions are less costly. There is no need to spend time and money making sure that others will uphold their end of the arrangement or penalizing them if they don’t. Economists such as Oliver Williamson and political scientists such as Elinor Ostrom have demonstrated how social capital translates into financial capital and resource wealth for businesses and self-governing units.