'Moral Reminders' May Help Clean Up Wall Street
NEW YORK (TheStreet) -- If you're inclined to lie and cheat -- and some days, it looks like just about everybody is -- it helps to distance yourself from your aberrant acts. Golfers, for example, will cheat more if they get a chance to nudge the ball closer to where they want by using a club, as opposed to picking it up with their hand.
And financial professionals, well, we'll get to the kinds of people who swap tips about confidential Goldman Sachs board meetings in a bit. But there's good news and bad news in the research behind The (Honest) Truth About Dishonesty: How We Lie to Everyone -- Especially Ourselves, the latest book by Duke University's engaging behavioral economist Dan Ariely. The good news is that there are actually ways to minimize the chances people will cheat. The bad news is that in the U.S., the most popular economic philosophy is not, in Ariely's view, one that nurtures corporate honesty.
I met Ariely just after he'd finished giving a speech in Connecticut last month. Amid a crowd of gray-suited executives, the professor was pretty easy to spot, clad in jeans, a Mountain Hard Wear hoodie and a pair of blue, white and orange sneakers.
"What's interesting about the economic crisis is that it's not just cheating -- it's cheating with a religious belief," he told me as we were sitting down to chat. Proponents of a free-market economy have taken the philosophy of "individual as good, government as bad" to extremes, Ariely says. "This invisible hand idea is a very, very nice story, and in unique cases it can work," but Ariely says the approach is better suited to perfectly matched chess games where luck doesn't come into play than it is to global economies.For starters, he doesn't buy the idea that the only way to incentivize people is money. "People say that if you need the best in the business, you have to pay them as an incentive, but is that true?" he asks. "There are other things people care about, like taking a vacation or doing social good." To get an idea of when people cheat the most, and when they don't cheat at all, Ariely and his colleagues set up experiments that often used students as guinea pigs. Much of the research was a variation on this idea: An experimenter hands out a set of problems and tells the group that the more problems they solve, the more money they will be paid. Some subjects are deliberately set up with an easy chance to cheat, having been instructed to put their test sheet through a shredder after they're done but before anyone can check to see how well they did. Thinking that their correct scores are destroyed (though that's not true, because the shredder is rigged), they report their inflated scores to the experimenter and collect their money.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV