Morality in Economics (and Elsewhere)

I just finished listening to CBC: The Invisible Hand, Episode 10 – Homo Economicus 2.0. The gist of the podcast was discussing the idea of economists modelling human behaviour in the marketplace via a sort of wire frame person acting its own self interest dubbed “Homo Economicus“. In recent years, an attempt has been made to address some shortcomings in the original model by providing a more well-rounded view of human behaviour including irrational and potentially self-destructive impulses. This new model has been called Homo Economicus 2.0.

One researcher in this area is Dan Ariely. He created an experiment that caught my attention. In his experiment, he had subjects complete a math quiz in a set amount of time. Each subject would grade their own quiz and tabulate the number of questions he or she correctly answered. The subject would then shred the test sheet and report the number of correct answered questions he or she had to the researcher. The researcher would then pay the subject one dollar for each question he or she reported to have got right. The trick is that the shredder doesn’t actually shred the test paper so the researcher could check how many correct answers the subject actually got. The results showed that most people cheated a little and slightly overstated their score.

The experiment gets really interesting in its next phase. In this version of the experiment, the basic premise described above remains the same except the subject is given one token for each correctly answered question the subject reported. These tokens could be cashed in very shortly afterwards by the subject at the exchange rate of one dollar per token. In this iteration of the experiment, the cheating that occurred more than doubled. By creating a simple abstraction away from actual money, subjects felt much more at ease to cheat. It is quite alarming, to me at least, that such a simple change could increase the amount of cheating so dramatically.

This provides a simple demonstration of the behaviour we see when people steal office supplies or misrepresent information on a tax return. People seem to find it easy to cheat when the money doesn’t seem real or the people being hurt are not directly in front of them. This is how the Sub-prime Mortgage Crisis was able to happen.

In fact, you could arguably use that demonstration of abstracting away the reality of what one is doing to highlight the dangers of drone warfare where you commute into work, bomb a village, have lunch, bomb another village and then head home for the night. Maybe you stop at your local watering hole for a beer with your buddies and some nachos. Meanwhile, halfway around the world you never see the “collateral damage” caused by your actions.

Where does this leave us? It seems that more and more often the consequences of one’s actions are hidden by layers of abstraction in the increasingly complex world we live in. We can easily be lulled into engaging in or condoning some pretty reprehensible behaviour. We buy mutual funds and stocks and expect a good return on our investment, driving companies to improve their profits by any means necessary. This means jobs are lost as labour is either sent offshore or eliminated entirely. Employees of these companies have work increasingly longer hours to keep up. We demand low taxes and small government, not seeing the disenfranchised people, the elderly and the mentally ill especially, that are hurt by reduced or eliminated programs.

It is necessary for each of us to hold ourselves to a higher moral and ethical standard. We need to understand what the repercussions of our actions actually are. We must make educated and informed decisions every day. If we don’t do this then we will continue to see the consequences of actions in our petty elected officials and their policies, our degrading environment, our increasingly oppressive workplace and in the concentration of wealth and power in the hands of fewer and fewer people.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: