Our buggy moral code Dan Ariely

[Music]

I want to talk to you today a little bit

about the predictable irrationality and

my interest in irrational behavior is

started many years ago in hospital and I

was burned very badly and if you spend a

lot of time in hospital you’ll see a lot

of types of irrationalities and the one

that particularly bothered me in the

burned apartment was the process by

which the nurses took the bandage off me

now you must have all taken a band-aid

off at some point and you must have

wondered what’s the right approach do

you rip it off quickly short duration

but high intensity or do you take your

bandage off slowly you take a long time

but each second is not as painful which

one of those is the right approach the

nurses in my department thought that the

right approach was the ripping one so

they would grab hold and they would rip

and they would grab hold and they would

rip because I had 70% of my body burned

it would take about an hour and as you

can imagine I hated that moment of

ripping with incredible intensity and I

would try to reason with them and say

why don’t we try something else why

don’t we take it a little longer maybe

two hours instead of an hour and have

less of this intensity and the nurse

just told me two things and they told me

that they had the right model of the

patient that they knew what was the

right thing to do to minimize my pain

and they also told me that the word

patient doesn’t mean to make suggestions

or interfere or this is not just in

Hebrew by the ways in every language

I’ve had experience with so far and you

know there’s not much there wasn’t much

I could do and they kept on doing what

what they were doing and about three

years later when I left the hospital I

started studying at the University and

once the most interesting lessons I

learned lessons it was that there is an

experimental method that if you have a

question you cannot get create a replica

of this question in some abstract way

and you can try to examine this question

maybe learn something about the world so

that’s what I

I was still interested this question of

how do you take bandages of burn patient

so originally I didn’t have much money

so I went to a hardware store and I

bought a carpenter’s vise and I would

bring people to the lab and I would put

their finger in it and I would crunch it

a little bit and I would crunch it for

long periods and short periods that

painted went up and when it went down

and with breaks and without breaks all

kinds of versions of pain and when I

finished hurting people a little bit I

would ask them so how painful was this

oh how painful was this so if you had to

choose between the last two which one

would you choose I kept on doing this

for a while and then like all good

academic projects I got more funding I

moved to sounds electrical shocks

I even had a pain suit that I could get

people to feel much more pain but at the

end of this process what I learned was

that the nurses were wrong here were

wonderful people with good intentions

and plenty of experience and

nevertheless they were getting things

wrong predictably all the time it turns

out that because we don’t encode

duration in the way that we encode

intensity I would have had less pain if

the duration would have been longer and

the intensity was lower it turns out it

would have been better to start with my

face which was much more painful and

moved toward my legs giving me a trend

of improvement over time that would have

been also less painful it also turns out

would have been good to give me breaks

in the middle to kind of recuperate from

the pain all of these would have been

great things to do and my nurses had no

idea and from that point on I started

thinking are the nurses the only people

in the world who get things wrong in

this particular decision or is it more

general case and it turns out it’s a

more general case there’s a lot of

mistakes we do and I want to give you

one example of one of these

irrationalities and I want to talk to

you about cheating and the reason I

picked cheating is because it’s

interesting but also it tells us

something I think about the stock market

situation we’re in so my interest in

cheating started when Enron came on the

scene exploded all of a sudden

started thinking about what is happening

here is it the case that there is got a

few apples who are capable of doing

these things or are we talking about

endemic situation that many people are

actually capable of behaving this way so

like we usually do I decide to do a

simple experiment and here’s how it went

if you were in the experiment I would

pass you a sheet of paper with twenty

simple math problems that everybody

could solve but I wouldn’t give you

enough time when the five minutes were

over I would say pass me the sheets of

paper and I’ll pay you $1 per question

people did this I would pay people four

dollars for their task on average people

would solve four problems other people I

would tempt to cheat I would pass the

sheet of paper when the five minutes are

over I would say please shred the piece

of paper put the little pieces in your

pocket or in your backpack and tell me

how many questions you got correctly

people now solve seven questions on

average now it wasn’t as if there’s a

few bad apples a few people who did a

lot instead what we saw is a lot of

people who cheat a little bit now in the

economic theory cheating is a very

simple cost-benefit analysis you say

what’s the probability of being caught

how much do I stand to gain from

cheating and how much punishment would I

get if I get caught and you weigh these

options are to do the simple

cost-benefit analysis then you decide

whether it’s worthwhile to commit the

crime or not so we try to test this for

some people we varied how much money

they could get away with how much money

they could steal we paid them ten cents

per correct question 50 Cent’s $1 $5 $10

per correct question you would expect it

as the amount of money on the on the

table increases people would cheat more

but in fact it wasn’t the case we got a

lot of people cheating by still by a

little bit what about the probability of

being caught some people shredded half

the sheet of paper so there was some

evidence left some people shredded the

whole sheet of paper

some people shredded everything went out

of the room and paid themselves on the

ball of money that had over a hundred

dollars you would expect it as the

probability of being caught goes down

people would cheat more but again this

was not the case again a lot of people

cheated by just by a little bit and they

were uncensored to these economic

consent

so we said if people are not sensitive

to the economic rationale theory

explanations to these forces what could

be going on and we thought maybe what is

happening is that there are two forces

at one hand we all want to look at

yourself in the mirror and feel good

about ourselves so we don’t want to

cheat and the other hand we could cheat

a little bit and still feel good about

ourselves so maybe what is happening is

that there’s a level of cheating we

can’t go over but we can still benefit

from cheating at a low degree as long as

it doesn’t change our impressions about

ourselves we call this like a personal

fudge factor now how would you test a

personal fudge factor initially we said

what can we do to shrink the fudge

factor so we got people to the lab and

we said we have two tasks for you today

first we asked half the people to recall

other ten books to read in high school

or to recall the Ten Commandments and

then we tempted them with cheating turns

out the people who try to recall the Ten

Commandments and in our sample nobody

could recall the Ten Commandment but

those people who tried to recall the Ten

Commandments given the opportunity to

cheat did not cheat at all it wasn’t

that the more religious people the

people who remembered more of the

commandment cheated less and the less

religious people the people who could

remember almost any commandment you did

more the moment people thought about

trying to recall the Ten Commandments

they stopped cheating in fact even when

we give self-declared atheists the task

of swearing on the Bible and we give

them a chance to cheat they don’t cheat

at all now Ten Commandments is something

that is hard to bring into the education

system so we said why don’t we get

people to sign the honor code so we got

people to sign I understand that this

short survey falls under the MIT honor

code then this shredded it no cheating

whatsoever and this is particularly

interesting because MIT doesn’t have an

honor code

so all this was about decreasing the

fudge factor what about increasing the

fudge factor the first experiment I

walked around MIT and I distributed six

packs of cokes in their refrigerators

these were common refrigerators for the

undergrads and I came back to measure

what we technically called the half

lifetime of coke how long does it last

in the refrigerators and you can expect

it doesn’t last very long people take it

in contrast I took a plate with six $1

bills and I left those plates in the

same refrigerators no bill was ever

disappeared now this is not a good

social science experiment so to do it

better I did the same experiment as I

described to you before a third of the

people we pass the sheet they gave it

back to us a third of the people we

passed it they shredded it they came to

us and said mr. experimenter I solved X

problems give me X dollars a third of

the people when they finish reading the

piece of paper they came to us and said

mr. experimenter I solved X problems

give me X tokens we did not pay them

with dollars we pay them with something

else and then they took this something

else they walked 12 feet to the side and

exchanged it for dollars think about the

following intuition how bad would you

feel about taking a pencil from work

home compared to how bad would you feel

about taking ten cents from a petty cash

box these things feel very differently

with being a step removed from cash for

a few seconds by being paid by token

make a difference our subjects double

their cheating

I’ll tell you what I think about this in

stock market in a minute but this did

not solve the big problem I had with

anyone yet because in any one is also a

social element people see each other

behaving in fact every day when we open

the news we see examples of people

cheating what does this causes us so we

did another experiment we got the big

group of students to be in the

experiment and we prepaid them so

everybody got an envelope with all the

money for the experiment and we told

them at the end we asked them to pay us

back the money they didn’t make okay the

same thing happens when we give people

the opportunity to cheat they cheat that

you just buy a little bit all the same

but in this experiment we also higher

than acting’s to

this acting student stood up after 30

seconds and said I solved everything

what do I do now and the experimenter

said if you finished everything go home

that’s it the task is finished so now we

had a student an acting student that was

a part of the group nobody knew there

was though it was an actor and they

clearly cheated in a very very serious

way what would happen to the other

people in the group will they cheat more

or will they cheat less here is what

happens it turns out it depends on what

kind of sweatshirts they are wearing

here is the thing we ran this at a

Carnegie Mellon in Pittsburgh and the

Carnegie at Pittsburgh that two big

universities Carnegie Mellon University

of Pittsburgh all of the subjects

sitting in the experiment were Carnegie

Mellon students when the actor was

getting up was the Carnegie Mellon

student pretty it was actually a con

email student but he was a part of their

group cheating went up but when he

actually had the University of

Pittsburgh sweatshirt cheating went down

now this is important because remember

when the moment the student stood up it

made it clear to everybody that they

could get away with cheating because the

experimenter said you finished

everything go home and they worked with

the money so it wasn’t so much about the

probability of being caught again it was

about the norms for cheating somebody

from our in-group cheats and we see them

cheating we feel it’s more appropriate

as a group to behave this way but if

it’s somebody from another group these

terrible people I mean not terrible in

this but somebody we don’t want to

associate ourselves with from another

university another group office and

people awareness of honesty goes up a

little bit like the Ten Commandment

experiment and people cheat even even

less so what what have we learned from

this about cheating we’ve learned that a

lot of people can cheat they cheat just

by a little bit when we remind people

about the morality they cheat less when

we get bigger distance from cheating

from the object of money for example

people cheat more and when

we see things of cheating around us

particularly if it’s a part of our

in-group cheating goes up now if we

think about this in terms of the stock

market think about what happens what

happens in a situation when you create

something where you pay people a lot of

money to see reality in a slightly

distorted way would they not be able to

see it this way of course they would

what happens when you do other things

like you remove things from money

you call them stock or stock option

derivatives mortgage-backed securities

could it be that with those more distant

things it’s not a token for one second

it’s something that these many steps

removes for money for much longer time

could it be but people would cheat even

more and what happened to the social

environment when people see other people

behave around them I think all of those

forces worked in a very bad way in the

stock market

more generally I want to tell you

something about behavioral economics we

have many intuitions in our life and the

point is that many of these intuitions

are wrong the question is are we going

to test those intuitions we can think

about how we’re going to test this

intuition in our private life in our

business life and most particularly when

it goes to policy when we think about

things like No Child Left Behind when

you create new stock markets when you

create other policies taxation health

care and so on and the difficulty of

testing on intuition was was the big

lesson I learned when I went back to the

nurses to talk to them so I went back to

talk to them and tell them what I found

out about removing bandages and I

learned two interesting things one was

that my favorite nurse Ettie told me

that I did not take her pain into

consideration she said of course you

know it was very painful for you but

think about me as a nurse taking

removing the bandages of somebody I

liked and had to do it repeatedly over a

long period of time creating so much

torture was not something that was good

for me - and she said maybe part of the

reason what it was it was difficult for

her which was actually more interesting

than that because she said I did not

think that your intuition was right I

thought my intuition was correct so if

you think about all of your intuitions

think about it’s very hard to believe

that your intuition is wrong

she said given the fact that I thought

my intuition was right she thought her

intuition was right it was very

difficult for her to accept doing a

difficult experiment to try and check

whether she was wrong but the fact this

is the situation we’re all brawling all

the time we have very strong intuitions

about all kinds of things our own

ability how the economy work how we

should pay schoolteachers but unless we

start testing those intuitions we’re not

going to do better and just think about

how better my life would have been if

these nurses would have been willing to

check their intuition and how everything

would have been better we would just

start doing more systematic

experimentation of our intuitions thank

you very much

[Applause]

what does a machine know about itself

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smarter planet