CE26 - Innovation, travail

A study on Dishonesty: from Emotions and Cognition to InStItutions and OrganizatioNs – DECISION

A study on Dishonesty: from Emotions and Cognition to InstItutions and Organizations

Dishonesty is a pervasive phenomenon of our society with extremely detrimental consequences for society, negatively impacting<br />growth, democracy and living conditions. It increases transaction costs, reduces trust, impedes the functioning of the political system, and undermines security. Understanding the factors that influence the decision to act dishonestly is of fundamental importance in order to understand many economic behaviors.

Developing a pioneer analysis of the mechanisms, internal and external to the individual, that are involved in the decision to act dishonestly

• Objective 1: providing a clear-cut analysis of the cognitive and emotional factors related to the intrinsic cost of dishonesty. This objective is addressed in Task 1. In particular, we plan to study the extent to which the intrinsic cost of cheating is modulated by motivated memory (the fact that people may forget or distort unwanted memories), attentional biases (the tendency of people to focus on certain information over other) and status quo biases (a preference for the current state of affairs), and how intrinsic honesty is affected by positive and negative emotions.<br /><br />• Objective 2: identifying what organizational features contribute to individual & joint dishonesty. To pursue this objective (in Task 2), we focus on few key organizational aspects, namely (i) how incentives and feedback, by interacting together, affect honest behavior; (ii) how managers strategically choose the mean of communication and its content to convey false information or to push workers to cheat; (iii) how social ties between workers contribute to individual and joint dishonesty in the workplace; and finally (iv) how a moral and honest corporate culture can be restored by replacing the managers.<br /><br />• Objective 3: studying how deterrence institutions and social norms impact on people’s intrinsic honesty. We address this objective in Task 3 by investigating the spillover effects of formal and informal institutions on intrinsic honesty. This will be done by means of field experiments and a study across different countries.

DECISION combines knowledge from different disciplines (economics, psychology, political science, neurosciences). It employs different methods, including theoretical modeling based on behavioral game theory, experimental methods (laboratory, field and on-line experiments, analysis of psychometric data), survey methods, and econometric analysis.

At the individual level, we find that purely hedonic considerations, such as the maintenance of a positive self-image, are not sufficient to motivate unethical amnesia, but the addition of an instrumental value to forgetting triggers such amnesia. Individuals forget their past lies more when amnesia can serve as an excuse not to engage in future morally responsible behavior. These findings shed light on the interplay between dishonesty and memory and suggest further investigations of the cost function of unethical amnesia.

At the organizational level, we find that people lie more when placed in a competitive rather than a non-competitive setting, but only if everyone has the opportunity to cheat. Providing continuous feedback on other workers increases cheating under a piece-rate scheme but not in a competitive setting. These results provide new insights on the role that feedback plays on cheating behavior in dynamic settings under different payment schemes, and shed light on the origins of the effect of competition on dishonesty.

At the societal level, we find that formal institutions have important spillover effects on intrinsic honesty. In particular, we find that the exposure to ticket inspections in the context of public transport increases unethical behavior in a subsequent unrelated context. The effect is similar for both fraudsters and non-fraudsters. This result has important policy implications. It suggests that policy-makers should adopt a social welfare perspective when they evaluate the efficacy of an institution. This requires ensuring that, in the aggregate, the positive effects of a deterrence institution are not cancelled out by spillovers into contexts beyond its direct target.

Finally, we find that, in the context of tax evasion, people are generally over-inspected by the human tax agents and react to this with nearly full compliance. This suggests that a tax institution can use aggressive audit strategies to raise and sustain tax compliance.

DECISION contributes to the Axe 4.1 of the AAPG 2019 by addressing one of the major problems of modern society which is relevant to many spheres of economic and social life: dishonesty.

In times of deep economic slowdown, insecurity and general distrust in political and economic institutions, it is of extremely importance to better understand the mechanisms, internal and external to the individual, that are involved in the decision to act dishonestly. The goal is contribute to social innovation by providing insights on how to develop more effective tools to discourage dishonest behavior in order to restore trust, stimulate growth and improve citizens’ living conditions. By analyzing the emotional and cognitive determinants of dishonest behavior (Task 1), DECISION intends to contribute to a new theoretical framework of economic behavior which better explain why and when people behave dishonestly. By providing an original economic analysis of dishonest behavior within organizations (Task 2), DECISION will generate new economic insights on how private and public organizations can reduce the costs of occupational fraud and dishonesty in the workplace. Finally, by examining the relationship between intrinsic honesty and the institutional environment (Task 3), DECISION will provide new knowledge on how to design better institutions which account for potential spillover effects across contexts and the mutability of social norms.

From a scientific and methodological point of view, the results of this project will immediately provide important advances on the disciplines of economics, psychology and neuroscience. In addition, we expect them to have an impact also in neighboring disciplines investigating the foundations of human behavior and societies, like evolutionary biology and anthropology, and disciplines studying the effects of institutional and organizational processes in practice, like law, organizational science and governance.

1. Galeotti, F., V. Maggian, and M.C. Villeval (forthcoming) «Fraud Deterrence Institutions Decrease Intrinsic Honesty«, The Economic Journal.
2. Galeotti, F., C. Saucet, and M.C. Villeval (2020) «Unethical amnesia responds more to instrumental than to hedonic motives«, Proceedings of the National Academy of Sciences, 117 (41).
3. Benisant, J., Galeotti, F. and M.C. Villeval «The Distinct Impact of Information and Incentives on Cheating«, IZA Discussion Paper No. 14014 (under review at Journal of Economic Behavior & Organization)
4. Mittone, L., Ploner, M. & Verrina, E. (forthcoming) When the state does not play dice: aggressive audit strategies foster tax compliance. Social Choice & Welfare.

Dishonesty is a pervasive phenomenon of our society. It occurs when an agent violates certain moral or legal rules to gain a personal advantage. Dishonest practices have extremely detrimental consequences for society, negatively impacting growth, democracy and living conditions. They increase transaction costs, reduce trust, impede the functioning of the political system, and undermines security. Identifying the factors that influence the decision to behave dishonestly is of fundamental importance in order to understand many economic behaviors and promote a virtuous society. DECISION develops a pioneer analysis of the mechanisms, internal and external to the individual, that are involved in the decision to act dishonestly. To achieve this, it adopts a distinctive three-fold strategy. First, it looks at the individual and its internal psychological, cognitive and affective states. After that, it considers the wider context of an organization and the workplace where multiple individuals interact together. Then, it further enlarges the focus by studying how dishonesty varies and spreads in society where the interactions between individuals are regulated and shaped by formal and informal institutions.

More specifically, DECISION studies:

(i) The emotional and cognitive determinants of dishonest behavior (Task 1);

(ii) Which features of an organization contribute to individual and joint dishonesty (Task 2);

(iii) How deterrence institutions and social norms impact on intrinsic honesty (Task 3).

DECISION is based on a four-year interdisciplinary program which incorporates knowledge from different disciplines, including economics, psychology, political science, and neurosciences. It also embraces a multi-methodological approach involving theory, experiments (in the laboratory, in the field and on-line), the study of psychometric data, and the analysis of real world data. Over the course of these four years, DECISION is expected to generate substantial research advances to the understanding of dishonest behavior and provide important policy recommendations on how to reduce dishonest behavior and minimize its social impact.

Project coordination

FABIO GALEOTTI (GROUPE D'ANALYSE ET DE THEORIE ECONOMIQUE LYON - ST-ETIENNE)

The author of this summary is the project coordinator, who is responsible for the content of this summary. The ANR declines any responsibility as for its contents.

Partner

GATE -CNRS GROUPE D'ANALYSE ET DE THEORIE ECONOMIQUE LYON - ST-ETIENNE

Help of the ANR 262,531 euros
Beginning and duration of the scientific project: October 2019 - 48 Months

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