October 31, 2011 1 Comment
One of the more interesting psychological elements of the financial crisis is how the public characterizes people like Bernie Madoff or the Wall Street “geniuses” who sold billions worth of retranched junk CLOs labeled as AAA bonds. People often describe them as “bad” or “evil”, but I think this tends to downplay influential environmental factors. A new study about our desire to enter situations in which we can deceive another person appears to back this up.
Researchers from the University of Amsterdam presented subjects with an alternate version of the Ultimatum Game. Instead of dividing up a certain amount of money, subjects divided up 30 chips. In the “low temptation” condition, each chip was worth 1 monetary unit for both the proposer and the responder. This condition was essentially the same as the standard ultimatum game. However, in the “high temptation” condition the chips were worth 2 units to the proposer and 1 unit the responder, a fact that the responder was not aware of. That meant the proposer could appear to be fair by dividing the chips 15-15, but actually give himself more money. Before making an offer, subjects were told that instead of playing the game, they could simply accept 14 or 16 chips. The researchers found that subjects were much more likely to avoid playing the game in the “high temptation” condition, thereby demonstrating that people tend to avoid situations in which they can deceive others.
The really interesting finding emerged in a follow up experiment in which the researchers tested how viewing your partner in a cooperative or competitive light affected the decision to play the game. When a partner was shown to be cooperative, subjects were more likely to play in the “low temptation” condition than the “high temptation” condition. However, when the partner was shown to be competitive, subjects were more likely to play in the “high temptation” condition than the “low temptation” condition. In other words, although people generally avoid situations where they can deceive others, if they are in a competitive mindset they prefer situations in which they can deceive others.
The idea that people who are engaged in competition are more open to deception may seem obvious, but the beauty of the study is that it shows how a very subtle change in viewpoint can create a huge swing from altruism to deception. To tie it all back to the financial crisis, the implication is that the competitive culture of Wall Street is as much of a culprit as any banker’s individual personality. The depressing part is that it means that changing the laws or the people won’t really do much to change the nature of how Wall Street does business.
The study is also fascinating from an evolutionary psychology standpoint. Perhaps initially the ability to deceive others was beneficial for survival, but as society became more organized and reputations became more important, deceiving others became a bad thing. However, by that point we were unable to choose not to deceive, and so we developed an adaptation to simply avoid situations where deception was possible.
Shalvi, S., Handgraaf, M., & De Dreu, C. (2011). People avoid situations that enable them to deceive others Journal of Experimental Social Psychology, 47 (6), 1096-1106 DOI: 10.1016/j.jesp.2011.04.015