When Are People Willing to Deceive Others?

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.
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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

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Good Politicians Are Bad at Running the Country

It you want to be more than a state level politicians, you need to be really good at fundraising, public speaking, and smiling into a camera. Unfortunately, those abilities don’t make you better at running the country, and that mismatch between the skills needed to get the job and the skills needed to do the job is a serious problem that leads to sub-optimal governing. Imagine if in order to play quarterback for the Dolphins you needed to be a scratch golfer and speak French. The team probably wouldn’t end up with very many good quarterbacks, yet we essentially follow the same protocol when choosing politicians.

Thus far the only good news was that the qualities needed to be a high level politician were neutral. Being good looking won’t make you a better president, but it won’t make you worse at the job. Unfortunately, a recent study in Psychological Science shows that narcissism, a trait possessed by numerous politicians, makes people think you are a better leader but actually makes you worse at leading.

Despite people’s positive perceptions of narcissists as leaders, it was previously unknown if and how leaders’ narcissism is related to the performance of the people they lead. In this study, we used a hidden-profile paradigm to investigate this question and found evidence for discordance between the positive image of narcissists as leaders and the reality of group performance. We hypothesized and found that although narcissistic leaders are perceived as effective because of their displays of authority, a leader’s narcissism actually inhibits information exchange between group members and thereby negatively affects group performance.

Given the total shamockery that the Republican debates have become, you’d think that somebody (the media, the political parties) would be trying something (anything!) to better align the skills needed to become president and the skills required to do the job. Maybe instead of standard debate questions candidates could describe their response to some fictional and apolitical ethical or moral dilemma. Letting Americans see a candidate’s judgment outside the political sphere would at least give them more information than the slew of talking points and unrealistic proposals they get now.

The point is that the tendency for good politicians to make bad leaders only seems to be worsening with the infusion of money and media into politics, and therefore it seems like a good idea for people to start thinking about ways to reverse the trend.
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Nevicka B, Ten Velden FS, De Hoogh AH, & Van Vianen AE (2011). Reality at odds with perceptions: narcissistic leaders and group performance. Psychological science, 22 (10), 1259-64 PMID: 21931153

People Are More Likley to Lie When Communicating Online

Did that “young successful entrepreneur” you met on e-Harmony turn out to be a 40-year-old American Idol memorabilia salesman? Sorry, science can’t explain your inability to properly screen people. However, for those who often come across less blatant online exaggerations of the truth, you might take some comfort in new research showing that communicating online does increase the propensity to be dishonest.

This study investigated frequency of deception when getting to know a stranger face to face or using computer-mediated technologies. Same-sex pairs of undergraduate participants engaged in 15-min conversations using e-mail, instant messenger, or speaking face to face. Afterward, target participants reviewed transcripts of their conversations and recorded inaccuracies. The results showed increased deception in the computer conditions, compared to the face-to-face condition, with the most lies found in e-mail messages.

The authors attribute the results to “deindividuation” — the tendency for individuals to lose their sense of evaluation or adherence to social norms (e.g. truth-telling) when given anonymity.

As more and more social interactions (e.g. romantic partner selection, employee hiring) begin to take place online, this kind of thing could have a larger and larger effect. Still, it’s unlikely that the efficiency gains from conducting interactions online don’t vastly outweigh the losses from increased dishonesty. It will be interesting to see if the differences between online and face-to-face communication begin to grow or shrink over time as online interaction becomes more ingrained in society.

Although the results of the study are very broad, one specific application may involve public opinion surveys.  The anonymity of an online survey is unlikely to make a Rick Perry supporter claim he’s going to vote for Barack Obama, but in terms of policy questions that ask for Likert Scale-type answers, an online format may make people more likely to learn toward overly altruistic answers (more help for the poor) or answers that support token American values (no taxes ever).
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Zimbler, M., & Feldman, R. (2011). Liar, Liar, Hard Drive on Fire: How Media Context Affects Lying Behavior Journal of Applied Social Psychology, 41 (10), 2492-2507 DOI: 10.1111/j.1559-1816.2011.00827.x

What the Downfall of Newspapers Portends for Education

When people talk about an education “bubble” they tend to compare it to housing (Helloooo availability bias), but the best analogy for explaining why the higher education system could ultimately break down comes from the way technology changed print journalism.

Seventy years ago if you lived in San Francisco and wanted to read an article about a Supreme Court decision, you couldn’t read about it in the San Diego Union-Tribune, you had to read about it in the San Francisco Chronicle. That meant the San Francisco Chronicle needed to pay a writer to cover the Supreme Court. Similarly, if you lived in San Diego, you couldn’t read the San Francisco Chronicle, you had to read the San Diego Union-Tribune. That meant the Tribune also needed to pay a reporter to cover the Supreme Court.

Once the internet came around, somebody living in San Diego could easily read a story on the Supreme Court written by the San Francisco Chronicle’s reporter, and they could do it for free.  They could even read a story written by the Supreme Court guy at the New York Times. The result was that it became pointless for the Tribune to pay their own Supreme court reporter. This type of thing happened to nearly every department at nearly every newspaper. Because the internet could bring a piece of content to the entire country, Americans no longer needed 100 reporters writing the same story.

Now think about the higher education system. Seventy years ago if you were attending Harvard and wanted to learn about economics, you couldn’t learn from a Princeton professor, you had to learn from a professor at Harvard. The reverse was true for a student and Princeton. That meant both Harvard and Princeton needed to hire professors to teach economics, and students interested in learning economics from those professors had to attend Harvard or Princeton.

Flash forward to 2011. We know that the internet’s ability to bring a piece of content to the entire country created a huge excess of newspaper reporters and articles, but people are slow to realize that that ability will eventually do the same with college classes.  Right now the bulk of the population can’t fathom losing the personal touch of a lecture hall, but there is no real reason why the country needs 500 different Econ 101 classes. It’s a waste of resources, just as having 500 Supreme Court reporters is a waste of resources.

Education won’t change as quickly as newspapers did. Reformers still need to find accurate and efficient ways to conduct assessment and credentialing through online classes. There also remains an institutional bias against online learning, and elite institutions will surely put up a frantic fight to preserve the current system. Newspapers held out for a long time, but eventually they fell. The same will happen with a good chunk of higher education.

Can Professors Buy Positive Evaluations Through Grade Inflation?

Do you take your professor evaluations extremely seriously? Do you meticulously add up every lackluster response, burst of insight, or hilarious joke about the dean? Well, it turns out your evaluation is still biased by how you expect to do in the class, and according to a recent paper that provides an incentive for professors to buy positive evaluations through grade inflation.

Course evaluation scores are known to be positively correlated with students’ expected grades, and this paper tests whether or not there is an incentive for the instructor to “buy” higher evaluation scores by inflating grades. To test this hypothesis, I use unique data from the University of Washington’s Office of Educational Assessment that includes a measure of each student’s relative expected grade in the course. I find that there is an incentive for instructors to grade leniently after accounting for the potential endogeneity of the relative expected grade variable due to unobserved teacher productivity and unobserved heterogeneity of instructors and departments.

What’s interesting is that according to the paper many schools already have professor evaluation algorithms that take expect student grades into account, they just don’t place enough weight on it.

The silver-lining here is that the principal-agent problem in professor evaluations doesn’t apply to other areas where professionals are fighting anonymous evaluation (e.g. medical care.) Professors are responsible for providing two distinct products — a grade that serves as a signal of student ability and the actual knowledge students acquire  — and that allows them to buy a positive evaluation on the delivery of one product by freely increasing the quality of the other product. Doctors, on the other hand, deliver only one product (medical care), and so the only way doctors can “buy” a positive evaluation is to do a good job delivering their lone product (i.e providing excellent or extremely cost-effective medical care.)
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Ewing, A. (2011). Estimating the Impact of Relative Expected Grade on Student Evaluations of Teachers Economics of Education Review DOI: 10.1016/j.econedurev.2011.10.002

Can Rick Perry Take Credit for a Rangers World Series Title?

Campaign season means it’s time for candidates to attempt to take credit for everything positive that’s less than six degrees removed from anything you’ve ever been involved in. So why might Perry claim a hand in the Rangers success? The answer is that Texas has no state income tax, and according to a new study in the Journal of Sports Economics, that can give a team a quantifiable advantage.

This basic specification suggests that each percentage point of an income tax raises free agent salaries by $21,000 to $24,000; other estimates indicate even larger impacts. These findings suggest that the existence of this additional salary demand means that low-tax cities (e.g., Florida, Texas, and Washington) have a ‘‘home field advantage’’ in the baseball free agent market.

How much credit could Perry conceivably claim? Let’s try and figure it out with some extremely shoddy back-of-the-envelope calculations.

The 23 non-Canada, non-DC teams that are subject to state income tax have an average rate of 6.75%. Given the average savings of $21k-$24k per percentage point, the Rangers can save approximately $150,000 on each player compared to these teams. However, not every player on the Rangers 40-man roster was eligible to earn a free-market salary through arbitration or free agency. A quick glance at the roster reveals about 19 players who engaged in some type of salary negotiation with the Rangers. Although the teams saves vastly different amounts from high-salaried and low-salaried players, for the purpose of simplicity let’s stick the with the average figure of $21k-$24k per percentage point that the researchers came up with.

Adding the tax policy savings of those 19 players nets the Rangers a payroll discount of almost $3 million. The Rangers payroll at the beginning of the year was almost $92 million, meaning their tax savings are around 3% of payroll. This is right in line with the researchers’ estimate that “after correcting for multiple tax venues, Florida, Tampa Bay, Texas, Houston, and Seattle may be able to sign free agents at a salary savings of from 2% to 3% relative to other clubs.” Clearly, a team’s success is not directly related to payroll, but given the extremely simple and highly suspect nature of my “model,” let’s assume it is and say that the lack of a Texas income tax is responsible for 3% of the Rangers success.

Research has also shown that $3 million in additional salaries adds somewhere between .3 and .5 wins per season. The Rangers payroll was almost exactly at the league average of $92.9 million, but the team won 14 more games than the average MLB team. It’s hard to know the marginal value of each dollar, but if we apply the “wins-per-$3 million” numbers strictly to those 14 wins, we also get that the $3 million in savings is responsible for approximately 3% of the team’s unexpected success. (Nate Silver, where are you? Help me out.)

Now let’s get back to Rick Perry. The biggest obstacle to Perry’s potential claim on the Rangers’ success is that Texas had no income tax before Perry became governor. While it is unlikely Perry would ever attempt to institute a state income tax, he can claim some tiny amount of credit for resisting the urge to do so. In addition, Perry was the agricultural commissioner of Texas in 1993 when the amendment that outlawed the state income tax was passed. Although it’s unlikely he played a major role in the process, let’s also give him some credit for his presence in state politics at the time. All in all, let’s say there is a 1 in 500 chance that without Perry Texas would currently have a state income tax. Combine the 3% of the Rangers success that arises from state tax policy with Perry’s .2% responsibility for that policy, and we get that Perry can legitimately claim he is responsible for .006% of the Rangers success.

Take it and run with it Rick. Just don’t mention the Astros.
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Alm, J., Kaempfer, W., & Sennoga, E. (2011). Baseball Salaries and Income Taxes: The “Home Field Advantage” of Income Taxes on Free Agent Salaries Journal of Sports Economics DOI: 10.1177/1527002511422567

Social Psychology Explains Congressional Dysfunction: Part II

Last week I wrote about how the recent zero-sum nature of public policy (e.g. Mitch McConnell’s stated priority of making Obama a one-term president) overrides the compromise-inducing strategy of perspective taking.  Unfortunately, that’s that the only reason to doubt our political system. A new study by researchers at the University of Amsterdam provides yet another explanation for why zero-sum congressional negotiations lead to so many impasses.

The researchers examined how knowing your opponent’s motivation affects negotiation in “appetitive competition” (where the goal is to outperform the other party) and “aversive competition” (where the goal is to avoid losing). They hypothesized that “appetitive” competitions would lead to more agreement, but that when competitors had information about each other’s motivations the opposite would occur.

Once appetitive competitors know their counterpart also seeks relative gain and will not settle for anything less, their only way out is through a fierce battle that might result in an impasse with no outcome for both. Thus, whereas knowing one’s counterpart also is an aversive competitor may help in reaching agreement, knowing one’s counterpart also is an appetitive competitor undermines the likelihood of agreement.

Subjects in the experiment were told they were the buyer or seller of a prospective company and then given a set of preferences for five issues related to the sale on which they would need to negotiate. Half the subjects were primed to pursue “aversive goals” and half were primed to pursue “appetitive” goals. In addition, half the subjects were informed of their opponent’s motivation, and half were kept in the dark. The results confirmed the proposed hypothesis — knowing your opponent’s motivation kills agreement in an “appetitive” competition.

Whereas this information enabled aversive competitors to build-in safety, to develop trust, and to reach agreements that provided both parties with high outcomes, this information shattered appetitive competitors’ confidence and pushed them into an escalatory spiral with an almost guaranteed lose–lose end result.

In the last ten years the distinction between electoral politics and the politics of actually governing has nearly disappeared. The result is that every negotiation over policy has become extremely “appetitive.” Instead of the goal being to solve a problem with minimal “losses”, the goal is to gain an advantage over the other party. What’s worse, both parties know this, thereby fulfilling all the requirements for the disastrous negotiations the paper’s authors predict.
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Ten Velden, F., Beersma, B., & De Dreu, C. (2011). When competition breeds equality: Effects of appetitive versus aversive competition in negotiation Journal of Experimental Social Psychology, 47 (6), 1127-1133 DOI: 10.1016/j.jesp.2011.06.003