The Fudge Factor

Week three of Dan Ariely's online course on behavioral economics A Beginner's Guide to Irrational Behavior covered dishonesty. There were a lot of interesting tidbits that are relevant to both work and personal life.

Ariely's main premise is that the simple model of rational crime (moral issues are about cost vs. benefit) is outdated. People cheat for many reasons and cost benefit analysis isn't much of a deterrent.

Shrinking & Expanding the “Fudge Factor”

There’s a psychological benefit to viewing ourselves as basically good people and weighing that against economic incentive. Perhaps due to our flexible cognitive abilities and the fact that we can rationalize our actions quickly, we allow ourselves to cheat just a little. That’s the fudge factor—how much we allow ourselves to cheat before it hurts our own view of ourselves as good people.
 

How do we shrink the fudge factor? Remind people of their own morality. Just thinking about morality shrinks the fudge factor and can make us more honest.

What things expand the fudge factor?

• Increasing the distance from money (e.g. tokens, chips, cards, etc.), which is not good news for a society moving further and further away from cash
• Social proof that it’s okay; people cheat much more when they see others in their social group cheating because it provides social proof that it’s okay
• Certain personality traits foster cheating behavior, e.g., creative people cheat more, possibly because they are better at rationalizing their own behavior

Things we should stay aware of to monitor our own behavior:

• Conflicts of interest operate within the fudge factor; such conflicts allow us to justify unethical behavior, even unintentionally
• Our own interests can blind us from seeing the interests of others; but, if we understand that all of us are blinded by conflicts of interest, we can try to prevent ourselves from rationalizing our own deceptive behavior
• “Sunshine” policies of disclosure do not fix the problem
• Once we do a good deed (even something as simple as behaving in a “green” way), we tend to give ourselves a free pass on the next opportunity to misbehave, be selfish, or even cheat