Transcript 2013 Summer School Presentation Class One 1.03

SOCIAL NETWORKS, SOCIAL NORMS,
AND BEHAVIORAL ANALYSIS
LIOR STRAHILEVITZ ,
UNIVERSITY OF CHICAGO LAW SCHOOL
Class 1 – The Rational Actor Model and Its Complications
COURSE OVERVIEW
•
Today’s lecture: The Rational Actor Model and Its Complications – How does classical
economics assume people will behave and how consistent are these assumptions with
laboratory and real-world observations?
•
Tomorrow’s lecture: Law & Social Norms – What role do informal social norms play in
supplementing formal law? Are such norms efficient? How are they enforced?
•
Wednesday’s lecture: Social Psychology & Personality Heterogeneity – Do people have similar
or dissimilar personalities and dispositions? Can variation be understood in a systematic way?
How might law be tailored in light of personality heterogeneity?
•
Thursday’s lecture: Social Network Theory – How does information flow among people and
within organizations? Is information transmission predictable? What are the economic
consequences of particular pathways for information to flow? Is knowledge transmission
culturally contingent?
•
Friday lecture: Legal applications – How might behavioral law & economics influence regulatory
policy? How do social norms incentivize the creation of intellectual property? Can personality
explain variation in the way judges think about criminal procedure? Can social network theory
explain and rationalize information privacy law?
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
THEME OF THIS COURSE: BREADTH NOT DEPTH
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
REMINDER
•
Slides for every lecture will be made available to you in electronic form after class.
•
Also, there will be a short (5 minute) break after approximately 60 minutes
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
HOMO ECONOMICUS – THE RATIONAL ACTOR
•
Rational actor model assumes that people:
• Maximize their utility
• Utility is based on stable set of preferences
• Obtain optimal quantity of information and other inputs
Gary S. Becker, The Economic Approach to Human Behavior (1976)
•
Application: Ultimatum Game
• Two-player game. Player A is given $10. Player B is given nothing. Player A offers
some amount of that dollar to Player B, who can accept the offer and obtain the
offered amount or reject the offer and obtain no money.
• Rational Actor A offers $.01 dollar to Rational Actor B. Rational Actor B accepts and
takes $.01. Rational Actor A keeps $9.99.
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
NEED FOR BEHAVIORAL ANALYSIS
•
Results from experiments suggest that very few people playing ultimatum game will
accept an offer of $.01, and rejected offers are common below $4.00 (Jolls et al. at
1491). This experimental result does not surprise many people. Even when the stakes
are high (several months’ wages in Indonesia), ultimatum participants tend to offer a high
percentage, and offers below 35% were frequently rejected. Cameron, Raising the Stakes
in the Ultimatum Game: Experimental Evidence from Indonesia, 37 Econ. Inquiry 47
(1999). These results and intuitions help spark desire for a model of human behavior that
better reflects the real world.
•
Jolls, Sunstein & Thaler, A Behavioral Approach to Law and Economics, 50 Stan. L. Rev.
1471 (1998).
• Bounded Rationality
• Bounded Willpower
• Bounded Self-Interest
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
BOUNDED RATIONALITY
•
Origins in the work of Herbert Simon, A Behavioral Model of Rational Choice, 69 Q.J.
Econ. 99 (1955). Simon awarded Nobel Prize in 1978.
• Finds that people often satisfice instead of optimizing. They make a “good enough”
decision, given constraints on information available to them, time constraints,
cognitive limitations, etc. Example: I am running a small business, and I need to hire
a sales clerk. There are 100 applications for the position. I read the first ten
applications, find someone with good experience, interview her and hire her.
Stipulate that there is a stronger applicant whose application was not reviewed, but I
didn’t want to invest the time to find him, I wasn’t going to enjoy interviewing
additional people and making a harder decision, and I was not sure I would be able
to identify the stronger applicant correctly. I have satisficed instead of optimizing.
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
BOUNDED RATIONALITY (CONTINUED)
•
Kahneman (Nobel Prize in 2002) & Tversky show how heuristics (rules of thumb) are systematically
employed to guide decisionmaking. These can lead to common errors.
•
Losses and Gains are not treated equally (Prospect theory)
•
•
89% of undergraduates given a mug will refuse to trade mug for chocolate bar of equal value;
90% of undergraduates given a chocolate bar will refuse to trade it for mug of equal value.
Knetsch, The Endowment Effect and Evidence of Nonreversible Indifference Curves, 79 Am.
Econ. Rev. 1277 (1989). Effects diminish as consumers get more sophisticated and
experienced. List, Neoclassical Theory versus Prospect Theory: Evidence from the
Marketplace, 72 Econometrica 615 (2004).
Availability heuristic: Events that are easier to recall or salient are likely to weigh heavily on
decisionmakers; events that are harder to recall or less salient will weigh less heavily. Example: Are
there more words in the English language that begin with “R” or more words that have “R” as their
third letter?
•
Words with R as a third letter (e.g., north, shrink, burn) are more than twice as common
as words with R as the first letter (range, railroad, rower). But it’s easier to recall words
that begin with R.
•
People even make logical mistakes thanks to availability. People say that there are
more words ending in “ing” than there are words in which “n” is the second-to-last letter,
even though this is logically impossible.
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
ARE YOU MORE LIKELY TO BE KILLED BY A
SHARK OR A HORSE?
Sharks: One death per year in US
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
Horses: Twenty deaths per year in US
SUNK COSTS
Rational Actor Prediction
•
Sunk Costs will be ignored
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
Experimental Results
•
Students asked to play the ultimatum
game in which $10 was to be divided –
with funds provided by experimenters
– average minimum amount
demanded by Responders is $1.94
•
Students asked to play the ultimatum
game in which each contributes $5
from own pocket – average minimum
amount demanded by Responders at
least $3.21, with 23% to 40%
demanding $5.00 back
HINDSIGHT BIAS
Rational Actor model
•
People can evaluate matters
probabilistically, assess what might
have occurred regardless of what did
occur
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
Behavioral Model
•
Lay people, in groups or as individuals
more likely to say defendant negligent
when plaintiff was harmed, even holding
all facts pertinent to negligence constant
•
Interestingly, judges appear capable of
combating hindsight bias (or are drawn
from a pool not prone to it). See Chris
Guthrie et al., Blinking on the Bench:
How Judges Decide Cases, 93 Cornell L.
Rev. 1 (2007) (judges asked to rule on
motion to suppress and search warrant
application – both requiring probable
cause – statistically indistinguishable).
BOUNDED WILLPOWER
•
People succumb to temptation and engage in acts that they know they shouldn’t engage
in
• Example: Utilization of exercise facilities is much higher in the first few months of the
year (January, February) than in the last few months of the year (November,
December). New Year’s Resolutions are a major reason why, and exercise clubs
aggressively market one-year and two-year plans to new members around the
beginning of the year.
• People try to cope with bounded willpower by constraining themselves
• Tardy people set their watches five minutes early to avoid being late
• People install web site blocking software on own computers to prevent them
from accessing entertainment web sites when they should be working
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
BOUNDED SELF INTEREST
•
Experimental results from ultimatum game are consistent with bounded self-interest
•
Many people are more sensitive to their relative wealth rather than their absolute wealth.
Example: Would you prefer to make $50,000 if your peers typically earn $25,000 or
$100,000 if your peers typically earn $200,000? Roughly half the population chooses the
former and half chooses the latter, even after being told that the purchasing power of
money is constant across conditions (i.e., $100,000 buys twice as much as $50,000).
Solnick & Hemenway, Is More Always Better? A Survey on Positional Concerns, 37 J.
Econ. Behav. & Org. 373 (1998).
•
Many people are reciprocators. They will forego monetary rewards to share resources
with people who have shared with them, and they will expend scarce resources to punish
people who have treated them (or others) in an opportunistic manner. See Kahan, The
Logic of Reciprocity: Trust, Collective Action, and Law, 102 Mich. L. Rev. 71 (2003)
(reviewing studies). Reciprocal behavior tends to promote positive regard for others.
See, e.g., Sprecher et al., Taking Turns: Reciprocal Self-Disclosure Promotes Liking in
Initial Interactions, 49 J. Exper. Social Psych. 860 (2013).
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
RATIONAL ACTOR MODEL SUGGESTS THAT
AFTER LITIGATION, PARTIES SHOULD BARGAIN
•
•
Coase Theorum presupposes that some bargaining will occur once a court determines which
party in a dispute has the legal entitlement
•
Bilateral monopoly means transaction costs could be high
•
But in some category of cases the available surplus should exceed transaction costs
associated with bilateral monopoly and other forms of strategic behavior
Ward Farnsworth, Do Parties in Nuisance Cases Bargain After Judgment?, 66 University of
Chicago Law Review 373 (1999).
•
Key finding is that none of the 20 cases that he looked at (nuisance only cases, litigated to
court of appeals, injunction entered or denied) had any substantial talk of selling the
injunction / entitlement. And none of the lawyers felt that things would have been different
had the other party won.
•
There was a post-decision offer in only 1 of the 20 cases, and the parties never got close
to a deal
•
Lawyers in these cases often got along well, but the clients did not – lawyers describe an
“Acrimony premium”
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
RATIONAL ACTOR MODEL SUGGESTS THAT
AFTER LITIGATION, PARTIES SHOULD BARGAIN
•
Farnsworth at 405:
This discrepancy between the market-like norms about bargaining that economists
imagine and the other norms that lawyers may encounter even when transaction costs
are low might be behind the odd suggestion, made by one of the plaintiff's lawyers in
Payne v Skaar, that “(i)f Easterbrook ran the feedlot and Posner were the neighbor, we
might have been able to negotiate something,” but that the “frame of reference of
these people” was different. At first this sounds like a mistake on the order of
supposing that a Freudian is someone who acts as Freudian theory would predict. But
the attorney was gesturing toward a more reasonable point: translating entitlements
into opportunities for pecuniary improvement does not come naturally or comfortably
to everyone.
•
To what extent is this a selection effect in operation? Perhaps only psychopaths litigate
cases to their conclusion (especially against a neighbor). Rational actors settle. It appears
that firms that litigate cases to conclusion sometimes negotiate post-judgment.
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
THE UTILITY OF THE BEHAVIORAL ACCOUNT
•
Authors use it to explain existence of laws against ticket-scalping and usury, impulse for
price regulation following natural disaster
• Sharp deviation in price from the “reference transaction” likely to engender a
fairness-based backlash
• Reference transaction (ordinary price) acts as an “anchor” for subsequent transaction
• Sometimes, though, rationality prevails. Article (from 1998) says using demand to
price Broadway tickets would amount to a public relations “disaster”
• In 2011 the taboo was broken, and dynamic pricing has become the norm for
popular Broadway shows
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
THE UTILITY OF THE BEHAVIORAL ACCOUNT
•
Availability heuristic may explain enactment of many laws
•
Love Canal public emergency of 1978 leads to enactment of Superfund law in United States.
Significant expenditures on enforcement even though apparent health consequences from toxic
waste dumps are low compared to other environmental problems
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
MORE AVAILABILITY CASCADES?
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
DEBIASING THROUGH LAW
•
Limiting juror access to information to combat hindsight bias
•
Inform jurors of competing risks weighed ex ante by company
• Risks of commission: Using chemical may cause cancer that will kill x residents living
near manufacturing facility
• Risks of omission: Not using chemical may cause bacterial contamination that will kill
x consumers who use their otherwise beneficial product
• Jurors would not know which risk was actually manifested at time they must
determine liability
•
Adjust the liability threshold where hindsight bias is quite likely.
• If hindsight bias causes jurors to overestimate probability of harm, then raise
plaintiff’s burden to proving 75% probability of harm, rather than 51% probability (but
jurors are poor at making these judgments).
•
For a much lengthier treatment, see Jolls & Sunstein, Debiasing Through Law, 35 J. Legal
Studies 199 (2006).
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
SUNSTEIN TO OFFICE OF INFORMATION AND
REGULATORY AFFAIRS
•
Sunstein appointed by President Obama to become “regulatory czar” of United States,
served from 2009 to 2012
•
“What’s OIRA?”
•
OIRA has implemented an aggressively behavioralist agenda during Obama
Administration – see Sunstein, Empirically Informed Regulation, 78 University of Chicago
Law Review 1349 (2011). We will explore this in a bit more detail on Friday.
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
EXAMPLES OF RECENT OIRA REGULATIONS
•
Nutrition labeling: If product describes meat as 90% lean, it must also include its fat
percentage
•
Auto mileage labeling: Miles per gallon misleads consumers into thinking fuel costs gains
are linear. Increasing economy from 20 to 25 mpg saves more fuel than increasing from
30 to 38 mpg.
•
Retirement savings: Regulations making it easier for employers to adopt automatic
enrollment 401(k) pension plans
•
Direct enrollment (no forms to fill out) for subsidized school lunch programs, bring
additional 270,000 children into program
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
SOME OTHER KEY WORKS IN BEHAVIORAL LAW
& ECONOMICS
•
Richard A. Posner, Rational Choice, Behavioral Economics, and the Law, 50 Stanford Law
Review 1551 (1998) (responding to Jolls et al.)
•
Oren Bar-Gill, The Behavioral Economics of Consumer Contracts, 92 Minnesota Law
Review 749 (2008)
•
Uri Gneezy and Aldo Rustichini, A Fine is a Price, 29 Journal of Legal Studies 1 (2000)
•
John Bronsteen, Christopher Buccafusco, and Jonathan Masur, Happiness & Punishment,
76 University of Chicago Law Review 1037 (2009)
•
Avishalom Tor & William J. Rinner, Behavioral Antitrust: A New Approach to the Rule of
Reason After Reegin, 2011 University of Illinois Law Review 805
•
Tess Wilkinson-Ryan, Breaching the Mortgage Contract: The Behavioral Economics of
Strategic Default, 64 Vanderbilt Law Review 1547 (2011)
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
UP NEXT: CHEATING
BEFORE WE TRANSITION: WHAT HAVE I MISSED?
?
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
IN-DEPTH LOOK AT CHEATING THROUGH A
BEHAVIORAL LENS
•
•
Classical Economics: Gary Becker’s (Nobel Laureate 1992) Model of Crime (Crime and Punishment: An
Economic Approach, 76 J. Political Econ. 169 (1968)).
•
Let B = Monetary Gain from Committing Crime
•
Let L = Likelihood of Detection, Apprehension, and Conviction for Committing Crime
•
Let P = Criminal Justice System’s Penalty for Committing Crime
•
Homo economicus (rational actor) criminal will commit crime if B > L X P
•
If fines can be imposed then increasing P is less expensive to state than increasing L
•
See Levitt & Miles, Empirical Study of Criminal Punishment, 1 Handbook of Law & Econ. 455
(Polinsky & Shavell ed. 2007) (for much more analysis and a review of the empirical evidence).
Now suppose that the Criminal’s Self Worth declines if he commits a crime
•
Let W = Self Worth Effect from Committing Crime (typically a negative number = lower self worth)
•
Hence, homo behavioralis criminal will commit crime if (B + W) > (L X P)
•
Note that W is insensitive to probability of detection; Criminal knows he broke law
•
Shift from homo economicus to homo behavioralis, ceteris paribus, should permit society to reduce
investments in raising L and / or reduce P
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
WHAT DO WE KNOW ABOUT “W”?
•
Mazar, Amir & Ariely, The Dishonesty of Honest People: A Theory of Self-Concept Maintenance,
45 J. Marketing Research 633 (2008).
•
Experiment 1
• Participants asked to write down either ten books they read in high school or the Ten
Commandments (Thou Shall Not Steal, Thou Shall Not Commit Adultery, etc.)
• Participants asked to do simple test problems, rewarded for number of correct
answers. Control group answers checked by experimenter, Experimental group
answers not verified, subject to self-reporting with ability to cheat.
• Participants in experimental group primed with books cheated significantly more, but
magnitude of extra cheating was modest (6.7% of maximum)
• Priming with Ten Commandments eliminates observable cheating in experimental
condition
• Experiment 2 reveals that mention of fictitious honor code has same effect as Ten
Commandments reminder on cheating, but this could affect perceived P, not W
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
MAZAR, AMIR & ARIELY (CONTINUED)
•
Experiment Four
• Task 1: Solve one set of problems – control group has answers verified (no
cheating), experimental group answers not verified (cheating possible, occurs)
• Task 2: Questionnaire asks participants how honest they are, how moral they felt
today compared to previous day
• Task 3: Participants told they will solve second set of similar problems, asked to
predict how many they will answer correctly with incentives to be accurate, all are
told their answers will be verified (no ability to cheat)
• Task 4: Solve second set of problems – control group and experimental group both
have answers verified
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
MAZAR, AMIR & ARIELY (CONTINUED)
•
Experiment Four results:
• Experimental group cheated (6.7 correct answers) on problem set 1 (4.2 for control)
• Experimental group predicted 6.3 correct answers on problem set 2 (6.3 for control)
• Experimental group & control equally confident about predictions
• Suggests that experimental group knew they had cheated and adjusted prediction
• No significant difference between experiment and control groups re: reported self assessment of own honesty, or how moral they feel today compared to yesterday
• Authors say overclaimers do not update self-concept in terms of honesty even
though they recognize their actions (p. 639).
• Another (unmentioned) possibility is that having lied once to experimenter, it was
easy to lie again about honesty and morality, despite experienced reduction in self worth. Paradox of relying on self-reports in experiment that studies subject deception
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
MAZAR, AMIR & ARIELY (CONTINUED)
•
Experiment Six
• Multiple choice, general knowledge test administered to 326 students, students given
$.10 for each correct answer. $5 maximum award for perfect score.
• Control Group: Answers are checked by experimenter
• Experimental Groups: Expected chance of being caught decreases for each of three
groups: (1) Experimenter given bubble sheet and test (showing discrepancy), (2)
Experimenter given bubble sheet only (subject shreds test), (3) Subject shreds both
bubble sheet and test sheet, removes amount of money earned from jar using honor
system (experimenter then counted amount remaining to see how much money was
taken.)
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
MAZAR, AMIR & ARIELY (CONTINUED)
•
Experiment Six Results
• Control group answers 32.6 questions on average
• Each of the experimental groups report higher number of correct answers, indicating
cheating (36.2, 35.9, and 36.1, respectively).
• Given the opportunity to cheat, subjects overwhelmingly did so, but typically only by
a little. (Approximately 10% of respondents reported 45 or more correct answers).
• Subjects cheated when cheating was possible but did not increase their cheating
when cheating became really easy / probability of detection fell. This result was
replicated by a more recent paper. See Gamliel & Peer, Explicit Risk of Getting
Caught Does Not Affect Unethical Behavior, 43 J. Applied Social Psych. 1281 (2013).
• Interpretation: Subjects can justify a little cheating while maintaining self-concept.
High levels of cheating undermine self-concept, and the desire to maintain a positive
self concept deters cheating regardless of risk of getting caught and punished.
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
MAZAR, AMIR & ARIELY (IMPLICATIONS)
•
This evidence complicates the Becker model. Subjects seem unresponsive to L (likelihood of
detection) in experimental setting. As B (Monetary Gain) rises, W (Self Worth Effect of Committing
Crime) grows more negative, though the precise relationship is undetermined. (B+W) > L X P may
present difficult calculations to policymakers.
•
Only 5 of 791 participants cheated the maximum amount across experiments. Slight cheating
common, but the cheating doesn’t flow from a small number of people cheating a lot.
•
See also Jolls et al. at 1540 (suggesting that criminals aren’t terribly responsive to lengthened prison
terms – five years in prison rated only twice as bad as one year in prison). Policy dilemma.
•
But let’s not get carried away. Some real-world evidence supports the Becker hypothesis. See Levitt
& Miles at 457 ([Despite challenges created with demonstrating causal relationships and difficulty of
disagregating deterence and incapacitation, “researchers have enjoyed significant progress in recent
years in testing the economic model. They have found that deterrence has a substantial but far from
complete role in explaining observed patterns of criminal activity.”).
•
As Mazar et al. note, their finding that being informed about higher scores of others does not increase
cheating is surprising. Mazar et al. at 643. Other evidence is contrary, see, e,g., Coleman, The
Minnesota Income Tax Compliance Experiment: Replication of the Social Norms Experiment (Nov.
2007); Rettinger & Kramer, Situational and Personal Causes of Student Cheating, 50 Res. Higher
Educ. 293 (2009), and it would seem that “everyone is cheating” would permit cheaters’ self -concept
to be maintained. We will explore this issue in more detail tomorrow.
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
QUESTIONS ON MAZAR ET AL.?
?
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
Scott Wiltermuth ,
Cheating More When the
Spoils are Split,
115 Org. Behav. & Human
Decision Processes 157 (2011)
•
Simple Becker Rational Actor Model (B > L X P) predicts that if a criminal internalizes all the benefits from a
crime, the incentive to commit the crime will be maximized. If benefits are split, then incentive will be reduced.
•
But people may experience utility based on the “warm glow” of helping others. See Andreoni, Giving with Impure
Altruism: Applications to Charity and Ricardian Equivalence, 97 J. Pol. Econ. 1447 (1989).
•
Still, even incorporating altruistic criminals into Becker’s model, splitting the spoils from crime should not increase
crime. As Wiltermuth says: “even if the individual were not particularly self-interested and valued helping others
more than she valued benefiting herself, rational choice theory (e.g., Becker, 1968) would predict that she would
be no more likely to behave unethically when forced to split the spoils of cheating in a particular distribution than
when she could accrue all of the spoils of cheating and later decide how to allocate some of those benefits to
others. In other words, the cheater could give away the money she earned later and still derive a warm -glow
benefit from giving, assuming that she could do so easily and without fear of detection and punishment. Whether
the allocation occurs as a direct result of the unethical act or as a result of giving away some of the proceeds of
the unethical act should therefore not affect an individual’s utility.” Wiltermuth at 159.
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
CHEATING MORE WHEN THE SPOILS ARE SPLIT
•
Experiment 2
• 262 Participants in online experiment earn $1 - $2 for each additional word jumble
solved, but as soon as participant is unable to solve one jumble, ability to earn
additional money ceases
• Taguan?
• Semovedly = separately
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
Jumble
Correct Words
Unhted
Hunted
Eoshu
House
Unaagt
Taguan
Ythoird
Thyroid
Olarc
Coral / Carol
Jnipmug
Jumping
Hgitwe
Weight
Claslou
Callous
Yomseevid
Semovedly
CHEATING MORE (CONTINUED)
•
Experiment 2 (continued)
• Subjects Assigned to one of five conditions:
• Self-Alone Low Benefit: You will receive $1 per word jumble solved
• Self-Alone High Benefit: You will receive $2 per word jumble solved
• Self-and-friend Benefit: You will receive $1 per word jumble solved and a friend
of your choosing will also receive $1 per word jumble solved
• Self-and-other Benefit: You will receive $1 per word jumble solved, plus a
randomly selected participant from another experiment will receive $1 per.
• Other-alone Benefit: Your performance will not affect the payment you receive.
However, a randomly selected participant from another experiment will receive
$2 for each word jumble you solve.
• Participants indicated which word jumbles they successfully unscrambled but not
asked to write out any unscrambled words.
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
CHEATING MORE (CONTINUED)
•
Experiment 2 Results
• Self-Alone Low Benefit: You will receive $1 per word jumble solved (26.7% report
solving Taguan; 3.5 Anagrams reported solved)
• Self-Alone High Benefit: You will receive $2 per word jumble solved (22.4% report
solving Taguan; 3.18 Anagrams reported solved) (not significantly lower)
• Self-and-friend Benefit: You will receive $1 per word jumble solved and a friend of
your choosing will also receive $1 per word jumble solved (43.1% report solving
Taguan; 4.45 Anagrams reported solved)
• Self-and-Other Benefit: You will receive $1 per word jumble solved, plus a randomly
selected participant from another experiment will receive $1 per correct answer
(36.7% report solving Taguan; 3.93 Anagrams reported solved)
• Other-Alone Benefit: A randomly selected participant from another experiment will
receive $2 for each word jumble you solve; you receive nothing for solving jumbles
(16.3% report solving Taguan; 2.86 Anagrams reported solved)
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
CHEATING MORE (CONTINUED)
•
Experimental Results (continued)
•
No statistically significant relationship between Individual Benefit and Propensity to Cheat,
and direction of effect is contrary to Becker Model predictions
• Perhaps subjects used stakes as proxy for likelihood of detection / seriousness of
punishment?
•
Post Hoc Gender Result: 52% of Women but only 28% of Men in Self-and-Friend Benefit
report solving Taguan. 26% of Men and 18% of Women in Self Alone Conditions reported
solving Taguan. Gender effect not significant in follow-up experiment (Study 3).
•
Splitting the Proceeds 67% - 33% rather than 50% - 50% did not seem to make any
difference (Experiment 4)
•
Subjects told that spoils would be shared with beneficiary “randomly selected from a group
of participants whose responses indicated that they are highly prejudiced against racial
minorities” did not cheat more than those in Self-Alone condition (Experiment 4)
•
Subjects rarely wanted (11.9%) to share some of money obtained with third parties
(Experiment 4)
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
CHEATING MORE (CONTINUED)
•
Interpretation
•
“[P]eople may be most susceptible to engage in activities such as lying, cheating, or stealing when
others can share in the benefits of those transgressions. When individuals would stand to gain all of
the rewards of their dishonesty, their own need to see themselves as moral may stop them from
behaving unethically. When they could attribute some of their behavior to the desire to benefit others,
they may be able to see themselves as moral even as they behave in ways most people would deem
immoral.” Wiltermuth at 166.
•
In real world setting, danger of sharing information about crimes with third party beneficiaries may
confound this effect. Sharing gains with others may entail informing others of criminality, which raises
the risk that third parties will inform police.
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
CHEATING MORE (CONTINUED)
•
Implications of Research
• If the Self-Concept Benefits from Sharing Spoils + Increased Probability of Success if
Third Parties Help in Criminal Enterprise > Increased Risk of Detection from Criminal
Cooperation, then Well-Publicized Penalty Enhancements for Joint Efforts (e.g.,
Conspiracy Liability) May be Warranted.
•
Legal Design Implication: Be wary of designing opportunities to cheat where
rationalization is easy for cheater. Ability to assist strangers may be almost as
tempting as ability to assist friends, assuming assistance can occur anonymously
and without risk of detection.
• Concern about Generalizability: This is a student population and the stakes were low.
How well would these effects hold up among people tempted to commit serious
crimes?
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
QUESTIONS ON WILTERMUTH (OR ANYTHING
ELSE CONNECTED TO TODAY’S TOPICS)
?
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS
THANK YOU!
•
I’ll be here or in the hallway outside for as long as there are questions, and I will see you
all tomorrow.
PROFESSOR LIOR STRAHILEVITZ, UNIVERSITY
OF CHICAGO LAW SCHOOL 2013 SUMMER
SCHOOL IN LAW & ECONOMICS