Dishonesty, Choices and Investing
by Charles Rotblut, CFA and Dan Ariely
Dan Ariely is a professor of psychology and behavioral economics at Duke University. I spoke with him recently about how advisers and investors rationalize actions that are not in the investors’ best interests.
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Charles Rotblut (CR): In your new book, “The (Honest) Truth About Dishonesty” (Harper Collins, 2012) you seem to imply that people rationalize their dishonesty and that people only cheat up to a certain point. Could you elaborate?
Dan Ariely (DA): The standard view is that people who cheat do a cost/benefit analysis. They weigh the cost, the benefit, what they stand to gain, what they stand to lose. And they work within that framework.
First of all, we don’t find evidence of that. But also, if you think about it, even if you look at the cheating you see around you, you will probably come to the conclusion that you have lots of opportunities to cheat every day that you don’t take. And it is the same for everybody. It turns out that there’s this construct that we call morality, which keeps us more honest than we would be if we were perfect cost/benefit analysts.
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Dan Ariely is the James B. Duke Professor of Psychology and Behavioral Economics at Duke University and a founding member of the Center for Advanced Hindsight. His new book is called “The (Honest) Truth About Dishonesty”.