In chapter one of Freakonomics, Stephen Dubner and Steven Levitt describe how when incentives are strong enough, many usually honest people from different walks of life will cheat in order to gain financially or climb the ladder in their careers. The authors define an incentive as “a means of urging people to do more of a good thing or less of a bad thing.” This chapter covers three varieties of incentives: Economic, Social and Moral. Economic incentives motivate people with the promise of money or goods. Social incentives motivate people to respond in a certain way because they care about how they will be viewed by others. Moral incentives motivate people on the basis of right and wrong. We look at four different case studies that show how these types of incentives can push people to cheat. The first case looks at ten day care centers in Israel. The centers started to fine the parents who were late picking up their children three dollars.
For the weeks before the fine was added there was an average of eight late pick-ups per week. After the fine was implemented, the number of late pick-ups increased to an average of 20 per week. The day care center was using an economical incentive for the parents to get there on time to avoid the fine and that plan failed. The authors believed this plan failed because parents felt they were paying off their guilt and the fine was too low. Next we looked at the high stakes testing in the Chicago Public School System. The government orders high stakes testing as part of the No Child Left Behind law. Schools with low testing scores would be punished or shut down, and schools who did well were awarded. Teachers whose students tested badly could be fired while teachers whose students tested well would receive large bonuses. This was economic incentive for teachers to cheat because they could gain money for doing well or lose their job for poor testing.
Levitt developed a computer algorithm to look for strings of suspicious answers on standardized tests. After analyzing the data it revealed that in about five percent of the classrooms there was evidence of the teacher cheating one way or another. The next case study was on Sumo Wrestling matches in Japan. Sumo wrestling is huge in Japan and the ranking is everything to the sumo wrestlers. Highest ranked wrestlers are treated like royalty while those who don’t rank as high must tend to their superiors and do jobs that are less than desirable. The results of the data in this chapter shows that a wrestler very well might throw a match to help his opponent maintain his current ranking, when throwing the match does not hurt or help his current ranking. There was economic and social incentive for them to cheat.
A wrestler would help another out with the promise of being helped out when they needed it. It was proven that the majority of sumo wrestlers do cheat at one point or another. The last study was data collected by an entrepreneur named Paul Feldman who decided to start a bagel business in the Washington D.C. area. He would drop off bagels to different offices and leave a basket for the employees to drop in the money for the bagel, a sort of honor system. He kept track of the payments and started an accidental study on honesty.
The data showed that smaller offices are more honest than larger ones. Also, someone’s mood could affect if they would pay or not. After reviewing his findings, Feldman believed that morale was a key factor in whether the employees were being honest. Evidently people are not above cheating, even when the gain is very low (95 cents for a bagel) and cheating appears to be more likely as the income level of customers increases. Although this is true, we now know that 87 percent of the time people are honest, even if they know they can get away with it.