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Culture and dishonesty in banking

The film 'A Good Year' starts with a ruthless financial trader called Max, played by Russell Crowe, manipulating bond markets in order to out-maneuver his competitors and make a quick, big profit. But, by the end of the film Max has decided to pack it all in and live out a more fulfilling life in rural France. Could that happen? Can someone really transition from a ruthless, selfish trader to a compassionate, loving family man in the space of a few days?
        A study by Alain Cohn, Ernst Fehr and Michel Marechal, publisehd in 2014 in Nature, suggests it might be possible. They used a standard coin tossing task to measure the dishonesty of 128 employees from a large, international bank. The task works as follows: A subject is asked to toss a coin 10 times and record whether the outcome was heads or tails. Depending on the outcome the subject can win $20 per toss. The crucial thing to know is that the subject records whether or not they won for each toss and there is no way for the experimenter to verify if the outcome is recorded correctly. So, the subject fills in the following table privately. This means a subject could 'easily' lie and walk away with $200.


        The crucial twist in the experiment was to vary the priming subjects faced before performing the coin-tossing task. Roughly half of the subjects were asked questions related to their work in the bank - Why did you decide to become a bank employee? What are the three major advantages of your occupation as a bank employee? Which three characteristics of your personality do you think are typical for a bank employee? etc. The other half of the subjects were asked questions not related to their work - What is your favorite leisure activity? Where did you spend your last vacation? Which three things did you like most about your last vacation? etc. 
        So, to the results. The figure below shows what happens for subjects not primed to think about work in the bank. The blue bars show the observed distribution of earnings and the green bars show the distribution of earnings expected by pure chance. We can see some hints of dishonesty - there are fewer than we would expect getting $40 or less and more getting $200. But, these are small things. The overall picture is that the bankers were honest.   


         Things change when subjects were primed to think about work in the bank. The distributions are shown below. Here we see a sizable increase in the amount of money being claimed. Needless to say, this is highly unlikely to be due to chance. It can be estimated that around 26% of subjects were dishonesty. Let us keep in perspective that this means 74% were honest. Even so, the headline result is that bankers only exhibit dishonesty when they are primed to think about banking.


        This finding feeds into a general debate about whether dishonesty is a personal trait or a product of culture. The results we have looked at here suggest that dishonesty has a large cultural component. That would make it more likely a banker can be ruthless in his job and then help old ladies across the road in his spare time. It is hard to imagine, however, that culture is the only factor at work here because we do know that there are reliable personal differences in dishonesty and willingness to cooperate. It is surely not by chance that some become investment bankers and others pediatricians? An interesting and closely related debate is whether studying economics makes people more selfish (culture at play) or whether more selfish people choose to study economics (personal traits at play). An article by Adam Grant provides a nice overview of the issues.  

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