Ch. 12 Predictably Irrational Summary and Response

In chapter 12 of Predictably Irrational, author Dan Ariely explains that people will very easily be dishonest and cheat when they are one step removed from cash, or using non-monetary object before cash. Ariely performed another test looking for similar results. He set up three different groups, the first of which was the test group that had five minutes to solve 20 math questions and with each correct answer they received 50 cents. The second group had the same exact rules except after they finished the questions they were allowed to tear of their papers and tell the grader how many they got right for money. This provided an opportunity to be dishonest. The last group had the same conditions as the second group but were telling a grader their answers in exchange for coins that held no value. These coins were then traded in for actual money. Ariely discovered that the last group lied the most out of the control group and the second group  because there was an insertion of a token into the transaction that made the students less honest because they weren’t directly lying for money. This group ‘solved’ 5.9 more problems than the control group that didn't have any options of cheating. This proved that given the chance, people will cheat, but only if it’s a step away from actual money.

According to Ariely, cheating is easier when you're one step removed from cash because it is easier rationalize why we do certain dishonest acts. People who cheat or are dishonest when one step removed from actual money would most likely consider themselves honest people and would never actually want to steal actual money from people. Ariely performed several experiments to see if his theory was accurate, one of which involved putting a six-pack of coke in a college dormitory fridge as well as a plate with six one dollar bills on it. Ariely tested to see how long it would take until all of each item was taken, and soon found out it took less than 72 hours for all of the coke’s to be taken, yet the money was never stolen. Ariely concluded that people rarely cheat or be dishonest with cold hard cash, but they will be dishonest when something is one step removed from money because it is easier to justify. This was shown in his testing example that I stated in my summary. This type of cheating relates directly to insurance fraud. When people report losses in their homes or with their cars they tend to exaggerate their claims by around 10%. For example, Ariely says that if someone owned a 27 inch television they would say that a 32 inch television was stolen from them. People who do this would be very unlikely to steal money directly from their insurance companies but by telling a lie about how grand their product was makes their lying justifiable. The rise of identity theft in America can be explained by Ariely's theory because people are not directly stealing money from people but rather are using a different mode to access these victims money. Ariely also looks into banks and what they are doing with credit card rates and how when people don't pay their bills in full the credit issuer will charge them a higher interest rate and charge interest rate on past purchases. This is an example of a company indirectly stealing from someone.