Ethics Exchange: Ethics, Compliance, and Human Nature [1]

[This conversation was originally posted at ECOA Connects [2].]

Jeff Kaplan:  Steve, nearly a century ago, John Maurice Clark – a professor at one of your alma maters, the University of Chicago – wrote:  “The economist may attempt to ignore psychology, but it is sheer impossibility for him to ignore human nature … If the economist borrows his conception of man from the psychologist, his constructive work may have some chance of remaining purely economic in character. But if he does not, he will not thereby avoid psychology, rather, he will force himself to make his own, and it will be bad psychology.”

So, swapping out “economist” in Clark’s quote for “E&C professional,” let me kick off our latest Ethics Exchange by asking: Do E&C professionals do enough generally to embrace what psychologists tell us about human nature? 

Steve Priest: Interestingly, at least for me in my nostalgia mode, I was an econ undergrad at U of Chicago, on my way to a Ph.D., when I became disillusioned with the inability of economics to integrate the real behavior of human beings. Business school seemed to do a much better job of incorporating the message of John Clark, so here I am.

The big failure in traditional economics is that human behavior is not always profit maximizing, and not always “rational” in utilitarian terms. Business leaders, including E&C professionals, are better at recognizing this than old school economists, but still have a long way to go.

Jeff:  I agree, and hope that the new insights into human behavior can promote E&C in two types of ways. The first type – of greater relevance to E&C professionals than business leaders – goes more to the “how” than “why” of E&C. That is, it identifies specific human frailties that should inform how we assess and respond to risk. Examples are studies showing that: “conformity bias” adversely impacts our ability to see the wrongfulness of our behavior; the “distance” of victims of wrongdoing blurs our ethical vision; in various ways we are vulnerable to ethical “slippery slopes”; we often have considerable difficulty in recognizing wrongful behavior in others when it is in our interest not to do so; and individuals in positions of power often have great difficulty in identifying their behavior as wrongful. (More information about these and similar studies can be found here: http://conflictofinterestblog.com/interests/moral-hazard-bias [3]

Steve: OK, I’ll bite and ask you about the second type. But speaking of bites, the insights you mention into human behavior are hardly new. The Book of Genesis in the Hebrew Scriptures (often referred to as the Old Testament) provides great insight in the story of the Garden of Eden. God says: “You have only one rule—don’t eat from that tree.” You can imagine the conversation: “But I am hungry.” “It’s only one bite.” “He can’t possibly be watching all the time—he will never know.” “We can blame it on an animal.” And then along comes the snake with the final temptation/rationalization and the rest is history (according to some, just a great story according to others.) Ok, now, what is the second type?

Jeff: Before getting to that, let me respond to your last point, by saying that while some behavioral ethics insights into human behavior indeed aren’t new (although some definitely are), what’s new about all of them is that they come supported by data.  For instance, while the famous saying about power corrupting can be traced back more than 125 years, having the  hard data that to show that at work may be key to persuading senior company officials to agree to E&C training addressed specifically to them, at least more so than using the quip of a dead English Lord would.  Similarly, the experimental findings on how we ignore the ethical failings of those we favor can be used as a basis for enhancing “supervisory liability” in E&C disciplinary standards, which has been a hard sell in many companies. As the pioneer in using data in E&C work that you are, Steve, I imagine you’d view these possibilities as a plus.

And, the second way in which this field of “behavioral ethics” can help promote E&C is more general, and is for the consumption of business leaders and enforcement officials.  The more that they realize how much actual human nature makes E&C a real challenge the more they should be willing to provide support for these programs.

Steve:  Data is good. Information and insight are better. One of the ironies in all this is that the recent research in behavioral economics and psychology (social, organizational and individual) is that we are very bad at turning data into insight and then into action. Even scientists with quantitative training misunderstand or misuse statistics with disarming frequency! My two favorite books that discuss this – and other issues you have discussed, Jeff – are Daniel Kahneman’s  Thinking Fast and Slow and Dan Ariely’s The Honest Truth About Dishonesty.  And for those very interested in the subject, Dan Ariely is once again teaching a class at www.coursera.com [4] called “A Beginner’s Guide to Irrational Behavior.” It begins March 11. Great content and a great teacher.  And it’s free! (Ariely discusses the emotional resonance of the word “free” in the course too…) And no, I do not receive any percentage of the fee for making this endorsement.

Jeff:  And to add two other resources to your great list – the recently launched Ethical Systems website http://www.ethicalsystems.org/ [5], with a wide range of information and links to other sources on behavioral ethics and other noteworthy aspects of human nature related to ethics; and Ethics Unwrapped http://ethicsunwrapped.utexas.edu/series/concepts-unwrapped/ [6] –  which has, among other things, free instructional videos on behavioral ethics and related topics.

 

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