Does Unethical Behavior Affect Choice of Profession: Public vs. Private Sector?

We studied worker self-selection into a corrupt workplace environment using a laboratory experiment with university students in India who were either private sector job aspirants or public sector aspirants (wanting to join the Indian bureaucracy). We investigated whether ones propensity to engage in unethical behavior can explain the career choice between the public and private sector. We divided the subjects into two groups: workers and supervisors. The workers performed in a real-eff ort task and the supervisors evaluated their work and sent them their earnings in tokens, which is a medium of exchange in laboratories. The supervisors had to claim the required number of tokens needed to pay the workers. The measure of cheating that we used in our experiment was the di fference between the number of tokens claimed by the supervisors and the number of tokens sent to the workers. Among the subjects, 64.5 percent engaged in unethical behavior. We then linked this cheating behavior to their future career choice. We found a signifi cant di fference in cheating behavior between public sector and private sector aspirants. Sixty-four percent of the private sector aspirants vs. 70 percent of the public sector aspirants engaged in unethical behavior. The proportion of public sector aspirants who engaged in unethical behavior was not statistically signi ficantly di fferent from that of private sector aspirants. However, the amount of cheating among public sector aspirants was signi ficantly greater than among private sector aspirants. Public sector aspirants cheated 51.5 percent more than those planning to pursue careers in the private sector.

The abstract is from this paper by Ritwik Banerjee, Tushi Baul, & Tanya Rosenblat.

The figure shows the distribution of the amount of cheating of public and private sector aspirants.

Figure 5 in the paper (page 13) is also interesting, although a little bit confusing. 

Morality, Institutions, and Economic Growth

The figure is from this paper by Harvey S. James Jr. , and this is the abstract

Generalized morality reflects ethical norms in society about the inappropriateness of behaviors that can cause harm to others. Generalized morality may be an important factor affecting the economic performance of countries. A measure of generalized morality is constructed from data from the World Values Survey. One question examined is whether generalized morality is correlated with economic growth rates in per capita GDP across a sample of countries, controlling for institutions and other factors expected to affect economic performance. A second question examined is whether the path by which generalized morality affects growth is direct or indirect through generalized trust. The findings reveal that generalized morality is correlated with economic growth, but its effect is manifested primarily through generalized trust when economic institutions are weak.

I am glad to see papers like this one, and the topic remains under-researched. Great insights can be found in David Hume.

Ethics, Economics, and the History of Economic Thought

That is from a paper by Jerry Evensky titled "Hes Presidential Address: What is Wrong With Economics" (2012). The theme of the paper is not ethics in economics per se but about the lack of history of economic thought in doctoral programs in economics. 

Ethics, Social Responsibility, and Inside Trading

. . . [E]xecutives of socially responsible firms make significantly lower profits from their insider trades. This inference is robust to a battery of sensitivity tests. We further find that executives of socially responsible firms are less likely to trade on future corporate news events. Our results are consistent with executives of socially responsible firms having higher ethical standards than other executives.

Source: Gao, Lei Lisic and, Zhang (September 2012).

Self-Interest, Rationality and a Better Life

I liked this video: An interview with Preston Jones. Preston is a professor of History at John Brown University. There are many topics, and I thought about the link between "a better life" as an individual and "economic development." 

I wonder why one does not see much ethics in economic studies of prosperity. I read a lot about social change, but not much emphasis is given to moral change or ethical change. I am referring to values (or norms), which are essential for compliance with the law [double-enter if the link does not work]. Some exceptions are McCloskey's work and Buchanan's [let me know if you know others]. May be we need more ethics to understand economic development, and  to understand how ethical change interacts with cultural change. This might be pretty obvious for you, but the question is then, how can we promote ethical change? If ethical change is at the center of escaping poverty why we do not see many development programs that do exactly that?

Ethics and gender

Women appear to have higher ethical standards than men -- see for example Dreber and Johannesson 2007.

Kray and Haselhuhn (2011) argue: 

. . . [M]en’s ethical leniency is driven by pragmatism in that they were more egocentric (Study 1) and more instrumental (Study 2) in how they set ethical standards."

Economics students lying more . . . again?

In a study by Shalvi, Dana, Handgraaf, and De Dreu (2011) it was convincingly demonstrated that psychologically, the distinction between right and wrong is not discrete, rather it is a continuous distribution of relative ‘rightness’ and ‘wrongness’. Using the ‘die-under-the-cup’ paradigm participants over-reported high numbers on the roll of a die when there were financial incentives to do so and no chance of detection for lying. Participants generally did not maximise income, instead making moral compromises. In an adaptation of this procedure in a single die experiment 9% of participants lied that they had rolled a ‘6’ when they had not compared to 2.5% in the Shalvi et al. study suggesting that when the incentive is donation to charity this encourages more dishonesty than direct personal gain. In a follow-up questionnaire study where sequences of three rolls were presented, lying increased where counterfactuals became available as predicted by Shalvi et al. A novel finding is reported where ‘justified’ lying is more common when comparative gains are higher. 

An investigation of individual differences revealed that economics students were much more likely to lie than psychology students. Relevance to research on tax evasion, corporate social responsibility and the ‘credit crunch’ is discussed. 

That is the abstract of the paper "Drawing the line somewhere: An experimental study of moral compromise" by Lewis et al (Journal of Economic Psychology, August 2012)  (alas, no full paper is available online). If we assume that this is a stylized fact about economics students, how can we fix it or minimize it (beyond the obvious answer of teaching ethics, or reading ethical codes)? Is there a self-selection problem? How generalizable is this behavior? 

Ethics and economics

Ethics at its best is all about perspective, about standing back from our first order intuitions about a situation or relationship in order to properly appreciate its subtleties and nuances. Its central question is, Shouldn't we think about that too? Economics at its best is all about proportion, about standing back to see how important different aspects of a problem really are when considered as part of a complex system. Its central question is, How much does it matter? Good judgement needs both perspective and proportion, which means that neither ethics nor economics can be very successful if it neglects the skill the other specialises in. (HT The Browser). Source.

Although the story can be more complicated, Sen has done it, the article is very interesting.