Ben Franklin – Behavioral Ethicist?

We continue the discussion from our most recent post in this series on behavioral ethics on circumstances in which an individual’s ethical standards – her “inner controls” – may not reduce the risk of wrongful behavior as much as expected.   

Another set of circumstances that is relatively likely to lead to an ethical shortfall is where we do not know who will be impacted by a contemplated act.   As described in this paper by Deborah A. Small and George Loewenstein, in one study “subjects were more willing to compensate others who lost money when the losers had already been determined than when they were about to be” and in another “people contributed more to a charity when their contributions would benefit a family that had already been selected from a list than when told that the family would be selected from the same list.”  

Beyond their direct application to the area of charitable giving, these findings may be relevant to a broader range of ethics issues, and, for instance, could help explain the relative ease with which so many individuals engage in offenses where the victims are not identifiable.  

One example of this is insider trading – a crime which, although widely known to be wrong, seems utterly pervasive (based, among other things, on the extent of trading in securities right before public disclosure of market moving events).  A behavioral ethics perspective suggests that (at least part of) the reason for this “inner controls” failure is that the victims of insider trading are essentially anonymous market participants. 

Another  offense of this sort is government contracting fraud (where the victims tends to be everyone),  and indeed Ben Franklin famously described the risks of an ethics shortfall here as well as anyone could: “There is no kind of dishonesty into which otherwise good people more easily and more frequently fall than that of defrauding the government.”   Understanding why “otherwise good people” do bad things is much of what behavioral ethics is about.

From a C&E risk assessment perspective, the combination of behavioral ethics data and Franklin’s (eerily prescient)  insight suggests that companies should take extra measures (e.g., through training, auditing and other C&E tools)  to prevent and detect wrongdoing  in situations where legal or ethical violations would seem to be victimless – and hence where our “inner controls” could be weak . 

 In our next post in this series: behavioral ethics and the unexpected risk of doing good.