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What makes somebody lie sometimes and tell the truth other times?
So, of course, if you work in a bank and your bank people are perfectly honest, and then you have other banks where people try all the funny procedures and they don't have Chinese walls and they sell stocks that are not good to their clients to take them off of their hands and so on.
All of a sudden if you're honest, you would do well by your clients, but you would be less wealthy.
So, often we think about people as agent, so we decide and we act, and we act on our preferences and we are kind of executing our own internal state, but the reality is that the decisions people often make are best described by the environment in which they are placed.
When we place people in some environments they are able to cheat to a higher degree and when they are placed in a different environment, that same person with the same mindset ends up cheating to a much lower degree. One of them has to do with the degree to which we can justify our dishonesty and, in particular, the distance of the dishonest act from money.
So, there's lots of examples like this when individuals are misbehaving dishonestly in the short-term and not thinking about the long-term and companies are not sufficiently successful in regulating this behavior.
In terms of being honest and it backfiring, it depends on what you mean by “backfiring”.
Based on your research, what motivates people to behave dishonestly?
What we basically find is that people are a nice combination of economic incentives and psychological incentives.
Can you name a situation when somebody was dishonest and it backfired on them? So of course there are many cases where dishonesty has backfired and I think the best example of this is the financial crisis.
When Greenspan went in front of Congress he said that he thought that companies would self-regulate themselves, right, that the individual traders and bankers of course have an incentive to be dishonest because they get to pocket a tremendous amount of money from this activity- something that is good for them in the short-term, but maybe not so good in the long-term.