You would be hard pressed to find someone who says they’ve never been dishonest, and if they do – they’re probably lying. We all regularly engage with dishonest behaviour at various levels, often involving small acts of everyday dishonesty such as lying on a CV, calling in sick, taking office supplies, or returning used goods as new. Some of us go further and commit intellectual property theft or tax deception. Individually, they appear as relatively innocuous and victimless crimes, but on aggregate the cost of these behaviours add up significantly for organisations and society as a whole. For example, it is estimated that stealing from the workplace costs around $52 billion annually in the US alone (Weber et al 2003). The tax gap in the US, which is the difference between what the IRS estimates taxpayers should pay and what they actually pay, is over $300 billion a year which would translate to an overall noncompliance rate of 15% (Mazar & Ariely 2006). Therefore, these individual everyday small-scale deceptions contribute to the economy losing billions which has a knock on effect on wages, jobs, and investment.

Honest behaviour is a necessity for economic life, as it is expected when we report private information such as taxes and uphold contracts. If people stop trusting each other, society will no longer function as normal. Yet still, it is clear that dishonesty is a pervasive part of human nature. This blog is the first in a two-part series that examines why and when people lie, and based on this offers insight into potential interventions to boost honest behaviour. In this part, we will take a macro-level view of conflicting models from economics and psychology to answer the first question: why do people lie?

The Economic Perspective

Here, the classical economic perspective and psychological perspective are at odds with how they model dishonest behaviour and as a result how they suggest to combat it. Economic models of lying are based on rational self interest and the assumption of ‘homo economicus’ – a perfectly rational, selfish human being that is only interested in maximising their own payoffs. Models such as Becker’s rational theory of crime suggest that a cost-benefit analysis is conducted when deciding whether to be dishonest, weighing up the expected costs based on probability and severity of punishment against the benefits of the lie (Becker 1968). It argues that rational agents will opt for dishonest behaviour when the expected costs are lower than the gain. Under this model, the strategy to combat dishonesty would be to increase the probability of being caught as well as the magnitude of punishment. Historically, the economic perspective has informed how organisations and governments have tried to tackle the issue of societal dishonesty, but the evidence is mounting that the assumption of rational self interest that the economic perspective takes may not be how we actually behave. As a result, large and costly interventions using this approach may be ineffective.

The Reality

In reality, we are quite a lot better than this assumption! Not everyone cheats, even when they can get away with it and the punishment is non-existent. Most people either prefer not to, or cheat a little but don’t maximise their gains. One meta-analysis found that in fact people lie surprisingly little, and on average forgo about 75% of the potential gains from lying (Abeler et al 2019). This is far from the assumption of payoff-maximisation that the economic model would predict. Therefore, it is apparent that there are other motivations at play.

The Psychological Perspective

Psychological models of dishonesty have tried to explain these findings by integrating other-regarding preferences and self-image concerns. For example, the self concept maintenance theory suggests that people may act dishonestly as long as their behaviour doesn’t require them to negatively update their own self image of being good and honest people (Mazar et al 2008). This can be illustrated by the counterintuitive finding from a large scale field study that found citizens were actually more likely to return lost wallets containing more money than less. The authors suggested that this was in part due to citizens having concerns of theft aversion, which is not wanting to update their self-image as a thief (Cohn et al 2019).

Other models have suggested that we also suffer a cost of lying due to going against social norms. It has been suggested that we have internal reward mechanisms that reward or punish us depending on compliance with these norms and values (Mazar & Ariely 2006). Under this view, people’s preferences for dishonesty are shaped by their environment and interactions. Evidence for this can be found by looking at how behaviour varies across societies. One study conducted the same task in 23 countries where people could misreport their results for monetary gain. They then compared the average outcomes on this task to countries’ prevalence for rule violations indexed by the general level of political fraud, tax evasion and corruption. They found a clear correlation between high levels of rule violations in countries and more dishonest behaviour (Gachter & Schulz 2016). Therefore, the psychological perspective suggests that one way to combat dishonesty is by enhancing the psychological costs of acting dishonestly, such as through highlighting morality, self-image and social norms. Looking at actual human behaviour, it is clear that there is a lot more going on in people’s decisions to lie than just how bad it would be if they got caught.

Crucially, both the economic and psychological literature suggest that whether or not we are dishonest largely depends on the decision making environment we find ourselves in rather than who we are as people. As the psychological model incorporates, nobody likes to see themselves as a liar or cheater, but rather sometimes we take advantage of a tempting opportunity where it is easy to be dishonest to boost our personal gain. Therefore, knowing the conditions that increase the likelihood of dishonest behaviour enables us to identify environments where interventions might be the most effective in changing behaviour. This is the question we will explore in part 2 coming next week by taking a deeper dive into specific conditions that have been shown to enhance dishonesty. This includes ones that are rampant in our modern life – a lack of self-control created by sleep deprivation and time pressure, as well as digitalisation and the anonymity and psychological distance it brings with it.