Cheating as the Primordial Act of Economy in Freakonomics

The chapter begins by telling how parents are often late to pick up their kids from day-care. A pair of economists heard of this dilemma and decided that fining the tardy parents would solve the problem. The economists decided to test the solution on a study of ten day-care centers in Haifa, Israel. They would add a $3 fine per child each time the parents arrived more than ten minutes late. This caused the number of late pick ups to more than double from 8 per week to 20 per week. (15-16) Incentives are defined as the study of “how people get what they want, or need, especially when other people want or need the same thing” (Steven D. Levitt and Stephen J. Dubner, 2005, p. 16). We respond to incentives starting at a young age, receiving rewards for good behavior and punishments for bad behavior. For example, if you bring home straight A’s from school, your parents may buy you a new bike. If a three-year-old eats all their vegetables for a week, they may win a trip to the toy store. Or if you are spotted picking your nose in class, the other students will ridicule you as punishment. (16-17)

There are three types of incentives: economic, social, and moral, often incentive schemes will include all three. Many of the most compelling incentives are used to deter people from committing crime. There are economic incentives, such as the chance of going to jail, which will cause you to lose your job, house, and freedom. There are also moral and social incentives, such as knowing you did something wrong and others knowing you did something wrong. Modern society uses these economic, social, and moral incentives to best mitigate against crime. (17-18)

The incentive at the Israeli day-care center didn’t work because the $3 fine was too small. The numbers increased because the $3 penalty substituted an economic incentive for a moral incentive. For $3 the parents the parents could buy off the guilt of having teachers wait on them to pick up their kids. When the $3 fine was eliminated in the seventeenth week, parents continued to pick up their children late. The parents continued to believe picking up their kids late was alright, so they felt no guilt. (19) Freakonomics defines cheating as the primordial economic act of getting more for less. The Chicago Public School system set up a system in 1996, where schools with low reading scores would face the threat of being shut down. To avoid having the school shut down, a teacher whose students have low test scores may be fired or passed over for a promotion. A fifth-grade teacher in Oakland cheated when she wrote the answers to the state exam on the chalkboard. Teachers can also cheat by changing their student’s answers before they are read by an electronic scanner. (23-24)

To find out which teachers were cheating, economists looked for students had a one-year spike in their grades with a dramatic fall to follow (25). The Chicago data reveals evidence of teacher chating in more than two hundred classrooms per year (30). Teacher cheating showed an increase after the introduction of high-stakes testing in 1996 (31). The standardized exam was readministered as a way to prove which teachers were cheating (32). The retest only showed strong enough evidence for the Chicago Public School system to fire a dozen of the teachers (33).

Cheating occurs most often in the face of a bright-light incentive, making it common amongst many sports including sumo wrestling. Wrestlers ranking affects every part of their life including how much money he makes and how much he eats and sleeps. Their ranking is determined by elite tournaments held six times a year with fifteen bouts per tournament. His rank rises if he has eight or more victories and falls if he doesn’t, leaving the elite rank entirely with enough falls. An 8-6 wrestler may allow a 7-7 wrestler to beat him, since the 7-7 wrestler has more to lose than the 8-6 wrestler has to gain. The 8-6 wrestlers may be willing to throw the match for a bride or some other arrangement made between the two wrestlers.(35-38)

To determine if there was cheating, the data was compared between two wrestlers, first when one needed a win and second when they didn’t. The 7-7 wrestlers win 80 percent of the high risk matches, but “win only 40 percent of the rematches”(Steven D. Levitt and Stephen J. Dubner, 2005, p. 39). The wrestlers could have made an agreement that if the 8-6 wrestler lets the 7-7 wrestler win, next time the 7-7 wrestler would let the 8-6 wrestler win. Formal disciplinary action has never been taken against a Japanese sumo wrestler because it would cause national furor. Occasionally the Japanese media will mention possible corruption in sumo, which can create an incentive for these wrestlers to stop cheating.

Sumo wrestlers, day-care parents, and school teachers all cheat, so does that mean people innately corrupt? Paul Feldman unintentionally put this to the test when he delivered bagels to over 140 company’s where they were expected to pay on an honor system. It is unlikely that an office worker who failed to pay for a bagel would leave a restaurant without paying. Immediately after 9/11, the rate spiked 2 percent, this could be due to patriotism or a general surge in empathy. The data shows that “smaller offices are more honest than big ones” and pleasant weather inspires people to pay at a higher rate (Steven D. Levitt and Stephen J. Dubner, 2005, p. 45). The payment rates were the worst during Christmas week, dropping 2 percent- a 15 percent increase in theft. Although many people stole bagels, the vast majority of people didn’t, even with nobody watching over them. This fits the theme of Adam Smith’s first book, The Theory of Moral Sentiments, that people are innately honest.