Cheap promises: Evidence from loan repayment pledges in an online experiment

Bhanot, S. P. (2017).

Journal of Economic Behavior & 

Organization, 142, 250-261.

https://doi.org/10.1016/j.jebo.2017.03.003

Abstract

Across domains, people struggle to follow through on their commitments. This can happen for many reasons, including dishonesty, forgetfulness, or insufficient intrinsic motivation. Social scientists have explored the reasons for persistent failures to follow through, suggesting that eliciting explicit promises can be an effective way to motivate action. This paper presents a field experiment that tests the effect of explicit promises, in the form of “honor pledges,” on loan repayment rates. The experiment was conducted with LendUp, an online lender, and targeted 4,883 first-time borrowers with the firm. Individuals were randomized into four groups, with the following experimental treatments: (1) having no honor pledge to complete (control); (2) signing a given honor pledge; (3) re-typing the same honor pledge as in (2) before signing; and (4) coming up with a personal honor pledge to type and sign. I also randomized whether or not borrowers were reminded of the honor pledge they signed prior to the repayment deadline. The results suggest that the honor pledge treatments had minimal impacts on repayment, and that reminders of the pledges were similarly ineffective. This suggests that borrowers who fail to repay loans do so not because of dishonesty or behavioral biases, but because they suffer from true financial hardship and are simply unable to repay.

Discussion

Literature in experimental economics and psychology often finds impacts of promises and explicit honor pledges on behavior, and in particular on reducing dishonest behavior. However, the results of this field experiment suggest no meaningful effects from an explicit promise (and indeed, a salient promise) on loan repayment behavior in a real-world setting, with money at stake. Furthermore, a self-written honor pledge was no more efficacious than any other, and altering the salience of the honor pledge, both at loan initiation and in reminder emails, had negligible impacts on outcomes. In other words, I find no evidence for the hypotheses that salience, reminders, or personalization strengthen the impact of a promise on behavior.  Indeed, the results of the study suggest that online loan repayment is a domain where such behavioral tools do not have an impact on decisions. This is a significant result, because it provides insights into why borrowers might fail to repay loans; most notably, it suggests that the failure to repay short-term loans may not be a question of dishonest behavior or behavioral biases, but rather an indication of true financial hardship. Simply put, when repayment is not financially possible, framing, reminders, or other interventions utilizing behavioral science are of limited use.

A pdf of the research is here.

The Little-known Emotion that Makes Ethical Leadership Contagious

Notre Dame Cetner for Ethics
www.ethicalleadership.nd.edu
Originally posted in September 2018

Here is an excerpt:

Elevation at Work

Elevation is not limited to dramatic and dangerous situations. It can also arise in more mundane places like assembly lines, meeting rooms, and corporate offices. In fact, elevation is a powerful and often under-appreciated force that makes ethical leadership work. A 2010 study collected data from workers about their feelings toward their supervisors and found that bosses could cause their followers to experience elevation through acts of fairness and self-sacrifice. Elevation caused these workers to have positive feelings toward their bosses, and the effect spilled over into other relationships; they were kinder and more helpful toward their coworkers and more committed to their organization as a whole.

These findings suggest that elevation is a valuable emotion for leaders to understand. It can give ethical leadership traction by helping a leader's values and behaviors take root in his or her followers. One study puts it this way: "Elevation puts moral values into action."

Put it in Practice

The best way to harness elevation in your organization is by changing the way you communicate about ethics. Keep these guidelines in mind.

Find exemplars who elevate you and others.

Most companies have codes of values. But true moral inspiration comes from people, not from abstract principles. Although we need rules, guidelines, regulations, and laws, we are only inspired by the people who embody them and live them out. For each of your organization's values, make sure you can identify a person who exemplifies it in his or her life and work.

The info is here.

A Two-Factor Model of Ethical Culture

Caterina Bulgarella
ethicalsystems.org

Making Progress in the Field of Business Ethics

Over the past 15 years, behavioral science has provided practitioners with a uniquely insightful
perspective on the organizational elements companies need to focus on to build an ethical culture.
Pieced together, this research can be used to address the growing challenges business must tackle
today.

Faced with unprecedented complexity and rapid change, more and more organizations are feeling the
limitations of an old-fashioned approach to ethics. In this new landscape, the importance of a proactive ethical stance has become increasingly clear. Not only is a strong focus on business integrity likely to reduce the costs of misconduct, but it can afford companies a solid corporate reputation, genuine employee compliance, robust governance, and even increased profitability.

The need for a smarter, deeper, and more holistic approach to ethical conduct is also strengthened by
the inherent complexity of human behavior. As research continues to shed light on the factors that
undermine people’s ability to ‘do the right thing,’ we are reminded of how difficult it is to solve for
ethics without addressing the larger challenge of organizational culture.

The components that shape the culture of an organization exercise a constant and unrelenting influence on how employees process information, make decisions, and, ultimately, respond to ethical dilemmas.  This is why, in order to help business achieve a deeper and more systematic ethical focus, we must understand the ingredients that make up an ethical culture.

The information is here.

Improving Ethical Culture by Measuring Stakeholder Trust

Phillip Nichols and Patricia Dowden
Compliance and Ethics Blog
Originally posted April 10, 2017

Here is an excerpt:

People who study how individuals behave in organizations find that norms are far more powerful than formal rules, even formal rules that are backed up by legal sanctions.[ii] Thus, a norm that guides people to not steal is going to be more effective than a formal rule that prohibits stealing. Therein lies the benefit to a business firm. A strong ethical culture will be far more effective than formal rules (although of course there is still a need for formal rules).

When the “ethical culture” component of a business firm’s overall culture is strong – when norms and other things guide people in that firm to make sound ethical and social decisions – the firm benefits in two ways: it enhances the positive and controls the negative. In terms of enhancing the positive,  a strong ethical culture increases the amount of loyalty and commitment that people associated with a business firm have towards that firm. A strong ethical culture also contributes to higher levels of job satisfaction. People who are loyal and committed to a business firm are more likely to make “sacrifices” for that firm, meaning they are more likely to do things like working late or on weekends in order to get a project done, or help another department when that department needs extra help. People who are loyal and committed to a firm are more likely to defend that firm against accusers, and to stand by the firm in times of crisis. Workers who have high levels of job satisfaction are more likely to stay with a firm, and are more likely to refer customers to that firm and to recruit others to work for that firm.

The blog post is here.

Why Are So Many Millennials Having Zero Sex?

By Jesse Singal
The Science of Us
Originally posted August 2, 2016

When it comes to millennials and sex, there are two narratives going on at the moment, and they clash pretty severely. One, expressed in the form of panicky think pieces about Kids These Days, argues that because of the rise of dating apps, a reduced emphasis on commitment, and various other factors, young people are having casual sex at a higher rate than ever before, and this may be causing psychological problems, particularly for young women, who — so the story usually goes — don’t get as much out of casual sex as the guys they are hooking up with.

The other narrative is that, well, the kids are all right. Even assuming there is something wrong with safe, consensual casual sex (and the proper answer to that question is it’s complicated), some researchers who track generational differences in behavior have found something that might surprise the panickers: if anything, today’s young people are hooking up less than members of past recent generations did when they were the same age. In an article published last year in the Archives of Sexual Behavior, for example, Jean Twenge of San Diego State University and Ryne Sherman of Florida Atlantic University wrote that, among adults, the “[n]umber of sexual partners increased steadily between the G.I.s and 1960s-born Gen X’ers [with Boomers in the middle] and then dipped among Millennials to return to Boomer levels.” That is, millennials, on average, appear to be having sex with fewer people than Gen-Xers did when they were at the same age, and about the same amount of sex as the boomers did when they were in their younger years.

The article is here.

Seeking better health care outcomes: the ethics of using the "nudge".

Blumenthal-Barby JS, Burroughs H.
Am J Bioeth. 2012;12(2):1-10.
doi: 10.1080/15265161.2011.634481.

Abstract

Policymakers, employers, insurance companies, researchers, and health care providers have developed an increasing interest in using principles from behavioral economics and psychology to persuade people to change their health-related behaviors, lifestyles, and habits. In this article, we examine how principles from behavioral economics and psychology are being used to nudge people (the public, patients, or health care providers) toward particular decisions or behaviors related to health or health care, and we identify the ethically relevant dimensions that should be considered for the utilization of each principle.

The article is here.

Teaching doctors when to stop treatment

By Diane E. Meier
The Washington Post
Originally published May 19, 2014

Here is an excerpt:

For years I had tried to understand why so many of my colleagues persisted in ordering tests, procedures and treatments that seemed to provide no benefit to patients and even risked harming them. I didn’t buy the popular and cynical explanation: Physicians do this for the money. It fails to acknowledge the care and commitment that these same physicians demonstrate toward their patients. Besides, my patient’s oncologist would make no money from the neurosurgery required for the intrathecal chemotherapy procedure.

It seemed that giving more treatment was the only way the oncologist knew to express his care and commitment. To him, stopping treatment was akin to abandoning his patient. And yet the only sense in which she felt abandoned was in her oncologist’s unwillingness to talk with her about what would happen when treatment stopped working.

The entire story is here.