Illuminating Rationalization – Dan Ariely and the honest truth about dishonesty: Fraud Decoded

“… it’s all about rationalization.” (Dan Ariely – The Honest Truth About Dishonesty)
Dan Ariely – The Honest Truth About Dishonesty – TAM 2013

Dan Ariely illuminates the mysterious process of rationalization with research studies that have . Dan Ariely is the James B Duke Professor of Psychology and Behavioral Economics at Duke University. He is the author of a number of books, including Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions and The Honest Truth About Dishonesty: How We Lie to Everyone–Especially Ourselves.

This 30 minute presentation by Dan Ariely gives a glimpse into the fascinating studies he has done about truth, dishonesty, and the factors that make a difference in whether we lie and cheat.

Read more from Dan Ariely on his web page.

Can the social science of Behavioural Economics help to explain how people rationalize fraud?

Criminologists and others fighting fraud and corruption have explored a number of theories, including rational choice theory which proposes that people choose to commit crime through a rational cost-benefit analysis process.

One of the most enduring and popular explanations of fraud is the three-factor concept introduced almost 60 years ago by Donald Ray Cressey in  Other People’s Money: A Study in the Social Psychology of   Embezzlement.

Cressey concluded that for occupational fraud to be committed, three things must be present:

“Trusted persons become trust violators when they conceive of themselves as having a financial problem that is non-shareable, are aware that this problem can be secretly resolved by violation of the position of financial trust, and are able to apply to their own conduct in that situation verbalizations which enable them to adjust their conceptions of themselves as trusted persons with their conceptions of themselves as users of the entrusted funds or property.” (Donald R. Cressey, Other People’s Money)

Cressey’s theory has become known as The Fraud Triangle, and a number of useful fraud prevention and detection tools have grown out of it. However, I’ve always felt that more attention needs to be focused on the process of rationalization.

Face it – fraud has been around for thousands of years – it was addressed in the code of Hammurabi which dates back to 1754 BC.

“If a herdsman, to whose care cattle or sheep have been entrusted, be guilty of fraud and make false returns of the natural increase, or sell them for money, then shall he be convicted and pay the owner ten times the loss.” Hammurabi’s Code of Laws Translated by L. W. King)

For 4 thousand years, most of our attention has focused on fraud detection and punishment, and the often futile attempt to get the money back to its rightful owners. Fraud prevention efforts have focused primarily on internal controls and victim awareness.

I believe that until we understand the dynamics by which a person rationalizes depriving others of things of value through deceit (AKA “cheating”), we can’t make effective inroads into fraud prevention.

Fortunately, modern behavioural economists are now illuminating the mysterious process of rationalization with solid scientific studies that go beyond theory to explain the process of rationalization.

Behavioural economist Dan Ariely and his colleagues are adding a growing treasure-house of scientific data to be explored by those probing the mystery of how ordinary humans who hold a belief of themselves as ethical can rationalize their way into immoral and criminal acts.

Ariely has a special talent for clear, engaging communication and a penetrating reality-anchored intelligence that makes both his writing and his videos a pleasure to explore. It’s no wonder several of his books are New York Times bestsellers.

Check out Dan Ariely’s website, which includes

  • information about his research, which is extensive and fascinating
  • his “Ask Ariely Blog” with an RSS feed and links to his  Wall Street Journal column
  • links to his many videos
  • information about his books
  • links to his Facebook page, Twitter feed,

And check out the Kickstarter page for the soon to be released Documentary Film Feature (Dis)Honesty: The Truth About Lies(Dis)Honesty Kickstarter Trailer

Our film “(Dis)Honesty -The Truth About Lies” examines the human tendency to be dishonest. We would like to hear from you about your own experiences around d…

If you have a link to an interesting news item or research relating to this post, feel free to comment here, on my Facebook page or my Twitter feed.

Vanessa

Author: V. G. Oltmann

V. G. Oltmann, MBA, CPA, CGA, CFI - Professor, Vancouver Island University 2002 - 2013 - Board Member, Association of Certified Forensic Investigators of Canada (ACFI): 2010-2013 - LinkedIn Profile: http://ca.linkedin.com/in/vgoltmann/

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