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Research Shows that Our Moral Standards Weaken When We Feel Financial Strain

By Adam Alter, Eesha Sharma, Dan Ariely and Nina Mazar

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Those in the position to make powerful financial decisions might be swayed by their sense of financial comfort – and they are strikingly unaware of it.

NYU Stern Professor Adam Alter discusses implications for moral behavior in an environment of slow economic recovery

Many times, people’s immediate desires lead them to defy their longer-term, more stable preferences. When we crave food, we are tempted to break our diets; similarly, when we feel deprived of financial resources, we are susceptible to sacrificing other important values. In a new study, NYU Stern Professor Adam Alter and his co-authors, Stern alumnus Eesha Sharma (PhD '13) of Dartmouth College, Dan Ariely of Duke University and Nina Mazar of the University of Toronto, find that people believe financial constraints should not excuse immoral conduct. However, when people actually feel worse off financially, they loosen their own moral standards to redress the perceived unfairness of their situation.

Across one survey and five experiments, the authors find:
  • People’s moral standards shift as their own financial status fluctuates.People who feel financially insecure tend to cheat more for financial gains, and judge other financially insecure people who cheat more leniently than do financially comfortable people.
  • This apparent moral hypocrisy diminishes when it is clear that immoral conduct cannot alleviate financial imbalances, when financial deprivation seems fair or deserved, and when acting immorally seems unfair.
  • People are generally unaware of their vulnerability to this behavioral inconsistency. However, based on their findings, the authors suggest that people may recognize their apparent hypocrisy after behaving immorally.
Alter describes how these findings are relevant in today’s world economy: “The US and European markets are not out of the woods yet. To the extent that people feel financially deprived, our research suggests that they’re more likely to engage in workplace sabotage, pilfering and other dishonest conduct.” The authors posit that fostering a sense of equity or fairness in the workplace can help mitigate the possibility of immoral conduct.

In the paper, Alter and his co-authors also consider the influence on corporate policy issues (e.g., unemployment packages) as well as fiscal policies (e.g., stimulus spending). “Those in the position to make powerful financial decisions might be swayed by their sense of financial comfort (and the financial comfort of those affected) – and they are strikingly unaware of it,” explains Alter.

The article, "Financial Deprivation Selectively Shifts Moral Standards and Compromises Moral Decisions," is forthcoming in the journal, Organizational Behavior and Human Decision Processes.

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Adam Alter is an Assistant Professor of Marketing with affiliated appointment in the Psychology Department.