Cognitive dissonance is the mental stress people feel when they hold two contradictory ideas in their mind at the same time. When the ideas have ethical dimensions, this discomfort is called moral dissonance.
Most people think of themselves as ethical. But studies show that most people also frequently lie and cheat in ways they would not want others to know about or see. This conflict between their moral self-image and their immoral actions creates cognitive dissonance and most people (consciously or unconsciously) want to resolve this psychological discomfort.
Ideally, people will settle the conflict by stopping their unethical actions and living up to their own (good) self-image. But more often, people resolve the dissonance by finding ways to think of themselves as good people while continuing to do bad things.
For example, take Toshihide Iguchi, a trader who lost $1.1 billion for his employer Daiwa Bank, and covered it up. Although he admitted to doing things that constituted a crime, he didn’t think of himself as a criminal. Because his goal had been to save Daiwa Bank from financial stress, he saw his cheating as altruistic.
Unfortunately, as Iguchi’s story (and many others) illustrate, we have an extraordinary ability to mentally distance ourselves from our own wrongdoing. So when we feel moral dissonance, we should stop and reflect carefully upon the choice we are about to make.