Insider Trading, Genocide, and Why Good People Do Bad Things

The business section of the New York Times Sunday edition is often a depressing read, as it was on July 28, 2013 when page BU1 carried a story about Steve Cohen’s SAC Capital Advisors and its apparently endemic culture of insider trading.  In light of the many convictions and guilty pleas of SAC employees, the government’s allegation that SAC fostered a culture “in which there was no meaningful commitment to ensure that [its trading edge] came from legitimate research and not insider information” seems mild.

But the really depressing (for an ethics blogger) articles were in the Weekend section.  Tana French wrote an op-ed piece on Ireland’s incarnation of the Sub-Prime Meltdown/Credit Crunch.  A study of the background of the Irish debacle has just been released and French wrote (my emphasis):

It’s not the bankers’ actions that have outraged people—pretty much everyone had a fair idea that this was what had gone down.  It’s the overpowering sense of amorality revealed on the recording, which were released by the Irish Independent newspaper.  The bankers have a great laugh about the situation.  It genuinely never seems to mean anything to them that the taxpayer is going to be forced to pay their bills, to the tune of tens of billions.  More than that: it never seems to occur to them that their actions might harm people.

And Nicholas Kristof’s column in the same section, a thoughtful piece about animal rights focusing on the movie “Blackfish,” began with a reference to the new documentary “The Act of Killing” about mass murder in Indonesia in the mid-1960s.  Kristof observed (again, emphasis mine):

The slaughter was monstrous, but it was also mystifying—which is the way it often is.  I’ve interviewed war criminals in a half-dozen countries, and it’s always bewildering how the nice old person across from me, so graciously concerned with how much milk I want in my coffee, could have committed atrocities.

These columns struck a chord with me because, of course, my ethics teaching focuses on behavioral ethics where much of the research endeavors to determine why good people do bad things.  Indeed, they sometimes do monstrous things.  While there are often psychotics and other damaged individuals involved in white collar crimes as well as war crimes, most wrongdoers in each setting are “normal” people with families, with ethical and often religious beliefs, who are good friends and neighbors to those around them.  And yet, such people insider trade, pay bribes to secure business for their companies, fudge on their taxes, and, in extreme settings, take part in murder and even genocide.

This little blog entry is not the place to explore in detail why good people do bad (even horrific) things, but I write to encourage the research that is being done to help answer this question because only when we know causes can we find cures.

Of course, we already know a lot.  This morning I read a blog entry by my University of Texas friend and colleague, Paul Woodruff, a distinguished professor of classics.  His column began with a quotation from Odysseus (in Sophocles’ play Philocetes):  “If the contest is in justice, I can show the strongest commitment of anyone to justice or honesty…But now, in this crisis, for just one day, set your honesty aside. You can be as honest as you like after we win the war.”   Paul reacts to this quotation to opine:

Ethical failure is most often due to the sense that we have crossed a boundary into territory where ethics no longer matters—for just a moment, for now, while times are especially hard, till we win, till we get out of this hole, till…till when?…well, you fill it in.  You can be good at home, good in the community, as good as you want.  But here, in this system, nothing matters but numbers.

I speculate that Paul’s point has direct application to the SAC Capital scenario, and likely to the Irish banking crisis.

The same principles, just in more extreme circumstances, likely account for the mass murders in Indonesia.  As it happens, not long after I read Kristof’s column, I waded through the new edition of Jonathan Glover’s Humanity: A Moral History of the Twentieth Century in which he endeavors to explain the genocides of Hitler, Stalin, Mao, and Pol Pot.  Literally millions of “ordinary people” were involved in these heinous wrongs.  How could that happen?  To figure this out, Glover, a philosopher, believes that we must turn to psychology of the type that underpins the discipline of behavioral ethics.

Without completely discounting bad character’s contribution to bad behavior, Woodruff concludes “Ethical failure is a complex phenomenon. Don’t blame it simply on individual weaknesses.  Look at our systems, the boundaries they create, and the way in which poor leadership—like that of Odysseus—can bring young people into trouble.”  Glover agrees:  “Rather than striving to develop characters that will determine our behavior in ways substantially independent of circumstances, we should invest more of our energies in attending to the features of our environment that influence behavior outcomes.”

The overarching lesson is:  Work on your character, but don’t lose sight of the contextual influences that might cause you to act inconsistently with that character. Among our “Concepts Unwrapped” videos that have direct application to these issues, I particularly recommend “Bounded Ethicality” and the “In It to Win” short video on “Jack & Rationalizations.”



Tana Franch, “The Psychology of an Irish Meltdown,” New York Times, July 18, 2013.
Jonathan Glover, Humanity: A Moral History of the Twentieth Century (Rev. ed. 2012)
Nicholas D. Kirstof, “Can We See Our Hypocrisy To Animals?” New York Times, July 18, 2013.
Gretchen Morgensen, “How to Gauge SAC on the Richter Scale,” New York Times, July 18, 2013.
Paul Woodruff, “Failures in Ethics: How Our Systems Encourage Ethical Shortfalls,” (July 1, 2013).

, , , , ,

2 Responses to Insider Trading, Genocide, and Why Good People Do Bad Things

  1. Scott Wyatt September 17, 2013 at 5:10 pm #

    “Rather than striving to develop characters that will determine our behavior in ways substantially independent of circumstances, we should invest more of our energies in attending to the features of our environment that influence behavior outcomes.” . . . “The overarching lesson is: Work on your character, but don’t lose sight of the contextual influences that might cause you to act inconsistently with that character.”

    I think this is a valuable idea as far as it goes, but is not sufficiently focused, at least where interpersonal ethics is concerned. Gesturing at “circumstances,” “features of our environment,” and “the contextual influences that might cause you to act,” is not particularly illuminating. I dare say most moral systems, formal or otherwise, call on the moral actor to behave one way or another toward a particular “other” depending on his or her awareness of other’s human differences: his tribe, his clan, his nationality, his profession, his standing in the community, his skin color, his title, “his” gender, his age, etc., etc. Perhaps we can call this the content of the moral actor’s awareness of other. These human differences (and I define human differences as any feature, characteristic, concern, susceptibility, etc., that is not shared by people everywhere) are “the contextual influences that might cause you to act,” and “features of our environment.”

    My conceit (where interpersonal ethics is concerned) is that, only by adding “sameness awareness” to the content of the moral actor’s awareness of other can we hope to introduce compassionate impulses into the moral imaginations of men and women, staving-off or at least reducing the incidents of “man’s inhumanity to man.” Sameness awareness in this context is an active and present awareness in the moral actor of features in or about other shared by himself and all other human beings. The last phrase is critical, ‘shared by himself and all other human beings.’

    These features (human samenesses) are also “features of our environment,” as you know; but they are little attended to in our ethical discourse, and I wonder whether these had even crossed your mind, or had crossed Jonathan Glover’s mind, when he urges us to “invest more of our energies in attending to the features of our environment that influence behavior outcomes”?

    • Robert Prentice September 23, 2013 at 12:43 pm #

      Scott Wyatt’s post is a perceptive one. Studies show that all manner of contextual factors affect people’s ethical decision making and actions. People will cheat more in a dirty room than in a clean room, less in a well-lighted room than in a dark room, more when there is more to gain (no surprise there), and less when they are reminded of religion in some fashion before they begin the test (even if they are atheists). In addition, our Ethics Unwrapped videos point to many contextual factors that affect ethical decision making, including the tendency to be obedient to authority, to ignore minor changes in ethicality (incrementalism), to be overly optimistic regarding one’s ethicality, to be more risk-averse when facing losses than gains, and to conform to the actions of others so long as they are viewed as part of one’s in-group.

      Scott makes an important point that adds detail to the in-group/out-group dichotomy–that I mentioned in my blog post of June 7, 2013, relating to the Boy Scouts–when he speaks of “sameness awareness.” We seem evolutionarily disposed to help people whom we perceive to be in our in-group. The way we manage to mistreat others is to think of them as something else, as the “other,” as perhaps subhuman. Glover noted that in his book “Humanity” saying: “Atrocities are easier if the human responses are weakened. Torturers have to suppress sympathy, or ‘squeamishness’ as they come to think of it. One way is to stress that victims do not belong. They are usually assigned to some other, stigmatized group.” Think how Hitler’s Nazis strived to paint Jews as subhuman. That is one major way in which normal people can distance themselves from responsibility for their immoral acts.

      If we can educate people in the manner Scott Wyatt suggests regarding the common humanity that we all share, then it will be more difficult for people to act inhumanely toward others. Grant recently noted:

      In one experiment, psychologists in the United Kingdom recruited fans of the Manchester United soccer team for a study. When walking from one building to another, the soccer fans saw a runner slip on a grass bank, where he fell holding his ankle and screaming in pain. Would they help him?
      It depended on the T-shirt that he was wearing. When he wore a plain T-shirt, only 33 percent helped. When he wore a Manchester United T-shirt, 92 percent helped. Yale psychologist Jack Dovidio calls this “activating a common identity.”