DISMAL SCIENCE; BEAUTIFUL EXPERIMENT:

What the Bagel Man Saw (STEPHEN J. DUBNER and STEVEN D. LEVITT, June 6, 2004, NY Times Magazine)

Once upon a time, Paul F. dreamed big dreams. While studying agricultural economics at Cornell, he wanted to end world hunger. Instead, after doctoral work at M.I.T., he wound up taking a job with a research institute in
Washington, analyzing the weapons expenditures of the United States Navy. This was in 1962. After four years came more of the same: analyst jobs with the Bureau of the Budget, the Institute for Defense Analyses, the President's
Commission on Federal Statistics. Still, he dreamed. He had ''potent research ideas,'' as he recalls them now, which the Environmental Protection Agency failed to appreciate. He developed a statistical means of predicting cancer clusters, but because he was an economist and not a doctor, he couldn't make headway with the National Cancer Institute. He still loved the art of economics -- the data-gathering, the statistical manipulation, the problem-solving -- but it had led him to a high-level dead end. He was well paid and unfulfilled. ''I'd go to the office Christmas party, and people would introduce me to their wives or husbands as the guy who brings in the bagels,'' he says. '''Oh! You're the guy who brings in the bagels!' Nobody ever said, 'This is the guy in charge of the public research group.'''

The bagels had begun as a casual gesture: a boss treating his employees whenever they won a new research contract. Then he made it a habit. Every Friday, he would bring half a dozen bagels, a serrated knife, some cream cheese. When employees from neighboring floors heard about the bagels,
they wanted some, too. Eventually he was bringing in 15 dozen bagels a week. He set out a cash basket to recoup his costs. His collection rate was about 95 percent; he attributed the underpayment to oversight.

In 1984, when his research institute fell under new management, he took a look at his career and grimaced. ''I was sick of every aspect of the whole thing,'' he says. ''I was discouraged. I was tired of chasing contracts. So I said to management: 'I'm getting out of this. I'm going to sell bagels.'''

His economist friends thought he had lost his mind. They made oblique remarks (and some not so oblique) about ''a terrible waste of talent.'' But his wife supported his decision. They had retired their mortgage; the last of their three children was finishing college. Driving around the office parks that encircle Washington, he solicited customers with a simple pitch: early in the morning, he would deliver some bagels and a cash basket to a company's snack room; he would return before lunch to pick up the money and the leftovers. It was an honor-system commerce scheme, and it worked. Within a few years, he was delivering 700 dozen bagels a week to 140 companies and earning as much as he had ever made as a research analyst. He had thrown off the shackles of cubicle life and made himself happy.

He had also -- quite without meaning to -- designed a beautiful economic experiment. By measuring the money collected against the bagels taken, he could tell, down to the penny, just how honest his customers were. Did they
steal from him? If so, what were the characteristics of a company that stole versus a company that did not? Under what circumstances did people tend to steal more, or less?

As it happens, his accidental study provides a window onto a subject that has long stymied academics: white-collar crime. (Yes, shorting the bagel man is white-collar crime, writ however small.) Despite all the attention paid to
companies like Enron, academics know very little about the practicalities of white-collar crime. The reason? There aren't enough data. [...]

When he first went into business, he expected 95 percent payment, based on the experience at his own office. But just as crime tends to be low on a street where a police car is parked, the 95 percent rate was artificially high: Paul F.'s presence had deterred theft. Not only that, but those bagel eaters knew the provider and had feelings (presumably good ones) about him. A broad swath of psychological and economic research has argued that people will pay different amounts for the same item depending on who is providing it. The economist Richard Thaler, in his 1985 ''Beer on the Beach'' study, showed that a thirsty sunbather would pay $2.65 for a beer delivered from a resort hotel but only $1.50 for the same beer if it came from a shabby grocery store.

In the real world, Paul F. learned to settle for less than 95 percent. Now he considers companies ''honest'' if the payment is 90 percent or more. ''Averages between 80 percent and 90 percent are annoying but tolerable,'' he says. ''Below 80 percent, we really have to grit our teeth to continue.''

In recent years, he has seen two remarkable trends in overall payment rates. The first was a long, slow decline that began in 1992. ''All my friends say: 'Aha! Clinton!''' Paul F. says. ''Although I must say that most of my friends are conservative and inclined to see such things where others might not.'' The second trend revealed in Paul F.'s data was even starker. Entering the summer of 2001, the overall payment rate had slipped to about 87 percent. Immediately after Sept. 11, the rate spiked a full 2 percent and hasn't slipped much since. (If a 2 percent gain in payment doesn't sound like much, think of it this way: the nonpayment rate fell from 13 percent to 11 percent, which amounts to a 15 percent decline in theft.) Because many of Paul F.'s customers are affiliated with national security, there may be a patriotic element to this 9/11 effect. Or it may represent a more general surge in empathy. Whatever the reason, Paul F. was grateful for the boost. He expends a great deal of energy hectoring his low-paying customers, often in the form of a typewritten note. ''The cost of bagels has gone up dramatically since the beginning of the year,'' reads one. ''Unfortunately, the number of bagels and doughnuts that disappear without being paid for has also gone up. Don't let that continue. I don't imagine that you would teach your children to cheat, so why do it yourselves?'' [...]

He has identified two great overriding predictors of a company's honesty: morale and size. Paul F. has noted a strong correlation between high payment rates and an office where people seem to like their boss and their work. (This is one of his intuitive conclusions.) He also gleans a higher payment rate from smaller offices. (This one is firmly supported by the data.) An office with a few dozen employees generally outpays by 3 percent to 5 percent an office with a few hundred employees. This may seem counterintuitive: in a bigger office, a bigger crowd is bound to convene around the bagel table -- providing more witnesses to make sure you drop your money in the box. (Paul F. currently charges $1 for a bagel and 50 cents for a doughnut.) But in the big-office/small-office comparison, bagel crime seems to mirror street crime. There is far less crime per capita in rural areas than in cities, in large part because a rural criminal is more likely to be known (and therefore caught). Also, a rural community tends to exert greater social incentives against crime, the main one being shame.

The bagel data also show a correlation between payment rate and the local rate of unemployment. Intuition might have argued that these two factors would be negatively correlated -- that is, when unemployment is low (and the economy is good), people would tend to be freer with their cash. ''But I found that as the unemployment rate goes down, dishonesty goes up,'' Paul F. says. ''My guess is that a low rate of unemployment means that companies are having to hire a lower class of employee.'' The data also show that the payment rate does not change when he raises bagel prices, though volume may temporarily fall.

If the payment tendencies that Paul F. has noted so far might be called macro trends, it is the micro trends -- those reflecting personal mood -- that are perhaps most compelling. Weather, for instance, has a major effect on the payment rate. Unseasonably pleasant weather inspires people to pay a significantly higher rate. Unseasonably cold weather, meanwhile, makes people cheat prolifically; so does heavy rain and wind. But worst are the holidays. The week of Christmas produces a 2 percent drop in payment rates -- again, a 15 percent increase in theft, an effect on the same order, in reverse, as 9/11. Thanksgiving is nearly as bad; the week of Valentine's Day is also lousy, as is the week straddling April 15. There are, however, a few good holidays: July 4, Labor Day and Columbus Day. The difference in the two sets of holidays? The low-cheating holidays represent little more than an extra day off from work. The high-cheating holidays are freighted with miscellaneous anxieties and the high expectations of loved ones.

Easily the best part of being a conservative is that the functioning of the everyday world confirms all your prejudices.

MORE:
Pay up, you are being watched (Vanessa Woods, 18 March 2005, New Scientist)

Would you donate more to charity if you were being watched, even by a bug-eyed robot called Kismet? Surprisingly perhaps, Kismet's quirky visage is enough to bring out the best in us, a discovery which could help us understand human generosity's roots.

Altruisim is a puzzle for Darwinian evolution. How could we have evolved to be selfless when it is clearly a costly business? [...]

"It looks like the people in the experiments are trying to be nice, but the niceness is a mirage," says Terry Burnham at Harvard University, US.

He and Brian Hare pitted 96 volunteers against each other anonymously in games where they donate money or withhold it. Donating into a communal pot would yield the most money, but only if others donated too.

The researchers split the group into two. Half made their choices undisturbed at a computer screen, while the others were faced with a photo of Kismet - ostensibly not part of the experiment. The players who gazed at the cute robot gave 30% more to the pot than the others.

Burnham and Hare believe that at some subconscious level they were aware of being watched.

Another reason morality is impossible absent God.

Posted by Orrin Judd at March 18, 2005 12:53 PM