Nonmonetary Currency and Dishonesty
People cheat significantly more when dishonesty involves nonmonetary items (like tokens, goods, or services) compared to cash, because they can rationalize acts that are one step removed from money. Experiments show that cheating more than doubles when tokens replace immediate cash, even when tokens are immediately exchangeable for cash.
THE IDEA
The form of exchange—cash versus nonmonetary currency—affects honest behavior. In a series of experiments by Dan Ariely and colleagues, participants solved math problems for money. When they could cheat by tearing up their worksheets, they claimed solving about 6.2 problems (vs. 3.5 actual). But when they received tokens (later exchanged for cash) instead of direct cash, they claimed solving 9.4 problems—more than double the cheating. This effect occurs because nonmonetary currency allows people to rationalize dishonesty, as it feels less like stealing. Real-world examples include:
- Coke vs. Cash: Cans of Coke left in MIT dorm refrigerators vanished within 72 hours, while plates of dollar bills remained untouched.
- Wardrobing: Buying clothes, wearing them, and returning them costs the clothing industry $16 billion annually—people see it as not directly stealing cash.
- Expense Reports: People justify questionable expenses (e.g., a gift for a child) more easily when purchasing away from home or when assistants submit the receipts.
- Skype Hacking: A hacker stole calling time (not money), rationalizing it as non-cash theft.
- Frequent-Flyer Miles: Airlines black out dates for lower mile redemptions, effectively stealing value without taking cash.
- Credit Cards: Two-cycle billing and hidden fees allow banks to extract money in ways that feel removed from directly taking cash.
The underlying mechanism is that nonmonetary transactions bypass our moral compass. We can invent justifications because the link to money is indirect. As Upton Sinclair noted, "It is difficult to get a man to understand something when his salary depends upon his not understanding it." In a world moving toward electronic and non-cash transactions, understanding this bias is crucial for maintaining honesty.
When to use it
When setting company expense policies, recognize that employees may be more likely to cheat with non‑cash items; consider making policies explicit and tied to cash values.
When designing loyalty programs, be aware that customers may behave less honestly if the rewards are non‑monetary.
When filing insurance claims, people tend to exaggerate losses because it is one step removed from cash; adjust claim review processes accordingly.
To prevent personal dishonesty, mentally convert non‑cash items to their cash value before making a decision.
FROM THEORY TO EVERYDAY LIFE
In practice
MIT Coke and Cash Experiment
Cans of Coke placed in MIT dorm refrigerators were all stolen within 72 hours, but plates of dollar bills placed in the same fridges remained untouched for the same period. This shows that people feel less guilty stealing non-cash items even when they are of similar value.
Token Experiment
In a math problem experiment, participants who received tokens (later exchanged for cash) cheated by claiming 9.4 problems solved, compared to 6.2 for those who simply tore up their worksheets and claimed scores without tokens (actual correct: 3.5). The token condition led to over twice as much cheating, and 24 out of 150 participants in the token condition cheated maximally, compared to none in the cash condition.
Wardrobing
Consumers buy clothing, wear it, and return it, costing the industry $16 billion annually. This is not seen as stealing cash directly, but as a 'dance of buying and returning' that allows self-justification.
A MOMENT TO REFLECT
Put it to work.
Think of a time you took something non‑monetary (like a pen from work) but would not have taken the equivalent cash. How did you rationalize it?
How might the use of tokens, points, or miles in loyalty programs affect your spending or honesty?
What steps can you take to make yourself aware of the difference between cash and non‑cash transactions to maintain honesty?
Often confused with
References
- Predictably Irrational — Dan Ariely (2008)
- Quote: It is difficult to get a man to understand something when his salary depends upon his not understanding it — Upton Sinclair
CONTINUE THE CONVERSATION
Source texts
- Predictably Irrational by Dan Ariely