New research suggests that just thinking about greenbacks might cause people to subconsciously make unethical decisions.
People are more likely to lie or make immoral decisions after being exposed to money-related words, according to researchers from Harvard and the University of Utah's David Eccles School of Business who published a report last month in the journal "Organizational Behavior and Human Decision Processes." The findings show that "even if we are well intentioned, even if we think we know right from wrong, there may be factors influencing our decisions and behaviors that we're not aware of," says Kristin Smith-Crowe, one of the co-authors and an associate professor of management at the University of Utah's David Eccles School of Business.
How information was gathered? Researchers asked college students studying business to make sentences out of various word clusters before answering questions and playing several games. Some of the phrases contained a financial focus such as "She spends money liberally," and others that were neutral, such as "She walked on grass." Researchers found that people who were exposed to the financial phrases lied more often in subsequent activities if they knew doing so would earn them more money. Subjects shown the money-related words were also more likely to make an unethical decision even when there was no direct financial reward, such as hiring someone who promises to share insider information from a competitor.
Consumers too should be on the lookout for how the profit motive could be leading them to make unethical decisions. Investors who are educated about the ways their biases could be impacting their decisions are less likely to be swayed subconsciously by such forces, according to a 2007 report by Princeton University and the Finra Investor Education Foundation, which works to improve financial literacy. "We should be aware that we are all biased in certain ways," says Smith-Crow.
The research could also be used to help investors and consumers recognize when they might be working with a financial professional who may be stretching the truth to make more money. Individual investors should be aware of how much their advisers are getting paid and by whom, says Terrance Odean, a behavioral finance expert and finance professor at the Haas School of Business at the University of California, Berkeley. An adviser who appears to be giving objective advice, for instance, could be "paid by the companies whose products they sell," says Odean, adding that most investors should stick with low cost, well diversified mutual funds such as broad market index funds.
Sources: Market Watch, Harvard University, Utah University, Wall St. Journal