Question/Comment: At one point during your report on teaching job skills to at-risk urban youth, I noticed a wall behind a student displayed a list of qualities to embrace: be honest, be accountable, among others. It almost seems cruelly ironic, to see these principles being taught as critically important, when unimaginable sums of money, and additional free public money too, have been got precisely by ignoring these principles. So my question is simple: are ethics of any kind taught in finance and business?
Paul Solman: Oh sure. There are lots of ethics courses in business schools AND corporations. But it’s hard to take them seriously in an increasingly depersonalized, anonymous and purposely unregulated global economy.
“Reciprocity” is hard-wired into us all, I believe, but if it isn’t reinforced by experience or our role models, how likely is it to be practiced? Economists talk about “multiple equilibria,” by which they mean different states of the world, each of which is self-reinforcing. A famous example is everyone sitting down at a football game and everyone standing up. Both are equilibrium states, in that it pays for people to keep doing what they’re doing in both cases.
Same for ethical behavior. We tend to do unto others as they do unto us. If everyone’s behaving ethically then, like a crowd staying seated in the stadium, there’s a lot of pressure on the person who stands. But if everyone is cheating, you’re a chump if you sit.
There have been Bernie Madoffs in every era, as I wrote in a recent answer. But they’re harder to distinguish in some settings than others.