Economics of White Collar Crime... and Bagels

Under what conditions are people honest? Paul F., a former economist who left his profession behind to become a bagel seller, has developed some interesting data on that question. He has years of statistics on who pays for their bagels and who steals, providing invaluable insight on the conditions of honesty.

Stephen J. Dubner and Steven D. Levitt write for the New York Times:

Each year he drops off about 7,000 boxes and loses, on average, just one to theft. This is an intriguing statistic: the same people who routinely steal more than 10 percent of his bagels almost never stoop to stealing his money box -- a tribute to the nuanced social calculus of theft. From Paul F.'s perspective, an office worker who eats a bagel without paying is committing a crime; the office worker apparently doesn't think so. This distinction probably has less to do with the admittedly small amount of money involved than with the context of the ''crime.'' (The same office worker who fails to pay for his bagel might also help himself to a long slurp of soda while he's filling a glass in a self-serve restaurant, but it is extremely unlikely that he will leave the restaurant without paying.)

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.

There is more in the full article, which is definitely worth reading. Why do people steal? Why don’t more people steal? I don’t know, but the data gathered by Paul F. provides some insight into some of the possible factors.

Read More:

• Guide to Ethics and Morality
• News About Ethics