Sunday, August 23, 2009

Economics @ Home © Volume 1 Issue 5

Economics of Brutal Honesty

Remember the time when we were young and we were told never to tell lies? “Honesty is the best policy”. Once we got older, not only did we learn to lie but we also became masters of deception. The power of reasoning was bestowed upon humans. Because of this, not only are humans able to weigh the costs and benefits of lying, but are also able to justify their deception. This issue explores the incentives for dishonesty and whether honesty really is the best policy.

First of all, many people will argue that concealing the truth does not tantamount to lying. That is to say that silence over some relevant issue is not equivalent to lying, which is often defined as disclosing information that is contrary to actual facts. I assert that nondisclosure is within the class of falsification or lying. Saying that it isn’t a lie is merely the justification of the lie that is a consequence of human reason. Before you become defensive, let me first clarify that I do not pretend to be a moral judge. I don’t care if it’s OK for you to lie. Whether or not it is “right” or “wrong” to lie about something is dependent on what “right” or “wrong” really is. That debate will be left for theologists and philosophers because those issues are not really relevant and their accurate definitions are unnecessary for our topic of interest.

One of the most common reasons that people lie is for protection. They lie to protect others, which apparently makes them nobler, or to protect themselves, which may or may not make them selfish. Usually, people who lie to protect are involved in issues that revolve around extreme danger. The common mentality is “the less you know, the better”. Usually, one has committed wrongdoings or is a witness to a crime. People can choose to hide the truth to protect themselves and their family to avoid retaliation. But if you were to think about it a little bit more, you will recognize that the need for protection is a result from the feeling of fear. Fear is a survival mechanism inherent to all living things. Applied to controversial issues of Malaysia today, many parties have cowered in silence for fear of retaliation from corrupt authorities and people in positions of power. Even the mysterious letter implicating the former Selangor MB and the TP of MACC was signed “anonymously”. If these witnesses were to list down every single one of their names, would the letter not appear to be more credible? However, in the animalistic world today, their very own survival is a priority. If every human being were to always consider the benefit of the greater good, then the benefits of always being honest will probably outweigh the costs. However, to a rational individual, the loss one’s ability to survive is of infinite cost, especially when compared with the marginal benefit one can gain from being honest.

The second incentive is closely related to the first. People lie for their own gains. Survival and protection is merely a subclass of one’s personal gains. Other common gains come in various shapes and sizes: money, power, pleasure and happiness, just to name a few. With so many incentives that can grant almost infinite utility (satisfaction) with relatively little personal cost, shouldn’t the real question be, “Why not lie?”. Once again, we have to look at the bigger picture. Cost-benefit on a personal basis would logically lead one to lie. However, many real life situations that involve lying are zero-sum in nature. That is to say, one man’s gain is another man’s loss. On a larger scale, not all situations are zero-sum. In fact, most scenarios have positive externalities when honesty is applied. Nonetheless, this would require one to actually consider the costs and benefit of a larger group as a whole, which is very often not the case. Our primal instincts tell us to look out for ourselves and our “own kind” (family, closed ones etc.). Fortunately we are not all animals.

Recently, I read a quote from Khir Toyo that made me laugh. The comment was referring to the mysterious letter that was handed to Gobind Singh that implicated several top officials and politicians, including Khir Toyo. This letter was published on many blogs and other online sources. I will not post the letter here because this is not my fight and I tend to get very emotional when I discuss cases like these. This was extracted from the Star:

Meanwhile, when contacted, the politician (referring to Khir Toyo), who was overseas, said the allegations were baseless. “I have nothing to gain by toppling the Selangor government,” he added.

“I don’t think it’s the work of MACC officers. What are they going to get by making such wild allegations?” he asked.

At first, you may not find it as funny as I did. But let me point you in the right direction. It was not because I think he was lying, but because of the reason he gave: “What are they going to get by making such wild allegations?”

This is so typical of a pig who only knows how to think of himself. He thinks that everything that everyone does is for self-gain. Maybe on an individual basis, the authors of the letter would gain nothing. However, to expose a corrupt fraud and pig of an ex-government official in a country that is trying to stem corruption from the core is a huge gain for the people of the country.

Let’s backtrack a little. Before this he said: “I have nothing to gain by toppling the Selangor government”. Once again, talks about self-gain. Clearly, a man who only looks out for himself. If only investigative journalism was more mature in Malaysia and reporters were given the free reign to report facts. A pig would never be able to hide under a man’s clothing. Of course I have no evidence to claim that Khir Toyo was lying when he said that. However, any being of at least miniscule intelligence can tell that there is everything to gain for an ex-Mentri Besar of Selangor to topple the current Selangor government. After all, he is the one who is living in a house that is allegedly worth RM 24 million.

Furthermore, theoretically, a politician should have an inherent desire to serve the public. If he still believes in such things, there should not be any talk about self-gain in trying to win his old position back. Do it for the people. Or maybe he thinks that the current Selangor government is doing a great job for the people. Maybe that’s why there is no reason to topple them. I guess I did venture a little too far into politics. Told you I’d get emotional.

Back to economics. There are many countless examples of people lying for self-gain. One can easily point to Bernie Madoff and his USD 65 billion scam. With the incentives of lying so tempting, can we really blame people for lying? Is honesty really the best policy? After all, these liars are behaving merely like the Homo economicus that we assume people to be in our study of economics.

If only we were Homo economicus, then we would have all the right reasons to lie. We are Homo sapiens. Some of you do not need to be reminded of that. However, it is not too uncommon that sometimes Sus barbatus forget what they are.

I would like to remind everyone that cost-benefit analysis must never be abused. While it is easy to see the infinite gains for oneself when practicing deception, it would be nice to think of the costs and benefits of everyone that is affected by our decisions. More often than not, the benefits enjoyed by the group far surpasses the cost to ourselves. That is why we call it the greater good. That is the world that I hope my children will get to live in. A world that prioritizes the greater good.

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