Money & morals

Here’s a paradox. One the one hand, there’s good laboratory evidence that money can change people’s behaviour for the worse, making them less likely to co-operate (pdf) with others and more likely to cheat. But on the other hand, there’s good evidence - gathered by Benjamin Friedman - that economic growth can improve society’s moral character.
Can we reconcile this apparent contradiction?
Yes - the key thing is hope. In the laboratory experiments, subjects had no hope of getting their hands on the cash. But in periods of economic growth, they do have such hope. And it’s this that makes us behave better.
One reason for this is purely instrumental. If we can anticipate getting a good job with a rising wage, the pay-off to staying out of prison is larger.
The other reason is that hope makes us happy. As Adam Smith said: “The progressive state is in reality the cheerful and the hearty state to all the different orders of the society. The stationary is dull; the declining melancholy (Wealth of Nations, I.8.42). And happier people are more likely (pdf) to behave well.
Friedman himself was explicit on the role of hope:

Periods of economic expansion in America and elsewhere, during which most citizens had reason to be optimistic, have also witnessed greater openness, tolerance, and democracy. (The Moral Consequences of Economic Growth, p9, my emphasis)

There are two important implications here.
1. Those people who are relaxed about slower economic growth - greens and happiness researchers who point out (possibly wrongly) that growth has little effect upon subjective well-being - might be missing something.
2.  One reason why inequality causes crime - and there can be little doubt it does (pdf) - is by depriving the poor of hope that they can get rich, because inequality is correlated with low social mobility. So, here’s a hypothesis: for a given level of income inequality, ceteris paribus, one would expect a society with greater social mobility to have lower crime rates.

Comments

[Innocent Abroad]

Ah, my old friend is back.

Ceteris paribus raro, I fear, and how can you tell when they are?

[reason]

Surely the logical conclusion is that growth of the economy is only a good thing if inequality is not increasing, or to put it another way, it is more important that the benefits of growth are spread than that the rate is high. So the environmentalist could for instance spin their position as smart growth and people might end up with more of the benefit from improved productivity in the form of increased leisure (not counted as a benefit in GDP).

[Bob B]

A classic case where the prospect of financial reward can change people's behaviour for the worse has recently emerged in a criminal trial for fraud. As reported, a "non-smoking advisor" received £90,000 from the NHS for claims relating to imaginary clients whom he had persuaded to give up smoking.

This might seem to be something more likely to occur in some banana republic with kleptocratic political leaders located in some distant continent but the fraud was perpetrated on the Kensington and Chelsea primary care trust in our NHS:
http://www.guardian.co.uk:80/money/2008/aug/21/scamsandfraud.nhs

Even so, it may surprise some readers to learn that the NHS, in fact, made a financial surplus in the last financial year of £1.7 billion:
http://news.bbc.co.uk/1/hi/health/7440519.stm

Which puts into a more illuminating perspective all those recent reports about wide differences in cancer survival rates between healthcare systems in European countries and proposed closures of NHS hospitals and A&E departments as surplus to requirements.