Agency & reciprocity in Corrie

It's a commonplace - at least to me - that you can learn a lot about economics from watching TV as long as you avoid news and current affairs programmes. This is true of Corrie, where Rob's efforts to defraud Carla - or, as I think of her, the future Mrs Dillow - have highlighted some important principles.

One is the danger of principal-agent failure. When Rob heard that Carla wanted to sell Underworld, he fiddled the accounts to give the impression that the business was of little value, thus making it possible for him to buy it.

Such behaviour is widespread. In a famous paper, Simon Johnson and colleagues showed how "tunnelling" - the transfer of corporate assets from small shareholders to controlling ones - can be "substantial." And as Eric Falkenstein has said, a big danger with banks having complex portfolios is that traders might sell them cheaply to others, to build up favours. Money flows from the powerless and uninformed to the powerful and informed.

However, Rob (whos name represents another victory for nominative determinism) did not set out to defraud Carla. For months, he worked well for her. This highlights a principle discussed by Robert Cialdini - the power of reciprocity. Initially, Rob was grateful to Carla for giving him the job, and he repaid her by getting new customers. It was only when he saw this reciprocity break down that he became dishonest.

Herein lies a big reason why people who have power over corporate assets - such as bosses or bank traders - are well-paid. Paying someone millions of pounds isn't necessary to elicit great effort. But it is necessary to buy the goodwill that stops them thieving.

Thirdly, consider Rob's response when he was caught (8'30" in). He says he "was the only person interested in  keeping this place going, ultimately saving everybody's job" and that he was "a loyal lieutenant who kept this place afloat." This is not false, but it's an example of what Dan Ariely calls "cognitive flexibility". We tell ourselves stories, he says, which justify even obvious wrongdoing:

Our sense of our own morality is connected to the amount of cheating we fell comfortable with. Essentially, we cheat up to the level that allows us to retain our self-image as reasonably honest individuals. (The (Honest) Truth about Dishonesty, p23)

In these ways, Rob is an exemplar of the new homo economicus.

Comments

[Anonymous]

In a Nominative Deterministic world I would choose to bear the name of Shaft. And boy, would I live up to that name! Form a queue, ladeez.

[Andrew]

when will you pop the question to the future Mrs. D? Do tell...