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Teaching Ethics, Heuristics, and Biases
University of Texas at Austin
Although economists often model decision makers as rational actors, the heuristics and biases literature that
springs from the work of Nobel Prize winner Daniel Kahneman and his late colleague Amos Tversky demonstrates that
people make decisions that depart from the optimal model in systematic ways.
These cognitive and behavioral
limitations not only cause inefficient decision making, but also lead people to make decisions that are unethical.
article seeks to introduce a selected portion of the heuristics and biases and related psychological literature, to highlight
its implications for ethical decision making, and to serve as the basis for a lecture that could inform students regarding
If business actors are on guard against errors in their own decision making processes, perhaps they can
avoid some of the ethical pitfalls that recently put Enron and so many other companies in the news.
attribution theory, behavioral psychology, biases, cognitive dissonance, decision theory, escallation of
committment, ethics, framing effects, heuristics, overconfidence, rationality, self-serving bias, sunk costs.
Purely by happenstance I recently found myself at two separate functions sitting next to
individuals who had been convicted of white collar crimes in high-profile scandals of the early
After each event, I described both men as “the nicest guy you’d ever want to meet.”
they certainly seemed to be.
This led me to wonder why nice guys (and gals, like my students) break the law and violate
Certainly economists have modeled criminal activity as rational decision
making involving the weighing of potential benefits of the crime against the potential
punishments multiplied by the chance of detection (Posner, 1977). However, most people who