How deep do Wall Street’s problems really go? Can they be rooted out by better-tailored financial incentives or farther-reaching regulations, the tools of choice of many pundits and government officials? Or could Wall Street’s deepest flaws be cultural, promulgated over generations by leaders who have chosen to reward those who cut corners, stab colleagues in the back, and engage in otherwise unethical behavior? This idea—that Wall Street takes in ambitious, hardworking young people and corrupts them—is the premise of a recent study, “Business Culture and Dishonesty in the Banking Industry,” by three economists at the University of Zurich. The researchers recruited 128 employees from a large, unnamed international bank and another 80 employees from other financial institutions and asked them to participate in a simple experiment. The typical subject had worked in banking for about 11 years—long enough to have fully absorbed the industry’s cultural norms.The task at hand was to flip a coin 10 times and report the outcomes of the tosses online. Subjects knew in advance whether heads or tails would be deemed the winner. If they reported that a coin toss yielded the right result, they would be given $20. Otherwise, they’d get nothing. At most they could make $200, or $20 each for 10 correct coin tosses. No one was watching as the bankers flipped a coin or reported their results, allowing the researchers to try to isolate behavior that looked like dishonesty. The results of the study were published in November, in Nature. Of course, the expected outcome is that half of each person’s tosses were heads and half were tails.
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