The Economics of Cheating

The obvious reason why people cheat is that they gain some kind of benefit from it...

So why not cheat all the time? Because with these benefits come costs. Let’s examine what these costs are. The most obvious cost that people think about is punishment for getting caught. So when people consider cheating, what they consider is the perceived chance of getting caught multiplied by the perceived punishment.

I use the word “perceived” here to emphasize that this is probably the area that potential cheaters are the most likely to misjudge. It is a known fact that people are very bad at judging probabilities...

Another cost of cheating is opportunity costs. Cheating often takes effort, and such effort could otherwise be used for other pursuits...

The final cost of cheating, and the most interesting because it’s the least rational, is the moral pain people feel when doing something wrong. Because of the moral pain involved, people will often avoid cheating even when the benefit of cheating far outweighs the opportunity costs and there is zero chance of getting caught.

When society tells you that something is wrong, you internalize the moral lesson and feel moral pain, or guilt if you prefer to call it that, while doing and after doing a wrongful deed. Some people feel moral pain more strongly than others...

In conclusion, we learned that a person’s net benefit from cheating is equal to the benefit he gets from cheating, minus the opportunity costs, minus the perceived probability of being caught times the punishment, minus the social stigma, minus the moral pain. A person will cheat if the net benefit exceeds zero. But because people have differing abilities to correctly ascertain the probability of being caught and because people have differing sensitivities to moral pain, when faced with the same cheating temptation not all people will behave the same way: some will cheat and some will not.

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Cheating is not socially efficient. Those cheating consider only the costs and benefits to themselves. They ignore the external costs they impose on others. And others are harmed. Non-cheating students suffer by comparison on exams, and taxpayers, who are paying much of the financial freight of education, end up with graduates who are less knowledgeable than advertised.

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