I enjoy psychology and learning counterintuitive ideas that affect us. For the poker players out there, the invention of the poker chip has been lauded as a turning point in the participation and growth of the game – it took away the immediate true value of the money.
In one of the studies from the video it was shown that cheating doubled in their experiments when they used tokens that could redeemed for money versus cheating to get money. The token had a value but not an immediate value. This is why people spend more with a credit card than with cash.
In another experiment they found college students cheated more when an actor, part of the experiment, obviously cheated and was wearing a sweater of their school. It gave them social proof from a peer.
What does this explain? The bankers, lenders, and homeowners, who may not have acted as risky, or much less cheat as the case may have been, changed their inclination as their peers packaged bad loans and friend after friend bought a new house that seemed too expensive.
The bankers sold derivatives and stocks which they most likely understood to be very risky but it was similar to the token concept where it almost becomes play money.
This doesn’t excuse what happened to the market but it explains human nature and it isn’t necessarily about them being greedy. The professor says in his video that larger amounts of money didn’t always increase the cheating.
Here is another video from this behavioral economist about how we make decsions.
http://www.ampedmind.com/2009/05/19/are-we-in-control-of-our-own-decisions/
