Simple Way to Curb Financial Dishonesty Found

Signing at the top of your tax return form could lead to a more honest return, a new study reported Aug. 27, 2012, suggests. CREDIT: Dreamstime View full size image

Many financial documents require a signature at the end to certify that all the information provided is true. This honor declaration doesn't always keep people honest. But what if it could? Scientists have discovered that having people sign at the beginning of the document rather than at the end may curb dishonesty.

Researchers looked at how the position of people's signatures affects their tendency to lie on a financial self-report, such as a tax return. Participants were much less likely to lie if they had to sign at the top of the document instead of at the bottom.

Essentially, signing before the opportunity to "cheat" makes morality salient when it's needed the most, researchers said.

"Our findings are very important for companies and policies," said study co-author Nina Mazar, an assistant professor of marketing at the University of Toronto in Canada. "Even if you might see effects for only a few years, it can save quite some money."

Sign here

Dishonest self-reporting on financial forms comes at a great cost to society, Mazar notes. For instance, the IRS estimates that the amount of revenue unreported and unpaid in 2005 totaled approximately $345 billion. Other countries, including Canada and the United Kingdom, also suffer from dishonest reporting, Mazar said. [6 Odd Historical Tax Facts]

The issue is people have mental tricks to self-deceive. "We find ways to suppress what we have done, to reinterpret what we have done," Mazar told LiveScience. By the time the honor code comes into play, it's too little, too late. "You can sign because you've made yourself believe everything you've done is fine — you've already had the opportunity to reinterpret your actions."

So Mazar and her colleagues wondered: Could positioning the signature up front make people more honest? They conducted several experiments to find out.

In two lab experiments, the team had participants complete math puzzles, in which they earned income for puzzles solved correctly. The participants later tossed their worksheets into a trash can. Then, on a tax form, they reported their income accrued from the puzzles they solved, with one group signing at the top and the other at the form's end.

The researchers used coded numbers to tie the tax forms to the worksheets they fished out of the trash, finding those who signed at the top were more honest about their earnings. In one experiment, for example, only 37 percent of the 30 people using the sign-at-top forms overstated their income from the puzzles, compared with 63 percent of the 30 sign-at-bottom participants.

Real-world use

The team then partnered with a U.S. automobile insurance company for a real-world experiment. They sent out more than 13,000 policy-review forms, which asked customers to report the current odometer mileage of their cars. Half of the customers received a modified form, where the honesty statement and signature line appeared up top. Comparing these readings with the company's latest records, they found that customers using the sign-at-top form reported driving their cars more than those with the standard sign-at-bottom form. The results suggest customers with the standard form were more willing to report lower mileages to reduce their insurance premiums.

Seeing the signature up front reminds people of their own moral standards, Mazar explained.

Jason Dana, a University of Pennsylvania psychologist who wasn't involved in the study, thinks the idea of moving the signature is "really cool and interesting." But he wonders if the effect seen has more to do with novelty than morality. "Slapping it at the top just makes me think, 'Whoa, something's up, they're serious,'" Dana told LiveScience. "What happens if all things are signed at the top and it's no longer novel?"

Whatever the case, Dana doesn't see a problem trying it out on some forms, such as insurance policies. "It basically costs you nothing to try it, and I can't imagine a world where this hurts or it will make people lie more," he said.

The research is published today (Aug. 27) in the journal Proceedings of the National Academy of Sciences.