Open AccessSELF‐ESTEEM, MORAL CAPITAL, AND WRONGDOING
Author(s) -
Dal Bó Ernesto,
Terviö Marko
Publication year - 2013
Publication title -
journal of the european economic association
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 7.792
H-Index - 93
eISSN - 1542-4774
pISSN - 1542-4766
DOI - 10.1111/jeea.12012
Subject(s) - wrongdoing , temptation , economics , moral hazard , deterrence (psychology) , microeconomics , social psychology , incentive , psychology , law and economics , political science , law
Abstract We present an infinite‐horizon planner–doer model of moral standards, where individuals receive random temptations (such as bribe offers) and must decide which to resist. Individual actions depend both on conscious deliberation and on a type reflecting unconscious drives. Temptations yield consumption value, but confidence in being the type of person who resists temptations yields self‐esteem. We identify conditions for individuals to build an introspective reputation for goodness (“moral capital”) and for good actions to lead to a stronger disposition to do good. Bad actions destroy moral capital and lock‐in further wrongdoing. Economic shocks that result in higher temptations have long‐lasting effects on wrongdoing. We show how optimal deterrence can change under endogenous moral costs and how wrongdoing can be compounded as high temptation activities attract individuals with low moral capital.