My daily drive to work takes me up Interstate 95. Every day I watch an odd thing happen. I'm passed by individuals driving 85-90 MPH, despite the speed limit being 65MPH. Oddly, if I happen to be in the farthest left non-HOV lane, they generally don't move into the HOV lane to pass me, choosing instead to sit behind me until I get the opportunity to move over.
There seems to be some very unusual decision making going on. Driving significantly over the speed limit is against the law and has been cited as one of the leading causes of traffic accidents. Driving in the HOV lane with only one occupant is also against the law. I doubt it causes nearly the same safety risk as speeding, however. So why the very different decisions? Why chose the legal risk and safety risk of speeding, but not chose to illegally use the HOV lane even if it helps you get where you’re going more quickly and possible more safely? Why is one bad decision deemed acceptable while the other is determined to carry too much risk?
Socially Acceptable & Anonymous
I think there are a couple critical factors. Speeding is a socially acceptable choice. Virtually every car is speeding by some small amount. Speeding a bit more than the group may feel less bad. Speeding is also anonymous, especially when speeding among a flow of traffic also driving fast.
Using the HOV lane inappropriately is very different. Drivers generally honor the rules by only using the lane when their vehicles have more than one occupant. Using the HOV lane also isolates you. You drive on an island where people can easily see you breaking the rules. This choice is neither socially acceptable nor anonymous.
Socially Acceptable, Anonymous Financial Decisions
I think certain parallels can be drawn between this faulty traffic decision-making and personal financial decision-making. We certainly see poor financial decisions being made all the time that are socially acceptable.
One such example is paying taxes. There are plenty of examples of this, many you can probably identify with. Whether it’s a family member discussing how they write off 100% of the use of their personal vehicle for business use or a handyman asking for under-the-table cash payments for doing a side job, we hear and accept these stories all the time. They are socially acceptable, so much so that people are willing to discuss them!
Both are socially acceptable financial decisions, and both run afoul of tax law. Both can be done in relative anonymity and can be rationalized with no more logic than "everyone else is doing it!" They are poor financial decisions, yet people make them because there is a feeling many people cheat a little on taxes and it’s easy to do so without drawing attention to oneself. It's no different than speeding with the flow of traffic on the highway.
Small Gets Big
But this faulty decision making process can lead someone from small poor decisions to much larger ones. Like the driver that decided speeding at 90 MPH is really not that different than speeding at 70MPH, a small socially acceptable poor financial decision can become a larger one. What was a few dollars paid in cash for some work on the side might grow into keeping large pots of income off the books when filing taxes. A small bit of fudging on a vehicle use deduction could morph into phony charitable deductions or made-up business expenses.
The same process and rationalization that went into the small poor financial decision works in the bigger poorer financial decisions. Cheating a little on taxes is still socially acceptable (now a little is just being redefined) and it is still anonymous. This rationalization tells you to fire away!
It’s a bit frightening. There's not much effort needed to rationalize increasing speeding from 70 to 90MPH. Likewise, not much is needed to move from small poor financial decisions to very large high risk ones.