Cold drink shop without a cashier in Mandalay and a kaleidoscope of one's own

A few days ago I chanced to watch Democratic Voice of Burma's အင်တာနက်စာမျက်နှာ (Internet page) in its TV program and I was fascinated by its report on the self-service cold drink experiment in Mandalay, the second capital city of Myanmar. A day before that, the information on the same experiment was aired by DVB in its Youth Voice program. By now this has been replicated in five or more townships in Mandalay and some more in other cities. Afterward it took me some good efforts to pin down the address of pages of the “One to one ပြည်သူ့ကူညီရေးအသင်း” which is making the experiment.

It was quite by chance also that before I've heard about the One-to-One's effort, just a few days back, I have discovered the freakishly good reading “Freakonomics”. Then I was busy Googling and downloading the reviews and criticisms and even find time to include a guide for the students. Not that I haven't heard about Freaknomics before. May be a year or so ago I remember reading a statistician's (I think that was Andrew Gelman) comments saying that it was a thoroughly good read, but that he missed the citations on research the book drew upon. I made a mental note and promise myself to read it sometime later, but totally forgotten it until lately.

Freakonomics was written by University of Chicago economist Levitt and New York Time's journalist Dubner and published in April 2005. The full title of the book is “Freakonomics: A Rouge Economist Explores the Hidden Side of Everything” and according to the authors:

… the book’s central idea is set forth: namely, if morality represents how people would like the world to work, then economics shows how it actually does work.

Why the conventional wisdom is so often wrong…How “experts”—from criminologists to real-estate agents to political scientists—bend the facts…Why knowing what to measure, and how to measure it, is the key to understanding modern life…

Is the Levitt-Dubner gang any good? Well, in a typical dummy way, I would point out that their first book “Freakonomics” became a best seller and sold 4 million copies worldwide by late 2009. Then they followed that up with “Superfreakonomics” in 2009 and the most recent “Think Like a Freak: The Authors of Freakonomics Offer to Retrain Your Brain” in May 2014.

By now getting fidgety, are you about to question me how exactly would Freaknomics be relevant to One-to-One People's Aid Association? Well I don't know much about economics or freakonomics or ethics to answer that directly. On the other hand Sai Nay Myo Mg Mg who started the present honor system cold drink vending in Mandalay explained to DVB that he is not interested in vending as such but is mainly interested in seeing people's morality improve. Here, Feldman the Bagel Man's experiences and insights and Levitt's analysis may be useful not only to One-to-One, but to all others who are curious about honor systems as well as white-collar crime and more broadly, morality.

From Freakonomics the topic directly relevant to One-to-one would be “... typical Washington DC area bagel business and its customers” of chapter-1. As for the book, I found out that I could download the pdf file version of Freakonomics here as well as in some other places. For What the Bagel Man Saw, you could also read the original article of June 2004 in New York Times Magazine here.

Paul Feldman was an analyst serving with various government agencies in U. S. such as the US Navy, Bureau of the Budget, the Institute for Defense Analyses, the President's Commission on Federal Statistics from 1962 till 1984. Then he was tired of chasing contracts and quit his job to sell beagles. Beagles, as you know, are bread that looks like donuts.

“Driving around the office parks that encircle Washington, he solicited customers with a simple pitch: early in the morning, he would deliver some bagels and a cash basket to a company's snack room; he would return before lunch to pick up the money and the leftovers. It was an honor system commerce scheme, and it worked. Within a few years, he was delivering 700 dozen bagels a week to 140 companies and earning as much as he had ever made as a research analyst.”

When that New York Times article on Bagel Man appeared in 2004, Feldman was 72 and he had collected detailed data of his bagel business for twenty years. So he knew, for example that, in the past eight years he had delivered 1,375,103 bagels, of which 1,255,483 were eaten, as well as 648,341 doughnuts, of which 608,438 were eaten.

When Feldman started his business he was expecting 95% payment rate. By the time the Bagel Man article was written, he considered (i) companies to be “honest” if the payment is 90% or more, (ii) averages between 80 percent and 90 percent are annoying but tolerable, (iii) falling below 80 percent, it would be a big struggle to continue. It was notable that the payment rate started declining in 1992 and reached 87% by 2001, but climbed back to 89% immediately after the September 11 terrorist attacks.

Some of Feldman's notable experiences:

• Started out with open baskets for the cash. But cash disappear too often and ended up using wooden boxes with money slot at the top.
• Each year he drops off about 7,000 boxes and loses, on average, just one to theft. That means almost all of the people who stole more than 10% of his bagel did not bother to steal his cash boxes.
• He believed that employees further up the corporate ladder cheat more than those down below. He reached this conclusion in part after delivering for years to one company spread out over three floors -- an executive floor on top and two lower floors with sales, service and administrative employees. Maybe, he says, the executives stole bagels out of a sense of entitlement. (Or maybe cheating is how they got to be executives.)

Here in Myanmar we may not need such a strong haunch to explain the origin of executives' behavior. We could simply imagine that someone from the lower floors or even someone on the same floor would be too eager to take the bagels to executives without paying. I don't know if the corruption rampant in the public sector here in the past has spread to the private sector. Perhaps it was the other way round, or perhaps they were going hand-in-hand. Anyway, with the current directive on accepting gifts in force, a particular government official in Myanmar would have to be extra careful in limiting his or her free bagel consumption per year to be well below 100 when Feldman's bagel costs $1.00 apiece.

Feldman identified two strongest predictors of company's honesty: morale and size.

• His intuition gave him the conclusion that an office whose employees like their boss and their work has high payment rates.
• His data firmly showed that smaller offices yields higher payment rates. “An office with a few dozen employees generally outpays by 3 percent to 5 percent an office with a few hundred employees.”

Levitt and Dubner noted that the bagel data also show a correlation between payment rate and the local rate of unemployment. As they say, it seemed like these two factors would be negatively correlated -- that is, when unemployment is low (and the economy is good), people would tend to be freer with their cash.

''But I found that as the unemployment rate goes down, dishonesty goes up,'' Paul F. says. ''My guess is that a low rate of unemployment means that companies are having to hire a lower class of employee.''

Levitt and Dubner also found from the data that the payment rate does not change when Feldman raises bagel prices, though volume may temporarily fall.

This way, when Feldman took his bagel data to Levitt to analyze, Levitt was able to made significant contributions to understanding white-collar crime using unconventional analysis. Nothing much was known about white-collar crime as Levitt-Dubner noted, principally because of lack of data. Most of the time there has been no victim of such crime so there was no one to report, whereas in the Bagel Man case, Feldman was the victim and he happened to have collected twenty year's worth of data!

In the One-to-One's case, Lin Lat's post of May 3 shows that on their first day 10 persons paid for their drinks, but other 5 did not. I have no idea how they could get that statistics, unless they were watching and counting the number of persons who took out the drinks. Next day and after that it was reported that there was no shortage. Perhaps the results after the first day were influenced by the sign-board giving two day's result and the publicity on the Facebook. Then we won't be able to judge the (true) morality of customers from such results. Even with ideal conditions we would need long enough time to get some idea on the morality of customers.

In The bagel seller and a quirky new take on economics (The Telegraph, 17 April, 2006)

Edmund Conway recounted his talk with the authors of Freakonomics. Here is Levitt's warning about measuring things:

"When you start measuring things, people start to arbitrage relative to it.

"So, depending on what metric they use for the hospital, I can guarantee the doctors and administrators are going to start altering their behaviour. So if the thing you compute is death rates in surgery, surgeons won't want to do surgery on the sickest patients.

"It's a double-edged sword - you have to be very careful. Our book isn't just about measuring. It's more about thinking about when you measure you distort things."

Muel Kaptein of Erasmus University Rotterdam examined how ethics work in real life. In his book

Why Do Good People Sometimes Do Bad Things?: 52 Reflections on Ethics at Work (July 25, 2012), available at SSRN: http://ssrn.com/abstract=2117396 or http://dx.doi.org/10.2139/ssrn.2117396 he included a chapter entitled “Bagels at work: honesty and dishonesty”. There, in connection with the currently popular experiments of company canteens doing away with the services of cashiers, Kaptein quoted the Levitt-Dubner's Bagel Man case. His remark:

The facts of the bagel man case show that, when it comes to paying for a bagel, most people act honestly. Clearly many people, once they have reached adulthood, are able to resist this small temptation. Nonetheless, one in seven people abuses the opportunity and does not pay.

It is therefore naive to assume that everyone is always honest, even in small matters. Pinching a little piece of the pie, bending a rule once in a while, occasionally telling a white lie, just looking the other way for a moment, that’s all it takes.

With the honor system, initially the payment rate remains the same or even improved. But later the losses were greater than the costs of cashiers. That prompted some companies to change back to the cashier system.

But things are not that simple.

But are they really trusted? Research by Thomas Gabor and colleagues shows that cashiers too are only human. Researchers visited a shop as a customer, bought a newspaper for 30 cents, paid the cashier with a dollar bill, and walked slowly out of the shop, seemingly absent-mindedly, without waiting for the change. There was plenty of time for the cashier to call the customer back and give them their change. Still 16 percent did not, which incidentally fits in nicely with Paul Feldman’s figures. Another study shows that in more than three-fifths of cases not giving change results from carelessness or sloppiness on the part of the cashiers, and in the other cases from dishonesty.

So the question naturally arises: are people more likely to be honest when it comes to dealing with small misbehavior and small gains or with serious misbehavior and large gains? “Is it easier to resist small or large temptations? Little research has been carried out in this area. An exception is research by Ephraim Yuchtman-Yaar and Giora Rahav.”

They had bus drivers in Israel give back too much change to passengers and varied the amounts involved. They found that the more change was given back, and therefore the greater the temptation for the passenger, the more female passengers kept the money and the more male passengers gave it back. For men, as the temptation increased, so did the sense of responsibility, whereas with women the opposite was the case, according to the researchers.

Now, Sai Naymyo Mg Mg, Levitt and Dubner, Conway, and Kaptein have let me peep into their kaleidoscopes and I've snatched bits and pieces to put into my homemade one. I've enjoyed beautiful patterns out of Freakonomics, honor-systems, white-collar crime, ethics, and social-psychology experiments as it were. Take my kaleidoscope and share my joys. No permission required. Better still, make your own.