Monday, August 10, 2009

The Tuck Honor Code: a case study in a public good

For those that don’t know, Tuck utilizes an honor code for most of its academic administration. That means that most exams are unproctored. You can take them anywhere you like, and you self-time within a given window of usually a few days. The honor code has been strong asset for signaling future employers, as the Wall Street Journal survey has show that recruiters consistently rank us as the most ethical business school students out there.

You would think this would be a classic case for free rider problems. One might expect everyone to end up cheating, right? Well, I can say without a doubt, that is not the case. Cheating on these exams is definitely rare, to the point that you rarely hear even whispers or rumors of incidence. This does not mean that it doesn’t exist, and there have been exposed cases in the past, but overall, as a student here, I can unhesitatingly vouch for my classmates.

The question a standard economist might ask himself is why does this public good not suffer from massive free rider problems? After all, in Nash equilibrium, everyone in the school ends up cheating. One possibility is that the threat of the administration is so fearsome that the expected value is negative. But I’m pretty sure that isn’t it. The probabilities of getting caught by the administration are very low and the Judicial Board isn’t very likely to hand out the “death sentence” so to speak.

My take:

This is a Coasian story. The primary value gained from business school is the "property right" in the lifelong network you leave with. Adherance to the honor code is one of the costs of a property right in this network. The costs of self-regulation and self-policing are extremely low in a close-knit environment like Tuck, so it isn't hard to enforce rights related to this social capital. Feedback loops reinforce social costs of cheating (joking about it doesn't even seem permisable).

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