People exploit flexibility in mental accounting to relax psychological constraints on spending. Four studies demonstrate this in the context of moral behavior. The first study replicates prior findings that people donate more money to charity when they earned it through unethical versus ethical means. However, when the unethically-earned money is first 鈥渓aundered鈥濃�撯�搕he cash is physically exchanged for the same amount but from a different arbitrary source鈥攑eople spent it as if it was earned ethically. This mental money laundering represents an extreme fungibility violation: exchanging 鈥渄irty鈥� money for the same sum coming from a 鈥渃lean鈥� source significantly changed people鈥檚 propensity to spend it prosocially. The second study demonstrates that mental money laundering generalizes to cases in which ethically and unethically earned money is mixed. When gains from ethical and unethical sources were pooled, people spent the entire pooled sum as if it was ethically earned. The last two studies provide mixed support for the prediction that people actively seek out laundering opportunities for unethically earned money, suggesting partial sophistication about these effects. These findings provide new evidence for the ease with which people can rationalize misbehavior, and have implications for consumer choice, corporate behavior and public policy.
Published in: Journal of the European Economic Association
Blurring the source of ill-gotten gains can mitigate the effects of mental accounting.
鈥楳ental Money Laundering鈥� Lifts Constraints on Spending Morally Questionable Income
