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said, sumo was rife with drug use and sexcapades, bribes and tax evasion, and

close ties to the yakuza, the Japanese mafia. The two men began to receive

threatening phone calls; one of them told friends he was afraid he would be

killed by the yakuza. Still, they went forward with plans to hold a press

conference at the Foreign Correspondents’ Club in Tokyo. But shortly

beforehand, the two men died—hours apart, in the same hospital, of a similar

respiratory ailment. The police declared there had been no foul play but did not

conduct an investigation. “It seems very strange for these two people to die on

the same day at the same hospital,” said Mitsuru Miyake, the editor of a sumo

magazine. “But no one has seen them poisoned, so you can’t prove the

skepticism.”

Whether or not their deaths were intentional, these two men had done what no

other sumo insider had previously done: named names. Of the 281 wrestlers

covered in the data cited above, they identified 29 crooked wrestlers and 11 who

were said to be incorruptible.

What happens when the whistle-blowers’ corroborating evidence is factored into

the analysis of the match data? In matches between two supposedly corrupt

wrestlers, the wrestler who was on the bubble won about 80 percent of the time.

In bubble matches against a supposedly clean opponent, meanwhile, the bubble

wrestler was no more likely to win than his record would predict. Furthermore,

when a supposedly corrupt wrestler faced an opponent whom the whistle-

blowers did not name as either corrupt or clean, the results were nearly as

skewed as when two corrupt wrestlers met—suggesting that most wrestlers who

weren’t specifically named were also corrupt.

So if sumo wrestlers, schoolteachers, and day-care parents all cheat, are we to

assume that mankind is innately and universally corrupt? And if so, how

corrupt?

The answer may lie in…bagels. Consider the true story of a man named Paul

Feldman.

Once upon a time, Feldman dreamed big dreams. Trained as an agricultural

economist, he wanted to tackle world hunger. Instead, he took a job in

Washington, analyzing weapons expenditures for the U.S. Navy. This was in

1962. For the next twenty-odd years, he did more of the same. He held senior-

level jobs and earned good money, but he wasn’t fully engaged in his work. At

the office Christmas party, colleagues would introduce him to their wives not as

“the head of the public research group” (which he was) but as “the guy who

brings in the bagels.”

The bagels had begun as a casual gesture: a boss treating his employees

whenever they won a research contract. Then he made it a habit. Every Friday,

he would bring in some bagels, a serrated knife, and cream cheese. When

employees from neighboring floors heard about the bagels, they wanted some

too. Eventually he was bringing in fifteen dozen bagels a week. In order to

recoup his costs, he set out a cash basket and a sign with the suggested price. His

collection rate was about 95 percent; he attributed the underpayment to

oversight, not fraud.

In 1984, when his research institute fell under new management, Feldman took a

look at his career and grimaced. He decided to quit his job and sell bagels. His

economist friends thought he had lost his mind, but his wife supported him. The

last of their three children was finishing college, and they had retired their

mortgage.

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, Feldman was delivering 8,400 bagels a week to 140

companies and earning as much as he had ever made as a research analyst. He

had thrown off the shackles of cubicle life and made himself happy.

He had also—quite without meaning to—designed a beautiful economic

experiment. From the beginning, Feldman kept rigorous data on his business. So

by measuring the money collected against the bagels taken, he found it possible

to tell, down to the penny, just how honest his customers were. Did they steal

from him? If so, what were the characteristics of a company that stole versus a

company that did not? Under what circumstances did people tend to steal more,

or less?

As it happens, Feldman’s accidental study provides a window onto a form of

cheating that has long stymied academics: white-collar crime. (Yes, shorting the

bagel man is white-collar crime, writ however small.) It might seem ludicrous to

address as large and intractable a problem as white-collar crime through the life

of a bagel man. But often a small and simple question can help chisel away at the

biggest problems.

Despite all the attention paid to rogue companies like Enron, academics know

very little about the practicalities of white-collar crime. The reason? There are no

good data. A key fact of white-collar crime is that we hear about only the very

slim fraction of people who are caught cheating. Most embezzlers lead quiet and

theoretically happy lives; employees who steal company property are rarely

detected.

With street crime, meanwhile, that is not the case. A mugging or a burglary or a

murder is usually tallied whether or not the criminal is caught. A street crime has

a victim, who typically reports the crime to the police, who generate data, which

in turn generate thousands of academic papers by criminologists, sociologists,

and economists. But white-collar crime presents no obvious victim. From whom,

exactly, did the masters of Enron steal? And how can you measure something if

you don’t know to whom it happened, or with what frequency, or in what

magnitude?

Paul Feldman’s bagel business was different. It did present a victim. The victim

was Paul Feldman.

When he started his business, he expected a 95 percent payment rate, based on

the experience at his own office. But just as crime tends to be low on a street

where a police car is parked, the 95 percent rate was artificially high: Feldman’s

presence had deterred theft. Not only that, but those bagel eaters knew the

provider and had feelings (presumably good ones) about him. A broad swath of

psychological and economic research has shown that people will pay different

amounts for the same item depending on who is providing it. The economist

Richard Thaler, in his 1985 “Beer on the Beach” study, showed that a thirsty

sunbather would pay $2.65 for a beer delivered from a resort hotel but only $1.50

for the same beer if it came from a shabby grocery store.

In the real world, Feldman learned to settle for less than 95 percent. He came to

consider a company “honest” if its payment rate was above 90 percent. He

considered a rate between 80 and 90 percent “annoying but tolerable.” If a

company habitually paid below 80 percent, Feldman might post a hectoring note,

like this one:

The cost of bagels has gone up dramatically since the beginning of the year.

Unfortunately, the number of bagels that disappear without being paid for has

also gone up. Don’t let that continue. I don’t imagine that you would teach your

children to cheat, so why do it yourselves?

In the beginning, Feldman left behind an open basket for the cash, but too often

the money vanished. Then he tried a coffee can with a money slot in its plastic

lid, which also proved too tempting. In the end, he resorted to making small

plywood boxes with a slot cut into the top. The wooden box has worked well.

Each year he drops off about seven thousand boxes and loses, on average, just

one to theft. This is an intriguing statistic: the same people who routinely steal

more than 10 percent of his bagels almost never stoop to stealing his money

box—a tribute to the nuanced social calculus of theft. From Feldman’s

perspective, an office worker who eats a bagel without paying is committing a

crime; the office worker probably doesn’t think so. This distinction probably has

less to do with the admittedly small amount of money involved (Feldman’s

bagels cost one dollar each, cream cheese included) than with the context of the

“crime.” The same office worker who fails to pay for his bagel might also help

himself to a long slurp of soda while filling a glass in a self-serve restaurant, but

he is very unlikely to leave the restaurant without paying.

So what do the bagel data have to say? In recent years, there have been two

noteworthy trends in the overall payment rate. The first was a long, slow decline

that began in 1992. By the summer of 2001, the overall rate had slipped to about

87 percent. But immediately after September 11 of that year, the rate spiked a full

2 percent and hasn’t slipped much since. (If a 2 percent gain in payment doesn’t

sound like much, think of it this way: the nonpayment rate fell from 13 to 11

percent, which amounts to a 15 percent decline in theft.) Because many of

Feldman’s customers are affiliated with national security, there may have been a

patriotic element to this 9/11 Effect. Or it may have represented a more general

surge in empathy.

The data also show that smaller offices are more honest than big ones. An office

with a few dozen employees generally outpays by 3 to 5 percent an office with a

few hundred employees. This may seem counterintuitive. In a bigger office, a

bigger crowd is bound to convene around the bagel table, providing more

witnesses to make sure you drop your money in the box. But in the big-

office/small-office comparison, bagel crime seems to mirror street crime. There is

far less street crime per capita in rural areas than in cities, in large part because a

rural criminal is more likely to be known (and therefore caught). Also, a smaller

community tends to exert greater social incentives against crime, the main one

being shame.

The bagel data also reflect how much personal mood seems to affect honesty.

Weather, for instance, is a major factor. Unseasonably pleasant weather inspires

people to pay at a higher rate. Unseasonably cold weather, meanwhile, makes

people cheat prolifically; so do heavy rain and wind. Worst are the holidays. The

week of Christmas produces a 2 percent drop in payment rates—again, a 15

percent increase in theft, an effect on the same magnitude, in reverse, as that of

9/11. Thanksgiving is nearly as bad; the week of Valentine’s Day is also lousy, as

is the week straddling April 15. There are, however, a few good holidays: the

weeks that include the Fourth of July, Labor Day, and Columbus Day. The

difference in the two sets of holidays? The low-cheating holidays represent little

more than an extra day off from work. The high-cheating holidays are fraught

with miscellaneous anxieties and the high expectations of loved ones.

Feldman has also reached some of his own conclusions about honesty, based

more on his experience than the data. He has come to believe that morale is a big

factor—that an office is more honest when the employees like their boss and their

work. He also believes that employees further up the corporate ladder cheat

more than those down below. He got this idea 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. (Feldman wondered if

perhaps the executives cheated out of an overdeveloped sense of entitlement.

What he didn’t consider is that perhaps cheating was how they got to be

executives.)

If morality represents the way we would like the world to work and economics

represents how it actually does work, then the story of Feldman’s bagel business

lies at the very intersection of morality and economics. Yes, a lot of people steal

from him, but the vast majority, even though no one is watching over them, do

not. This outcome may surprise some people—including Feldman’s economist

friends, who counseled him twenty years ago that his honor-system scheme

would never work. But it would not have surprised Adam Smith. In fact, the

theme of Smith’s first book, The Theory of Moral Sentiments, was the innate

honesty of mankind. “How selfish soever man may be supposed,” Smith wrote,

“there are evidently some principles in his nature, which interest him in the

fortune of others, and render their happiness necessary to him, though he derives

nothing from it, except the pleasure of seeing it.”

There is a tale, “The Ring of Gyges,” that Feldman sometimes tells his economist

friends. It comes from Plato’s Republic. A student named Glaucon offered the

story in response to a lesson by Socrates—who, like Adam Smith, argued that

people are generally good even without enforcement. Glaucon, like Feldman’s

economist friends, disagreed. He told of a shepherd named Gyges who stumbled

upon a secret cavern with a corpse inside that wore a ring. When Gyges put on

the ring, he found that it made him invisible. With no one able to monitor his

behavior, Gyges proceeded to do woeful things—seduce the queen, murder the

king, and so on. Glaucon’s story posed a moral question: could any man resist

the temptation of evil if he knew his acts could not be witnessed? Glaucon

seemed to think the answer was no. But Paul Feldman sides with Socrates and

Adam Smith—for he knows that the answer, at least 87 percent of the time, is

yes.

Levitt is the first to say that some of his topics—a study of discrimination on The

Weakest Link?—border on the trivial. But he has shown other economists just

how well their tools can make sense of the real world. “Levitt is considered a

demigod, one of the most creative people in economics and maybe in all social

science,” says Colin F. Camerer, an economist at the California Institute of

Technology. “He represents something that everyone thinks they will be when

they go to grad school in econ but usually they have the creative spark bored out

of them by endless math—namely, a kind of intellectual detective trying to figure