Moral decay in investment

Abstract

How strongly do higher investment premiums tempt people to invest in unethical assets, such as harmful ‘sin stocks’? We present two experimental studies (Ntotal = 1260) examining baseline willingness to invest in ‘sin stocks’ (without a premium), changes in investments as premiums increase, and how individual differences in deontological and utilitarian inclinations and dark personality traits impact baseline and changes to investments. We compare results to hypothetical models of sensitivity to higher returns: a) full resilience (to moral decay), where people increase investment in regular but not sin stocks with increasing premiums, b) partial resilience, where increasing premiums increases investment more slowly for sin than regular stocks, c) sin deduction: a flat baseline penalty for sin versus regular stocks resulting in similar sensitivity to increasing premiums, and d) decay, where investment differences in sin versus regular stocks reduce as premiums increase. On average, responses aligned best with the partial resilience model. Individual differences in morally-relevant traits moderated effects: most notably, people with higher deontological inclinations and lower dark traits showed greater resilience. However, 21–33% of participants exhibited full resilience, refusing to invest more in sin stocks even as premiums increased, which was more common in people with higher deontological inclinations and lower dark traits. These findings suggest that decisions to invest in sin stocks reflect the sensitivity to the sinfulness of the stock, which remains strong even after unethical investments are made more attractive. We conclude that increasing the economic reward of unethical investments does not crowd out moral concerns.