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Chicago Booth Review: ‘Mental money laundering’ lifts constraints on Spending Morally Questionable Income

Numerous experiments have demonstrated that people are more generous with money they’ve earned unethically. But research by Chicago Booth’s Alex Imas, Carnegie Mellon’s George Loewenstein, and Carey K. Morewedge of Boston University discovers there’s a way to avoid this self-imposed penalty: psychologically “launder” the money by obfuscating its source. Their findings suggest the complicated effects this informal bookkeeping can have, as it can cause people to be generous with dirty money but also to find ways to avoid such generosity. In further experiments, they also find evidence that mental money laundering also applied to situations in which ethically and unethically earned money was pooled. When “dirty” money mixed with clean, participants tended to treat the entire pool of money as though it were ethically earned.  Moreover, people recognize their tendency to treat laundered money differently than unlaundered money, and seek out opportunities to sanitize it, the research suggests. Read more at Chicago Booth Review.