Learning about honesty from your neighborhood car dealer

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A couple of months ago my wife and I bought a car from our local Volkswagen dealership. We needed a new car after our second child was born, and we ultimately settled on a Jetta Sportwagen, which I highly recommend for any parents out there who need a car big enough to fit two car seats, but are desperately trying to disguise the fact that they’re no longer cool.

After we agreed to buy the car and all the paperwork was signed (mostly by me, as my wife was home with the new baby), the salesman gave me a head’s up that I’d be receiving a survey via email about my experience at the dealership. “We’d appreciate it if you could give us 9s and 10s”, he said, referring to my survey responses.

At the time I didn’t think much of this comment, and just assumed he and his colleagues would benefit from some positive feedback. But when the time came came to fill out the survey — a simple, straightforward electronic form that I can only assume most people go through in a minute or less — I grappled with my answers. Did I really think the presentation and cleanliness of the car showroom, for instance, was “truly exceptional”, which is what the survey instructions indicated that a 9 or 10 response was supposed to mean? The honest truth was that the experience at the dealership was good but nothing to call home about. I had bought a car from another VW dealership a few years earlier, and I found it hard to decide which buying experience left me more satisfied. How could I honestly say that this last one was something “exceptional”?

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Financial regulation sounds a whole lot like high school

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I finally got around to listening to This American Life’s radio piece about Carmen Segarra and her secret recordings while working for the Federal Reserve Bank of New York. Even if the subject of financial regulation doesn’t typically blow your socks off, I’d highly recommend listening to the podcast, which features TAL’s typically tremendous mix of information and entertainment. At the very least, read the transcript.

The episode is about something called “regulatory capture”, which is a phenomenon we see in a lot of industries, particularly finance and banking. As the piece puts it, regulatory capture is a lot like when there’s “a watchdog who licks the face of an intruder and plays catch with the intruder instead of barking at him”.

Why does this happen? We often point to the “revolving door” separating industry and regulation, where people bounce back and forth between the private sector and the regulatory agencies, dulling their incentive to be tough on the companies they’re regulating now but might work for in the future. But the piece seems to suggest there’s something more purely psychological than that at play.

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