ONCE UPON a time, Paul Feldman dreamed big dreams. Trained as an agricultural economist, he wanted to tackle world hunger. Instead, he took a job in Washington, analysing weapons expenditures for the US Navy. This was in 1962. For the next 20-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 neighbouring floors heard about the bagels, they wanted some too. Eventually he was bringing in 15 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 per cent; 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 paid off 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 honour-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 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? In what circumstances did people tend to steal more, or less?
As it happens, Feldman’s accidental study provides a window on to a form of cheating that has long stymied academics: white-collar crime. 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 to chisel away at the biggest problems.
Despite all the attention paid to rogue companies such as Enron, academics know very little about the practicalities of white-collar crime. 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 generates 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 per cent 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 per cent 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 learnt to settle for less than 95 per cent. He came to consider a company “honest” if its payment rate was above 90 per cent. He considered a rate between 80 and 90 per cent “annoying but tolerable”. If a company habitually paid below 80 per cent, 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 7,000 boxes and loses, on average, just one to theft.
This is an intriguing statistic: the same people who routinely steal more than 10 per cent 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 $1 (54p) each, cream cheese included — than with the context of the “crime”.
