John Dean, Watergate and Loss Aversion

In the wake of Watergate, where so many of the culprits of the scandal were lawyers, the ABA responded by requiring law students in accredited schools to take at least one course in professional responsibility.  Then, as now, the thinking goes that immersing students in discussions about the profession’s rules and values will encourage more ethical behavior, including at the highest levels of government.  Those of us who advocate for a behavioral approach to legal ethics, however, have come to believe that teaching the profession’s rules and values, though central, are insufficient.  Rather, students also need to learn about how ethical decisions actually are made — that is, to learn about the situational variables, cognitive biases and heuristics that contribute to unethical behavior.

Recently, I was pleased to learn that John Dean — famed former White House Counsel whose riveting testimony about the Watergate cover-up during the Senate Watergate Hearings was a key part of the saga — also believes in a behavioral approach. In an illuminating deep dive into the Watergate years on The Josh Marshall Podcast, Dean reflects upon how, he now realizes, loss aversion explains much of his misconduct during his time in the Nixon White House. As Dean states (starting around 30:00 of the podcast; and as he has written elsewhere), during his active participation in the Watergate cover-up (for which ultimately he was sentenced to jail) he was experiencing a “loss frame,” which caused him to irrationally “double down” on his own misbehavior to prevent exposure and detection.  Only later on, Dean notes — when he started to cooperate with prosecutors — did his loss aversion abate.

John Dean’s explanation of his own behavior has an empirical basis.  A number of studies have demonstrated the perils of loss framing. For instance, in one set of experiments, researchers found that “decision makers engaged in more unethical behavior if a decision was presented in a loss frame than if the decision was presented in a gain frame.” Other studies (e.g., here and here) have concluded that cheating occurs more frequently to avoid a loss than to secure a gain. And, as one expert on loss aversion has noted, “a host of empirical and experimental studies have shown that tax compliance is higher when, following overwithholding, taxpayers expect a refund (a gain frame), than when, following under-withholding, they expect to pay additional sums (a loss frame).” Eyal Zamir, Law Psychology and Morality: The Role of Loss Aversion (2015) at 32.

As the new semester begins, with Watergate again in the news, many professional responsibility classes undoubtedly will be revisiting the lessons learned from the events of more than 40 years ago.  As these conversations take place, loss aversion and its role in producing unethical behavior can be — and I hope will be — an important part of the discussions.

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