Moral luck in investment contexts: We consciously find unprofitable investments less moral

Raphael Max; Matthias Uhl

doi:10.1371/journal.pone.0278677

. 2023 Jan 17;18(1):e0278677. doi: 10.1371/journal.pone.0278677

Moral luck in investment contexts: We consciously find unprofitable investments less moral

Raphael Max ^1,^*, Matthias Uhl ²

Editor: Alfonso Rosa Garcia³

PMCID: PMC9844880 PMID: 36649364

Abstract

Moral luck refers to whether an actor is morally praised or blamed for an action whose outcome they could not influence. In two studies, we investigated the behavioral importance of this phenomenon in the realm of investments, which has become increasingly subject to ethical evaluations. In our first online experiment, we examined whether people’s moral evaluation of an investment decision depended on its arbitrary outcome and whether their interpretation of the nature of the decision was driven by this outcome. Our results showed that profitable investments were considered more moral than unprofitable investments. Moreover, profitable investments were labeled “investments” instead of “speculation” or “gambling” more often than unprofitable ones. In our second study, we asked the subjects to assess investments independent of the outcome. After the outcome was announced, the subjects were given the opportunity to reflect and change their initial decision. The results show that people change the moral evaluation and label of investments when told that it had a bad outcome. This observation was stable across different investment contexts. These findings suggest that we must be careful with the increasing moralization of investment decisions and be sensitive to our cognitive biases.

Introduction

In the wake of the 2008 financial crisis, actors in financial markets were accused of immoral actions. This moral judgment was driven by consequentialist considerations that emphasized the negative impact of the individual and collective economic decisions made by financial intermediaries, bankers and investors. In this sense, it was largely an ex post judgment. However, this raises an important question: why were investors not criticized for immoral behavior in the years before the economic crisis unfolded? In other words, is an investor who took a risk and was lucky more moral than an investor who took the same risk but was unlucky?

Williams [1, p. 241] defines the term “moral luck” as a puzzle because it refers to cases where the agent is morally evaluated although it is clear that a significant factor that determined the outcome of their actions was beyond their control. Nelkin [2] argues, “Immunity from luck has been thought by many to be part of the very essence of morality” [para. 1]. However, behavioral research has provided evidence that people base evaluations of misbehavior on the severity of the moral outcome. Bazerman and Tenbrunsel [3] use an example of a medical scientist who manipulates research data to get a drug approved. Some participants were told that the drug has lethal side effects, whereas other participants were told that it is safe. In a between-subjects comparison, the scientist’s data manipulation was considered significantly more moral if the drug caused no lethal side effects. When participants were confronted with both stories simultaneously, they did not think that a moral difference should be made, indicating that people did not think that the side effects should make a difference.

Somewhat contradictory, many people seem to believe that arbitrary consequences should matter for the blame or punishment that we attribute to an agent. Arguably, few people would punish a drunk driver who was lucky enough to get home without incident as severely as an equally drunk driver who runs over a child. The belief that even highly arbitrary consequences matter substantially when attributing punishments is an essential principle of jurisprudence, not an unconscious outcome bias. This is underlined by the fact that in most of the world’s legal systems the partly arbitrary effects of a crime often have a substantial influence on the criminal’s punishment [4].

Given the increasing discussion surrounding sustainable and ethical investments, it is important to understand whether a person’s moral evaluation of an investment is driven by arbitrary monetary outcomes or is independent of these, as all definitions of ethical investments seem to imply. Even when a moral evaluation of an investment actually hinges on its monetary outcome, it is still an open question whether people commit a fallacy according to their own standards because people’s intuitions may differ from experts’ views. In this respect, it is crucial to understand whether outcome-based evaluations are the result of unconscious bias or people’s moral reasoning in the domain of investments simply being consequentialist (i.e., whether they think that an investment’s success or failure should actually determine its moral quality).

For several decades now, many asset classes have described themselves as ethical, social, green or sustainable. Sustainable, responsible and impact investment (SRI) and environmental, social and governance (ESG) are common labels for investments. Due to the multitude of normative concepts used in this regard, we use the term ethical investment as a common denominator for different approaches prevailing in the discourse, such as ESG, SRI or sustainable investment. What do we mean by ethical investments? Investment decisions in general and interest in particular have always been the subject of ethical scrutiny, as evidenced by the church’s ban on interest or halal investments in Islam. However, the discussion about ethical investment has recently (re-)entered public discourse and observers’ way of defining ethical property varies strongly. According to Sparkes [5], churches in the USA and UK have imposed “ethical” restrictions on investment decisions since the early 20th century. Unfortunately, no uniform definition of “ethical investments” exists. One definition pertains to integrating social, environmental or governance criteria in professional investor’s calculus [6–8]. Others define “ethical” as refusing to invest in companies that make their money with alcohol, pornography, tobacco or weapons, for example [6, 9, 10]. This view primarily originated from religious concepts and deontological considerations. After reviewing the taxonomy of sustainable investments of the EU’s High-Level Expert Group and the definitions of the European Banking Authority, the Deutsche Bundesbank, lobbyists and private providers, we have not found a single indication that an investment’s monetary performance should even partially determine its ethicality or sustainability. Despite the differences among ethical concepts in investment, certain investment contexts are touted as more unethical than others and the profitability of investment decisions are not used as criterion for distinction.

This paper examines the behavioral relationship between ethical investments and monetary success. Our research question examines whether and to what extent the economic outcome of an investment decision matters empirically for laypeople’s moral evaluation of the investment decisions.

The remainder of this article unfolds as follows. First, we describe philosophical literature on moral luck and behavioral literature on outcome bias. Second, we report the design and results of our experimental research. Third, we discuss the implications of our results and identify the limitations of our study.

The concept of moral luck

When is an action judged as moral or immoral? This question depends strongly on different ethical approaches. Kant [11] argues that a moral evaluation’s most important criterion is the good will of the actor, which originates from an individual striving to fulfill concrete duties. These duties originate in moral reasoning and, in Kant’s [11] case, with categorical imperative.

"It is impossible to think of anything at all in the world, or indeed even beyond it, that could be considered good without limitation except a good will.” [11, p. 7 (4:393)]

Furthermore, Kant [11] has pointed out that neither good luck nor bad luck should have any influence on our moral judgements about people or actions. Following this approach, consequences should not be taken into account when making moral judgments, particularly ones that cannot be foreseen by the acting individual [11, p. 8 (4:394)].

Williams [12] and Nagel [13] have confronted Kant’s position in their well-known, identically titled essays, “Moral Luck.” Williams [12] argues that the goal to make morality independent of luck is doomed to fail because our moral judgment clearly depends on the outcome. To illustrate his argument, Williams [12] uses the example of the French artist Gauguin, who has chosen to live as an artist in Tahiti rather than a life with a family. He argues that the moral judgment of this decision will depend on whether Gauguin becomes a successful artist or not [12].

A similar example of moral evaluation includes drunk driving. A drunk driver injuring a person on the way home from a party would lead to a different moral judgment than if the drunk driver arrives home without incident. The fact that both scenarios induce moral condemnation is not the point here. What is important is that the scenario without an incident is likely to receive less condemnation than the scenario with an incident. Because the car is driven negligently in both scenarios, this moral judgment should be identical, but Williams [12] argues that this is not the case and uses the term “moral luck” for this puzzle.

Moral luck refers to cases where an agent is considered as an object of moral judgment, although the essential aspects of their judgment depend on factors beyond their control [2]. In his work, Nagel [13] developed these ideas further and distinguished between different types of luck: resultant, circumstantial, constitutive or causal. Resultant luck refers to decisions that are made with uncertainty, which can produce different results. This view of luck is the underlying approach to this article. In the empirical studies in this article, we consider investment decisions that are, by definition, made uncertainly because no probability calculation for a risk quantification can be made on the decision’s outcome [14]. Michaelson [15] points out that moral luck is particularly relevant in a business context because many business decisions cannot be reversed but often have an impact on many people who were not initially involved.

The concept of moral luck is related to the behavioral phenomenon of outcome bias [3, 16, 17], which occurs when the evaluation of actions is influenced by factors that are not logically justifiable. This bias was first described by Baron and Hershey [17]. Tversky and Kahneman [18] explain that human intuition and behavior is biased in many ways and that humans tend to use short-sighted heuristics and “rules of thumb” to make decisions. These biases can also be found in moral judgments [3]. Many studies have shown that people unconsciously act immorally, even against their own ethical standards [19]. Although ethically irrelevant factors do factually influence our moral decisions, the moral implications of actions can also have an effect on epistemological questions, despite being deemed irrelevant a priori. Most prominently, Knobe [20] has shown that the moral quality of an action’s side effect transforms the intentionality that we ascribe to the actor.

Building on the theoretical considerations outlined above, we will examine a potential driver behind the moral evaluation of investment decisions. Does the arbitrary monetary outcome of an uncertain investment decision factually determine its moral evaluation? Does the outcome change how the nature of the decision is interpreted? Do people believe that a given investment decision should be declared as more moral if it has a positive monetary outcome and should lead to a reinterpretation of the decision itself? Nagel [13] believes that the luck of people under moral evaluation influences our judgment. In this article, we examine whether Nagel’s [13] claim aligns with people’s folk intuitions for investment decisions.

The concept of moral luck has already been examined in several empirical studies. For within-subjects design, Kneer and Machery [21] found that the majority rated lucky and unlucky outcomes as morally equivalent. However, for between-subjects design, moral evaluations were outcome driven. The result of their study demonstrated that the outcome effect is mainly induced by hindsight bias implying that people perceive past events as being more predictable than they actually were. In his study of moral luck, Cushman [22] focuses on the mental status of the evaluated individuals and found that the judgment of whether an act is considered moral is primarily based on the mental state of the agent, whereas the verdict of guilt and punishment is based on the mental state and the causal relationship between the agent and the harmful consequences. Young et al. [23] have shown that moral luck depends more on wrong beliefs than on negative results and that participants with false beliefs are regarded as having less justified beliefs and, therefore, as moral culprits. Olson et al. [24, 25] found that across multiple cultures, even three-year-old children prefer people who experience good luck to those who suffer from bad luck.

In contrast to existing literature, our study refers to the realm of investment decisions and attempts to shed light on the implications of increasing demand for ethical investments combined with a lack of a clear-cut definition of ethical investment. We not only focus on the moral evaluation of decisions, but also explicitly investigate whether the very nature of an investment decision is interpreted differently in light of concrete outcomes.

Study 1: Do people base their evaluations and interpretations on outcomes?

Aim and design of Study 1

We used a between-subjects design with vignettes to investigate whether people’s moral evaluation and interpretation of an investment decision hinges on its outcome, even though this outcome is beyond the investor’s control. In vignette studies, test persons are presented with a hypothetical situation for which they must then answer questions [26]. In our vignette, an investment decision was presented. We implemented a 2 x 3 design. In two outcome conditions, we varied whether the investment decision resulted in a profit or loss. In three context conditions, we varied whether the investor worked for a bank, an automotive company or a municipality. Subjects were randomly assigned to one of the six resulting treatments. In the following, we only present the vignettes with a positive and negative outcome for the bank context. The emphasis is only added here for means of illustration to highlight the lone difference between the two vignettes. The complete set of vignettes can be found in the S3 Data.

The vignette for the profit case reads as follows.

“Amanda Roberts is the Director of Financial Planning and Analysis of a large bank. Mrs. Roberts is responsible for the financial planning of the bank and has the goal to increase the financial assets. Several years ago, after consulting with financial advisors, she decided to buy complex financial products whose price development depends on the fluctuations of the oil price. Due to a significant oil price change in the following years, the bank recently recorded a large profit.”

The vignette for the loss case reads as follows.

“Amanda Roberts is the Director of Financial Planning and Analysis of a large bank. Mrs. Roberts is responsible for the financial planning of the bank and has the goal to increase the financial assets. Several years ago, after consulting with financial advisors, she decided to buy complex financial products whose price development depends on the fluctuations of the oil price. Due to a significant oil price change in the following years, the bank recently had to accept a strong loss.”

After the described situation, the test persons were asked two questions in randomized order to exclude series effects. One question asked for a moral evaluation of the investment decision. Another question asked them to label the investment decision to assess people’s interpretation of the decision. To assess the investment morally, we asked “How would you evaluate Mrs. Roberts’s behavior?” Respondents could then place a slider on a selection bar where the left pole meant “very moral” and the right pole meant “very immoral.” For our analysis, we translate this choice into an “immorality score,” (i.e., an integer from 0 [very moral] to 100 [very immoral]). To assess respondents’ interpretation of the nature of the investment decision, we asked “What would you call Mrs. Roberts’s behavior?” The possible answers were “Mrs. Roberts was investing,” “Mrs. Roberts was speculating” and “Mrs. Roberts was gambling.” Finally, we asked some demographic questions.

Results of Study 1

Respondents were recruited via the CloudResearch Prime Panel [27]. All subjects were US inhabitants and at least 18 years old. No further restrictions were made. The survey was conducted in April 2020. The sample consisted of 367 subjects, resulting in at least 50 subjects per group. Based on data from a pilot, we had conducted a power analysis to determine the appropriate sample size for our study. We calculated with an expected mean difference of 10 points of the immorality score between the three contexts in the profit case and the three contexts in the loss case and a standard deviation of 24. Table 1 describes the subjects’ age (life years) and gender (proportion of females) overall and in the profit and loss condition of Study 1. A comparison between the demographic variables in the profit and loss condition indicates that their random assignment to these conditions was effective. Table 2 summarizes the descriptive statistics per outcome condition for Study 1.

Table 1. Age and gender by outcome in Study 1.

	overall	profit	loss	profit vs. loss
n	367	169	198
age (years)	50.62 (15.53)	50.47 (15.33)	50.75 (15.74)	p = 0.867
proportion of females	0.59 (9.42)	0.60 (6.37)	0.58 (6.94)	p = 0.672

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Note: Reported are means and, in parentheses, standard deviations; p-value for age is based on unpaired t-test; p-value for gender is based on the chi-squared test.

Table 2. Immorality scores and proportions using label “investment” by outcome.

	overall	profit	loss
n	367	169	198
immorality score (0 = very moral, 100 = very immoral)	34.42 (23.18)	31.08 (23.45)	37.27 (22.62)
proportion using label “investment”	0.39 (9.34)	0.45 (6.47)	0.33 (6.62)

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Note: Reported are means and, in parentheses, standard deviations.

Fig 1 illustrates respondents’ “immorality score” (that could take an integer from 0 to 100) by outcome for the three investment contexts. Across all investment contexts, the average “immorality score” increased from 31.08 (sd = 23.45) in case of a profit to 37.27 (sd = 22.62) in case of a loss. To analyze whether the investment’s outcome predicted the investment decision’s moral evaluation, we first performed a one-way ANOVA with the “immorality score” as the dependent variable and the outcome of the investment decision (profit or loss) as the independent variable. We found that the outcome of the investment decision significantly predicted its moral evaluation (see Table 3). The same result is obtained when a Mann-Whitney U test is conducted (W = 19,477, p = 0.007).

Table 3. One-way analysis of variance using immorality score as the criterion.

	Df	Sum Sq	Mean Sq	F	p
outcome	1	3,488	3,488	6.59	0.011
residuals	365	193,176	529

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To check for the robustness of this finding, we calculated a multi-way ANOVA that also includes the order in which questions were presented (moral assessment first, labeling first), the investment context (bank, company, municipality) and the interactions between both these factors and the outcome as the independent variables. Table 4 summarizes the results of the multi-way ANOVA. We found again that the outcome of the investment decision significantly predicted its moral evaluation, whereas other factors and their interactions with the outcome did not significantly influence the moral evaluation of the investment.

Table 4. Multi-way analysis of variance using immorality score as the criterion.

	Df	Sum Sq	Mean Sq	F	p
outcome	1	3,488	3,488	6.568	0.011
order	1	3	3	0.006	0.939
context	2	2,503	1,252	2.357	0.096
outcome × order	1	30	30	0.056	0.813
outcome × context	2	1	0	0.001	0.999
residuals	359	190,639	531

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Fig 2 illustrates respondents’ interpretation of the nature of the described investment decision by outcome for the three investment contexts. Across all investment contexts, the proportion of people labeling the decision as “investment” instead of the more pejorative terms “speculation” or “gambling” decreased from 44.97% (76 of 169 respondents) in case of a profit to 33.33% (66 of 198 respondents) in case of a loss.

To analyze whether the investment decision’s outcome predicted respondents’ likelihood to label the decision “investment” as opposed to “speculation” or “gambling,” we calculated a logistic regression with a dummy variable for the label (1 = “investment,” 0 = otherwise) as the dependent variable. Our independent variables were again the outcome of the investment decision, the order in which questions were presented, the investment context and the interactions between both of these factors and the outcome. As Table 5 summarizes, the likelihood of the decision being labeled as investment drops significantly if the investment happens to result in a loss as opposed to a profit.

Table 5. Logistic regression with a dummy for label as the dependent variable.

	Estimate	Std. Error	z value	p
(intercept)	0.092	0.323	0.287	0.774
outcome (0 = profit, 1 = loss)	-0.979	0.461	-2.123	0.034
order (0 = eval first, 1 = label first)	-0.359	0.312	-1.151	0.250
automotive	-0.283	0.386	-0.734	0.463
municipality	-0.046	0.379	-0.121	0.904
outcome × order	1.179	0.455	2.595	0.009
outcome × automotive	-0.145	0.533	-0.271	0.786
outcome × municipality	-0.404	0.563	-0.719	0.472

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However, the interaction effect between the investment’s outcome and the dummy variable of whether respondents labeled the decision before or after evaluating is highly significant. Table 6 therefore summarizes the results of a logistic regression which only considers the labeling of those respondents who labeled the decision before they evaluated it. In this case, the outcome of the investment no longer predicts its labeling. It thus seems that reflecting on the investment’s morality influences respondents’ interpretation of the investment decision.

Table 6. Logistic regression with a dummy for label as the dependent variable for label first.

	Estimate	Std. Error	z value	P
(intercept)	-0.325	0.364	-0.894	0.371
outcome (0 = profit, 1 = loss)	0.325	0.525	0.620	0.535
automotive	-0.205	0.540	-0.380	0.704
municipality	0.057	0.518	0.110	0.912
outcome × automotive	-0.254	0.709	-0.359	0.720
outcome × municipality	-0.750	0.774	-0.970	0.332

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Study 2: Does the bias against unprofitable investments persist upon reflection?

Aim and design of Study 2

The aim of Study 2 was to analyze whether the tendency observed in Study 1 to base the moral evaluation and the interpretation of the nature of the investment decision on outcomes is grounded in moral reasoning or represents an unreflected moral intuition. Put differently, we want to understand whether the observed discrimination against unlucky investors is conscious or unconscious bias. The design of Study 2 closely followed the design of Study 1. The exception was that we let respondents evaluate and label the investment decision before the outcome unfolded (i.e., right after the decision had been taken). Only on the next screen did we inform respondents that it turned out in the following years that the investment decision had led to a loss or to a profit depending on the treatment. They were then explicitly asked to reconsider their previous evaluation in light of this new information. If they wanted to change their initial evaluation of the investment decision after reconsidering it, they were free to do so. Otherwise, they could simply adopt their initial evaluation. The same reconsideration took place for the labeling of the decision. As in Study 1, we randomized whether respondents were first asked for their moral evaluation or for their interpretation. The order in which respondents reconsidered their answers after having received the information on the outcome was identical to the order in which they made their initial assessments.

Results of Study 2

Respondents were also recruited via the CloudResearch Prime Panel. All subjects were again US inhabitants and at least 18 years old. No further restrictions applied. The survey was also conducted in April 2020. Subjects who had participated in Study 1 were excluded from the sample. The sample consisted of 368 subjects, resulting again in at least 50 subjects per group. Table 7 describes the subjects’ age (life years) and gender (proportion of females) overall and in the profit and loss condition of Study 2. A comparison between the demographic variables in the profit and loss condition indicates that their random assignment to these conditions was effective. Table 8 summarizes the descriptive statistics per outcome condition for Study 2.

Table 7. Age and gender by outcome in Study 2.

	overall	profit	loss	profit vs. loss
n	368	188	180
age (years)	45.54 (16.30)	45.40 (16.96)	45.68 (15.64)	p = 0.868
proportion of females	0.64 (9.21)	0.65 (6.54)	0.63 (6.48)	p = 0.753

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Note: Reported are means and, in parentheses, standard deviations; p-value for age is based on unpaired t-test; p-value for gender is based on chi-squared test.

Table 8. Change scores and proportions relabeling decision by outcome.

	overall	profit	loss
n	368	188	180
change score	2.95 (18.29)	0.59 (18.76)	5.43 (17.49)
proportion relabeling decision as “investment”	0.033 (3.43)	0.048 (2.93)	0.017 (1.73)
proportion relabeling decision as “speculation” or “gambling”	0.068 (4.83)	0.027 (2.22)	0.111 (4.21)

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Note: Reported are means and, in parentheses, standard deviations

To understand whether subjects wanted to revise their initial evaluation, we check whether their reconsidered immorality scores differed from their initial ones. The difference between initial evaluations in case of a profit and in case of a loss was not statistically significant (36.64 vs. 32.49, p = 0.259, Mann-Whitney U test). This is captured by a “change score” that is measured as the difference between a given subject’s reconsidered immorality score and their initial immorality score. Across all investment contexts, the average “change score” increased from 0.59 (sd = 18.76) in case of a profit to 5.43 (sd = 17.49) in case of a loss. This result is illustrated in Fig 3.

Fig 3 — Note: The change score is the difference between reconsidered and initial immorality scores. The light gray bar depicts the profit case and the dark gray bar depicts the loss case.

To analyze whether the quality of the investment’s outcome predicted the inclination to revise an investment’s moral evaluation in light of the outcome, we first performed a one-way ANOVA with the “change score” as the dependent variable and the outcome of the investment decision (profit or loss) as the independent variable. The result is that the outcome of the investment decision predicted the magnitude of the revision as measured by the change score (see Table 9).

Table 9. One-way analysis of variance using change score as the criterion.

	Df	Sum Sq	Mean Sq	F	p
outcome	1	2,157	2156.5	6.545	0.011
residuals	366	120,600	329.5

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As in Study 1, we performed a robustness test by calculating a multi-way ANOVA, which also includes the order in which questions were presented (moral assessment first, labeling first), the investment context (bank, company, municipality) and the interactions between both of these factors and the outcome as independent variables. Table 10 summarizes the results of the multi-way ANOVA and confirms the effect of the investment’s outcome on the change score (i.e., the tendency to reevaluate the immorality of the investment).

Table 10. Analysis of variance using change score as the criterion.

	Df	Sum Sq	Mean Sq	F	p
outcome	1	2,157	2,157	6.589	0.011
order	1	198	198	0.604	0.438
context	2	492	246	0.751	0.473
outcome × order	1	675	675	2.063	0.152
outcome × context	2	1,405	702	2.146	0.118
residuals	360	117,830	327

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Fig 4 illustrates respondents’ tendency to reinterpret a decision after getting to know its outcome. The difference between the initial proportions of subjects who labeled a decision as investment in case of a profit and in case of a loss was not statistically significant (53.7% vs. 57.8%, p = 0.434, chi-squared test). Across all investment contexts, the proportion of people who labeled the decision “investment” ex ante to relabel it “speculation” or “gambling” ex post was 2.66% (5 of 188) in case of a profit and 11.11% (20 of 180) in case of a loss. Vice versa, the proportion of people who labeled the decision “speculation” or “gambling” ex ante to relabel it “investment” ex post was 4.79% (9 of 188) in case of a profit and 1.67% (3 of 180) in case of a loss.

To analyze whether the investment decision’s outcome predicted respondents’ likelihood to relabel the decision, we calculated a logistic regression with a dummy variable for the label change (0 = no, 1 = yes) as the dependent variable. Our independent variables were the outcome of the investment decision, the ex ante labeling of the decision, the order in which questions were presented, the investment context, and the interactions of the investment’s outcome with the other variables. As Table 11 summarizes, there is a significant interaction effect between the investment’s outcome and the ex ante labeling of the decision on the propensity to relabel the decision.

Table 11. Logistic regression with a dummy for label change as dependent variable.

	Estimate	Std. Error	z value	p
(intercept)	-2.397	0.618	-3.878	0.000
outcome (0 = profit, 1 = loss)	-0.516	0.918	-0.562	0.574
ex_ante_label (1 = investment, 0 = other)	-0.844	0.583	-1.450	0.147
order (0 = eval first, 1 = label first)	0.072	0.560	0.129	0.897
automotive	0.562	0.679	0.828	0.408
municipality	0.047	0.734	0.064	0.949
outcome × ex_ante_label	2.686	0.870	3.086	0.002
outcome × order	0.164	0.729	0.226	0.822
outcome × automotive	-1.183	0.875	-1.352	0.176
outcome × municipality	-0.908	0.932	-0.974	0.330

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Implications and limitations

The results of our study should be interpreted in the context of the ethical discourse with respect to credit rating agencies (CRAs), the valuation of issues and the taxonomy debate of the EU on sustainable finance. The assignment of ratings by CRA has a strong impact on lenders and borrowers. In addition to the documented conflict of interest in the valuation of bond and creditor issues that is based on the payment links and the lack of transparency [28, 29], we point out another potential conflict based on the results of our study. Sustainability rating companies that are commissioned to issue a Second Party Opinion (SPO) for so-called green or social bonds should make the valuation of a bond or debenture independent of its issuer. This is because the issuer will have a more or less successful history with regard to return on investment that might bias the moral evaluation of the issued bonds. Assuming our respondents’ inclination to evaluate profitable investments as more moral and to do so even upon reflection should sensitize us for the strength of the outcome bias in evaluating investments.

Because the rating of financial instruments as ethical constitutes a public good, we should strive to improve the procedures from which they result as much as possible [30]. For an ethical evaluation of investments to be valuable, it should be orthogonal to the evaluation of financial performance. The assessment of whether an investment is ethical or socially responsible should therefore be based on a comprehensible and transparent catalogue that provides an unambiguous basis for its ex ante evaluation. The enterprise of adding an ethical dimension to the assessment of investments becomes at best empty if it is highly correlated with the investment’s financial success.

Our study is subject to some limitations. First of all, the identified outcome bias may be mitigated when considering the choices of experts in the field of ESG. Moreover, the “CloudResearch Prime Panel” used in our study is not representative of the overall US population. Specifically, the panel has a higher education, is younger, is more liberal and is less religious than the US population [31]. Krische [32] also points out that the level of financial literacy in this sample is higher than in the average US population. Further studies with a more diverse sample are needed to gain an understanding for the correlation of personal characteristics and the moral evaluation and interpretation of investment decisions. Finally, it should be noticed that no main effect of outcome on label change could be identified in Study 2. This does not provide any evidence for the absence of this effect but implies that no evidence for its presence was identified.

Conclusion

Literature in the sustainable investment discourses has dedicated much ink for outlining and elaborating on the meaning of ethical investments. Doing so, the discourse has largely concentrated on the underlying asset of investment decisions. Although the focus on the underlying asset affects public perception, literature on moral luck suggests that moral perceptions also depend on the success of the action, which means that successful actions are perceived as morally superior to unsuccessful ones. In our paper, we tested whether moral luck matters empirically for the moral judgment of investment decisions as well, although this is not proposed by any of the numerous conceptualizations of ethical investments in the normative literature. Specifically, we measured the extent to which the moral evaluation and interpretation of the nature of investment decisions depended on the investment’s arbitrary monetary outcome.

We found that investment decisions that turned out to be less profitable tended to be evaluated more negatively and were also more often interpreted as speculation or gambling instead of investments. Notably, our participants were even downgrading the morality of an investment and relabeled it as “speculation” or “gambling” more often when having the hindsight of a bad outcome. This divergence between ex-ante and ex-post evaluation of investments shows that the outcome bias observed in Study 1 is conscious rather than unconscious. The reason for this is that it is based on an intentional action and does not merely emerge as a subtle between-subjects effect. Notably, this is in contrast to the results obtained by Bazerman and Tenbrunsel [3] in the context of scientific fraud cited at the beginning of this article.

The results of our studies lead us to the conclusion that a rigorous, normative definition of what constitutes an ethical investment decision is indispensable to mitigate the influence of behavioral biases in the ethical evaluation of investments as the one exemplified in this study. When the leeway in classifying investments against the background of a vague definition is greater, the potential influence of the behavioral biases of the classifier is stronger. In any case, it seems likely from our findings that investments labeled as ethical due to the nature of the underlying asset might nonetheless face stronger public rejection if resulting in a financial loss. In this context, our results also suggest that experts should be wary of how they describe investment decisions, as the terms “investment” and “speculation” that may sometimes be used interchangeably in expert jargon do actually come with different moral connotations for laypeople. Clear definitions and generally applicable criteria for the moral valuation of funds remain a major challenge of utmost importance because the subjective classification of funds as ethical or sustainable may be subject to behavioral factors that could be difficult to defend on normative grounds.

Supporting information

S1 Data. Data of Study 1.

(XLSX)

Click here for additional data file.^{(35.5KB, xlsx)}

S2 Data. Data of Study 2.

(XLSX)

Click here for additional data file.^{(41.3KB, xlsx)}

S3 Data. Vignettes.

(DOCX)

Click here for additional data file.^{(21KB, docx)}

Acknowledgments

We are grateful for the very constructive comments of three anonymous reviewers.

Data Availability

All relevant data are within the manuscript and its Supporting Information files.

Funding Statement

The authors received no specific funding for this work.

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PLoS One. doi: 10.1371/journal.pone.0278677.r001

Decision Letter 0

Alfonso Rosa Garcia

25 Mar 2022

PONE-D-22-02964Morally Lucky Investors: We find profitable investments more moral although we think we should notPLOS ONE

Dear Dr. Max,

Thank you for submitting your manuscript to PLOS ONE. After careful consideration, we feel that it has merit but does not fully meet PLOS ONE’s publication criteria as it currently stands. Therefore, we invite you to submit a revised version of the manuscript that addresses the points raised during the review process.

We have received three reports of experts in the topic, and I agree with them that the paper is interesting but it needs substantial changes. In particular, the theoretical discussion on the concept of moral luck needs to be adjusted. Moreover, the statistical analysis is not adequate in some points: the use of ANOVA or other tests need to be justified, specially when it is not well suited, as in the case of binary variables. Please, read carefully the recommendations of the reviewers and try to update your analysis following their comments.

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Comments to the Author

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Reviewer #1: No

Reviewer #2: Partly

Reviewer #3: Partly

**********

2. Has the statistical analysis been performed appropriately and rigorously?

Reviewer #1: I Don't Know

Reviewer #2: No

Reviewer #3: Yes

**********

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Reviewer #1: No

Reviewer #2: Yes

Reviewer #3: Yes

**********

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Reviewer #1: Yes

Reviewer #2: Yes

Reviewer #3: Yes

**********

5. Review Comments to the Author

Please use the space provided to explain your answers to the questions above. You may also include additional comments for the author, including concerns about dual publication, research ethics, or publication ethics. (Please upload your review as an attachment if it exceeds 20,000 characters)

Reviewer #1: The paper explores an interesting hypothesis but seems to over-state the empirical support for it. It would also benefit from further conceptual clarification.

Major comments

⁃ p.5: clarify the conception of moral luck. A good action is not equivalent to a good will. The Kant quote does not say “that the most important criterion of moral evaluation is the good will”

⁃ from p.11: provide more details on both studies: data, details, and results of analyses such as a table. Explain why you used this analysis rather than a one-way ANOVA or Wilcoxon test, or report results of these analyses. Provide reasons for the chosen sample sizes for both studies.

⁃ Relatedly: Study 2, p.13: Please do a sanity check that there is no statistically detectable difference in initial evaluations and labels between groups. Test for differences in immorality scores and labels before versus after outcome.

⁃ Discuss the null results of your studies in the limitations

Minor comments

⁃ p.3: Williams has coined “moral luck” as an oxymoron: provide exact reference, or remove this claim (did he really call it an “oxymoron”? Would be news to me)

⁃ p.3: ditto for “Nelkin argues that immunity from luck is seen by many [who?] as the very essence of morality”

⁃ p.4, second para should be clearer; research question should be stated succinctly

⁃ p.4: historical note: I would bet that there have been ethical restrictions on investments long before the 20th century. Consider Christian restrictions on interest in the Middle Ages or “halal” investment in Muslim Law.

⁃ p.4: definitions of “ethical investment” need further clarification. For one thing, clarify “ethical”. You seem to suggest that “non-financial” is identical with “ethical”, which is incorrect. Also, please explain why investment in alcohol or tobacco should be unethical.

⁃ p.7: explain “Knightian uncertainty”

⁃ p.7: sentence unclear, please revise: “While ethically irrelevant factors exercise a factual influence on our moral decisions, moral implications…”

⁃ p.8: “our intention would reject this”: unclear, revise

⁃ p.15: “it would be better if an institutionalised mechanism controlled that such evaluations took place behind a veil of ignorance”: either explain in detail how this follows from your studies, or remove

Reviewer #2: Review of Manuscript # PONE-D-22-02964

Title: Morally Lucky Investors: We find profitable investments more moral although we think we should not

Summary: This paper reports the results of two experiments conducted to examine whether individuals evaluate the morality of investment decisions through a lens of moral luck.

In the first experiment, participants learn that an investment decision was made and that the investment was later determined to be either profitable or unprofitable (manipulated between subjects). Participants evaluate the profitable investment as more moral than the unprofitable investment and were more likely to label the profitable investment as an “investment” as opposed to “speculation” or “gambling.”

In the second experiment, participants learn about the investment decision and then make assessments of the morality of the investment and the appropriate label before learning whether the investment was profitable or not. Participants then learn about the investment’s outcome (profit or loss) and can revise their judgments on morality and labeling. Results of this study show no differences in morality judgments or labeling between the profit and loss condition, suggesting that individuals know that they should not base these judgments on the outcome of the investment decision.

Comments on Methods:

1.) Participants: The authors should tabulate or otherwise describe the demographics of the participants in the studies and indicate whether random assignment of participants to conditions was effective. That is, are there differences in demographics across experimental conditions? If there are, the authors should statistically control for demographic variables that differ.

2.) Descriptive Statistics: The authors should tabulate full descriptive statistics (means, standard deviations, number of participants, etc.) by condition for the DVs. Currently, only the means/frequencies are shown in a bar graph format.

3.) Statistical Models:

a. The morality judgments in both experiments are formally tested using ANOVA. The authors should include tables for the estimated ANOVA models.

b. For the order of DV elicitation manipulation and the investment context manipulation, the authors should analyze the interaction of these factors with the primary IV of interest (whether the investment is profitable or not). The authors only report the main effects of these two factors on the DVs; however, the main effects are of less concern than the interactive effects when interpreting whether these factors impact the inferences drawn. Also, note that when adding the interaction terms to the ANOVA to account for the full-factorial design of the experiment, the error degrees of freedom will be reduced. I replicated the reported results for experiment 1 using the data provided and found that adding the interaction terms will not affect the inferences of that study.

c. The labeling judgments in both experiments are also tested using ANOVA. This approach may be inappropriate because the dependent variable is constructed as a binary indicator variable (1 = “investment” or 0 = other labels). This may lead to violation of certain assumptions of ANOVA. A more appropriate method would be logistic regression. Again, tables for the estimated models should be presented and the interaction terms should be analyzed.

d. In the second experiment results, it would be informative to know whether participants in any condition were more likely to change their morality and labeling judgments after learning of the investment outcome. This could be accomplished by calculating a change score (reconsidered morality judgment – initial morality judgment), or by using another method. At the least, it would be useful to know whether the initial judgments varied at all by condition.

Other Comments:

1. The study’s abstract only describes the first experiment, yet the study’s title and write-up contemplate both experiments. I recommend revising the abstract to reflect the inferences drawn from the second experiment. Likewise, the conclusion paragraph does not mention the inferences of experiment 2.

2. Footnote 1 cites German Criminal Code (§46 paragraph 2 StGB), but does not explain what that part of the Code requires. More explanation would be helpful for the reader.

3. The study is partially motivated through the idea that certain investment opportunities are often touted as being more ethical – investments with underlying focus on CSR, green initiatives, etc. However, there is a bit of disconnect between this motivation and what is operationalized in the study. The investment security in the study is described as a complex financial instrument with a value that fluctuates based on changes in oil prices. No mention is made of whether the underlying investment is geared toward an ethical cause. The authors could better describe this design choice in light of the overall goals of the research and how the research is motivated.

4. The authors describe investment decisions, generally, as decisions made under conditions of Knightian uncertainty. I believe this is too strong of a statement. Typically, we think of investors making (or at least trying to make) rational decisions based on some estimation of expected value of the investment – i.e., managing risk as opposed to true Knightian uncertainty. While some investment contexts will reflect this high level of uncertainty, not all will. This also disconnects with the operationalization of the context in the experiment. In the vignettes, the investor is described as having consulted with financial advisors, presumably as a rational investor weighing risk and potential reward.

5. In the conclusion, the inferences of the study are extrapolated to infer that sustainability rating professionals may succumb to the moral luck bias when providing opinions regarding the moral evaluation of particular investments; however, this may not be the case. In the experiments, non-professionals make judgments demonstrating the moral luck effect. It is not clear that these results would generalize to professionals dedicated to such evaluations.

Reviewer #3: Summary

Comments

1. The literature has already showed people exhibit outcome bias (related to moral luck). I think the authors really need to emphasize how their work contribute to the literature. For instance, for study 1, even without their study, at least some readers would already think that people would base their evaluations and interpretations on outcome.

2. The section on “the concept of moral luck” is a bit too long and nearly included an entire paragraph of the original words from Kant. I don’t think it is necessary. It would make the story to stay on track better.

3. Figure 2a appear to show the results after they see the outcome. I think readers would be interested to see how their ratings are immediately after they see only the decision but before the outcome is revealed.

Moreover, please provide a name for the figure, at the first glance Figure 1a and Figure 2a appear to be the same.

Overall, I would think it is an interesting exercise but can be explored in more depth.

**********

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Reviewer #1: No

Reviewer #2: No

Reviewer #3: No

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PLoS One. 2023 Jan 17;18(1):e0278677. doi: 10.1371/journal.pone.0278677.r002

Author response to Decision Letter 0

30 Jun 2022

Dear editor,

Thank you very much for allowing us to revise our manuscript and for the many helpful comments on our work.

Before we go into detail on all of the individual comments, we would like to briefly point out that a very helpful additional analysis suggested by Reviewer 2 has led to a change in the interpretation of our data. We have reanalyzed our data from scratch and now show that subjects' evaluation of the morality of an investment is indeed explicitly downgraded after the announcement of the economic success. We analyzed this and now discussed it in the paper. In line with a suggestion of Reviewer 2, we have labeled the respective measure "change score". Consequently, subjects not only labeled economically unsuccessful investment decisions as less moral, but explicitly changed the assessment after the outcome was revealed. This intentional divergence between ex-ante and ex-post evaluation of investments is in contrast to the results obtained by other scholars.

We have further tried to take all reviewer comments into account in our revision and will show you in detail below how we have dealt with reviewers’ comments. Reviewer comments are highlighted in bold type. Below that, you will find our comments in italics. We have created an individual PDF for all reviewers to address each comment individually for each reviewer.

We hope that our revision meets your expectations and are happy to address any additional comments you may have.

Your sincerely,

The authors

Reviewer #1:

Thank you very much for the constructive comments on our manuscript. We think that our manuscript has very much benefitted from incorporating the suggestions you made in your referee report. In what follows, we will address each of your comments individually.

⁃ p. 5: clarify the conception of moral luck. A good action is not equivalent to a good will. The Kant quote does not say “that the most important criterion of moral evaluation is the good will”

We specifically addressed this point and added more sentences to the manuscript.

⁃ from p. 11: provide more details on both studies: data, details, and results of analyses such as a table. Explain why you used this analysis rather than a one-way ANOVA or Wilcoxon test, or report results of these analyses. Provide reasons for the chosen sample sizes for both studies.

We added the data requested by Reviewer 1 to both studies.

⁃ Relatedly: Study 2, p. 13: Please do a sanity check that there is no statistically detectable difference in initial evaluations and labels between groups. Test for differences in immorality scores and labels before versus after outcome.

We now specifically investigate the differences and have transparently prepared the results and reported them in the article. As mentioned above, we included an analysis of the so called “change score” of the evaluations and analyzed the proportion of respondents’ relabeling the decision.

⁃ Discuss the null results of your studies in the limitations

The introduction of the change score and of the change in labels has led to an update in the results of Study 2 such that we do now observe different change scores and different inclinations to relabel the decision. The discussion of the results was changed accordingly.

⁃ p. 3: Williams has coined “moral luck” as an oxymoron: provide exact reference, or remove this claim (did he really call it an “oxymoron”? Would be news to me)

We have rechecked the citation "oxymoron" and provided the respective reference.

⁃ p. 3: ditto for “Nelkin argues that immunity from luck is seen by many [who?] as the very essence of morality”

Due to the fact that this is a direct quote, we would like to leave the sentence as it is. If the reviewer prefers to have the sentence removed, we will comply with this request.

⁃ p. 4, second para should be clearer; research question should be stated succinctly

We have included another paragraph to clarify and describe the research question.

⁃ p. 4: historical note: I would bet that there have been ethical restrictions on investments long before the 20th century. Consider Christian restrictions on interest in the Middle Ages or “halal” investment in Muslim Law.

The reviewer is right, of course, that there was a centuries-old restriction on investment in various religions. We had not originally negated this fact. We infer from the reviewer's comment that our original wording was misleading and have consequently now completed the paragraph to reflect the comment.

⁃ p. 4: definitions of “ethical investment” need further clarification. For one thing, clarify “ethical”. You seem to suggest that “non-financial” is identical with “ethical”, which is incorrect. Also, please explain why investment in alcohol or tobacco should be unethical.

We have also revised the wording here to meet the reviewer's objections.

⁃ p. 7: explain “Knightian uncertainty”

Since the term "Knightian uncertainty" is not essential for the continuation of the argumentation in the paper and the point would require further description, we have decided to dispense with the term at this point.

⁃ p. 7: sentence unclear, please revise: “While ethically irrelevant factors exercise a factual influence on our moral decisions, moral implications…”

We have adjusted the wording.

⁃ p. 8: “our intention would reject this”: unclear, revise

We have removed the sentence as it is not of great relevance for the further argumentation of the paper.

⁃ p. 15: “it would be better if an institutionalised mechanism controlled that such evaluations took place behind a veil of ignorance”: either explain in detail how this follows from your studies, or remove

We have removed the sentence as it is not of great relevance for the further argumentation of the paper.

Reviewer #2:

We have added this information to the paper.

a. The immorality judgments in both experiments are formally tested using ANOVA. The authors should include tables for the estimated ANOVA models.

We have added this information to the paper.

We have adapted the analysis according to this suggestion.

We are grateful for this indication and are now using a logistic regression in the revised version of our paper.

We have now introduced the change score as suggested by Reviewer 2. We are very grateful for this suggestion as it indeed leads to the novel finding that respondents actively downgrade investments if they turn out to result in a bad outcome more strongly than they upgrade investments if they turn out to have a good outcome. We elaborate on this finding in the revised version of our discussion and conclusion.

This objection is justified. We have therefore completely rewritten the abstract and added the consideration of study 2 requested by reviewer 2. Furthermore we adjusted the conclusion part.

2. Footnote 1 cites German Criminal Code (§46 paragraph 2 StGB), but does not explain what that part of the Code requires. More explanation would be helpful for the reader.

We have changed the example for better explanation.

We have taken this important objection of Reviewer 2 seriously and added further comments to the mentioned paragraph.

As mentioned above, we have slightly reworded the sentence and weakened the argument with uncertainty in the sense of Frank Knight. The objection of Reviewer 2 cannot be completely eliminated in our eyes. However, since this argument is not of greatest relevance for the following argumentation in the paper, we have rewritten the paragraph.

We have also considered this comment and included some comments.

Reviewer #3:

In study 1, they found people rate higher immoral scores for a "loss" scenario than a "profit" scenario, similarly there are less people who believe it is an investment in the "loss" scenario" than the "profit scenario". Study 2 was to analyze whether the observed pattern in Study 1 is based on moral reasoning or an unreflected moral intuition. 1. The literature has already showed people exhibit outcome bias (related to moral luck). I think the authors really need to emphasize how their work contribute to the literature. For instance, for study 1, even without their study, at least some readers would already think that people would base their evaluations and interpretations on outcome.

This objection of Reviewer 3 is justified. We have tried to supplement and enhance the argumentation with some comments at the mentioned point.

We thank Reviewer 3 for this objection and have removed the lengthy quote from Kant at this point.

We now report these numbers and conduct further testing. The information requested here by Reviewer 3 is now shown in the paper.

4. Figure information can be better presented. For instance, the authors can easily include a legend name of what each color of the bar represent. The authors could also consider showing the p-values on the graph (or the show the ** on the graph). Moreover, please provide a name for the figure, at the first glance Figure 1a and Figure 2a appear to be the same.

We have revised the graphs as requested and do now provide figure names.

Attachment

Submitted filename: 01d_Answer_to_Reviewer_3.pdf

Click here for additional data file.^{(96.2KB, pdf)}

PLoS One. doi: 10.1371/journal.pone.0278677.r003

Decision Letter 1

Alfonso Rosa Garcia

23 Aug 2022

PONE-D-22-02964R1Morally Unlucky Investors: We find lossy investments less moral, even upon reflectionPLOS ONE

Dear Dr. Max,

Note that the reviewers have some minor comments. Consider them to improve the paper.

Please submit your revised manuscript by Oct 07 2022 11:59PM. If you will need more time than this to complete your revisions, please reply to this message or contact the journal office at plosone@plos.org. When you're ready to submit your revision, log on to https://www.editorialmanager.com/pone/ and select the 'Submissions Needing Revision' folder to locate your manuscript file.

Please include the following items when submitting your revised manuscript:

A rebuttal letter that responds to each point raised by the academic editor and reviewer(s). You should upload this letter as a separate file labeled 'Response to Reviewers'.
A marked-up copy of your manuscript that highlights changes made to the original version. You should upload this as a separate file labeled 'Revised Manuscript with Track Changes'.
An unmarked version of your revised paper without tracked changes. You should upload this as a separate file labeled 'Manuscript'.

We look forward to receiving your revised manuscript.

Kind regards,

Alfonso Rosa Garcia

Academic Editor

PLOS ONE

Journal Requirements:

Please review your reference list to ensure that it is complete and correct. If you have cited papers that have been retracted, please include the rationale for doing so in the manuscript text, or remove these references and replace them with relevant current references. Any changes to the reference list should be mentioned in the rebuttal letter that accompanies your revised manuscript. If you need to cite a retracted article, indicate the article’s retracted status in the References list and also include a citation and full reference for the retraction notice.

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Reviewers' comments:

Reviewer's Responses to Questions

Comments to the Author

1. If the authors have adequately addressed your comments raised in a previous round of review and you feel that this manuscript is now acceptable for publication, you may indicate that here to bypass the “Comments to the Author” section, enter your conflict of interest statement in the “Confidential to Editor” section, and submit your "Accept" recommendation.

Reviewer #1: (No Response)

Reviewer #2: (No Response)

Reviewer #3: (No Response)

**********

2. Is the manuscript technically sound, and do the data support the conclusions?

Reviewer #1: (No Response)

Reviewer #2: Partly

Reviewer #3: Yes

**********

3. Has the statistical analysis been performed appropriately and rigorously?

Reviewer #1: (No Response)

Reviewer #2: Yes

Reviewer #3: Yes

**********

4. Have the authors made all data underlying the findings in their manuscript fully available?

Reviewer #1: (No Response)

Reviewer #2: Yes

Reviewer #3: (No Response)

**********

5. Is the manuscript presented in an intelligible fashion and written in standard English?

Reviewer #1: (No Response)

Reviewer #2: Yes

Reviewer #3: Yes

**********

6. Review Comments to the Author

Reviewer #1: I thank the authors for addressing some of my concerns. I would find it helpful if authors could highlight the changed passages in the manuscript or at least provide line numbers and reference them. The following concerns have in my view not been fully addressed:

⁃definition of “moral luck”: I guess the authors have been trying to rephrase Nelkin’s sentence “Moral luck occurs when an agent can be correctly treated as an object of moral judgment despite the fact that a significant aspect of what she is assessed for depends on factors beyond her control.” Nelkin states that the agent is *being judged*. In the manuscript, the authors give the impression that it is the agent who is *making a judgement*. This may not be intended but readers can easily get this impression. Please revise.

⁃There is still no rationale given for the chosen sample sizes. Please add these.

⁃Study 2: I do not understand why the “change score” removes the worry about initial differences in pre-evaluations between groups. Please add information about these.

⁃Please add tables for one-way ANOVAs for both studies for sake of completeness

⁃As far as I see, there is still no main effect of outcome in Study 2. Please acknowledge this.

⁃Williams reference: Thanks, now I see where the talk of moral luck as an oxymoron is coming from. Williams (“Moral Luck”, 1981) is a locus classicus for the term and Williams is generally regarded as being supportive of moral luck, so the way the term is introduced currently gives the misleading impression that Williams thought moral luck was an oxymoron. Instead, he wanted to draw attention to a puzzle. Please adjust this.

⁃Tables 1 and 2 contain three sub-columns (under “profit”) for “bank”, shouldn’t two of these be “company” and “municipality”?

Reviewer #2: Review of Manuscript # PONE-D-22-02964R1

Title: Morally Unlucky Investors: We find lossy investments less moral, even upon reflection

General Comment: The authors have addressed many of the comments I made in the previous round. This resulted in a different interpretation of the results of the second experiment, so the paper has changed somewhat. In what follows, I will re-summarize the paper as I see it and then provide further suggestions for refining the manuscript.

Summary:

This paper reports the results of two experiments conducted to examine two questions: (1) Do individuals evaluate the morality of investment decisions through a lens of moral luck, and (2) If so, is this bias conscious or unconscious?

In the first experiment, participants learn that an investment decision was made and that the investment was later determined to be either profitable or unprofitable (manipulated between subjects). Participants evaluate the decision to invest as being more immoral when the investment is unprofitable than when it is profitable. Participants were also more likely to label the profitable investment as an “investment” as opposed to “speculation” or “gambling.” These results are consistent with the concept of moral luck.

In the second experiment, participants learn about the investment decision and then assess the morality of the investment and the appropriate label before learning whether the investment was profitable or not. Participants then learn about the investment’s outcome (profitable or unprofitable, manipulated between subjects) and can revise their judgments on morality and labeling. Results indicate that participants revise their initial judgments more in the unprofitable condition. Specifically, the investment decision is reassessed as more immoral in the unprofitable condition than in the profitable condition. These results suggest that the bias toward finding profitable investments more moral is conscious.

Comments on Methods & Analyses:

1.) Tables:

a.For descriptive statistics (tables 1& 2), it would be helpful to see the means for gain, loss, and overall because the main analysis collapses across the context factor. That is – the authors are most interested in the comparison of the profit and loss conditions. The way the descriptives are currently presented seems to emphasize the context factor (bank, automotive company, and municipality) but doesn’t provide the means of most interest (profit and loss). The tables should also include the sample size, n, for each cell.

i.There is an error in labeling the conditions in these tables (bank, bank, bank…)

ii.I recommend the authors find a similar paper published in the journal and ensure that tables are formatted similarly.

b.The authors should include a table of descriptives for the change measures from experiment 2. A table for demographics should also be included (as it was for Study 1).

2.)The results and implications of study two are not well described. Please expound on what the analyses mean in terms of the overall research question addressed by Study 2: Is the moral luck bias in the investment context conscious or unconscious?

Other Comments:

1.) I do not believe the title of the paper appropriately describes the research.

a.The paper is not about “morally unlucky investors,” per se. Rather, the paper investigates moral luck in the investment context.

b.The word “lossy” is not typically used in the investment context. It has specific meaning associated with electrical conduction. I recommend the authors choose one way of describing the two possible investment outcomes (perhaps, “profitable” vs “unprofitable”) and use that terminology in the title and consistently throughout the paper.

2.)I recommend the authors carefully proofread and consider having the paper professionally copyedited prior to publication.

3.)Krische (2019) is cited to justify the participants in the study. However, Krische used a sample of all MTurk workers, while this study’s sample is drawn from a CloudResearch Prime Panel. Notably, the CloudResearch sample seems to be significantly older than the sample drawn by Krische. I recommend de-emphasizing Krische as support for the participants and better describing any filters that were used to screen participants recruited from CloudResearch.

Reviewer #3: Referee Report for PONE-D-22-02964R1

Comments:

1.Some simple explanation regarding why the treatment assignment is not symmetric is needed (when we read Table 1)

For instance, we have all categories of context (bank, auto and municipality) for loss, but only bank for profit. Since the authors says it is 2 x 3, I am wondering is it a typo? Sam for Table 2.

2.Table 3 (the authors on page 12 referred to Table 3a, which I believe is a typo)

There is a 10% significance for context, I am wondering whether the authors intend to discuss this part.

3.Table 4

We see a significant interaction between outcome and order, if so, wouldn’t it be cleaner to just analyze the data that comes first? I think the authors shall provide some explanations for this.

Other minor comment

I am slightly confused which part of the paper I shall read. As I was reviewing it, I noticed that there is another version of the paper again from Page 42. I think in the future, it might be easier not to include the original submission to avoid such confusion (but I understand it could be part of the journal’s requirement).

A kindly future suggestion to the authors:

This response to reviewer can be provided with more details to facilitate the review process. For instance, the authors can provide more details regarding the exact revisions they have made. And mention where these revisions are, on which page, which section?

**********

7. PLOS authors have the option to publish the peer review history of their article (what does this mean?). If published, this will include your full peer review and any attached files.

If you choose “no”, your identity will remain anonymous but your review may still be made public.

Do you want your identity to be public for this peer review? For information about this choice, including consent withdrawal, please see our Privacy Policy.

Reviewer #1: No

Reviewer #2: No

Reviewer #3: No

**********

PLoS One. 2023 Jan 17;18(1):e0278677. doi: 10.1371/journal.pone.0278677.r004

Author response to Decision Letter 1

3 Oct 2022

Dear editor,

Thank you very much for the positive assessment of our revised manuscript. In the previous version, we have taken care of all the remaining comments by the reviewers. We also had our manuscript professionally proofread again, which resulted in numerous linguistic improvements.

We are looking forward to hearing from you.

Your sincerely,

The authors

Reviewer #1:

⁃ definition of “moral luck”: I guess the authors have been trying to rephrase Nelkin’s sentence “Moral luck occurs when an agent can be correctly treated as an object of moral judgment despite the fact that a significant aspect of what she is assessed for depends on factors beyond her control.” Nelkin states that the agent is *being judged*. In the manuscript, the authors give the impression that it is the agent who is *making a judgement*. This may not be intended but readers can easily get this impression. Please revise.

We rephrased the respective sentence to avoid the misunderstanding described by the reviewer.

⁃ There is still no rationale given for the chosen sample sizes. Please add these.

We added information on a power analysis in footnote 1 of the revised version of the paper.

⁃ Study 2: I do not understand why the “change score” removes the worry about initial differences in pre-evaluations between groups. Please add information about these.

We added footnotes 3 and 5 to provide the required information which shows that initial differences in pre-evaluations and pre-labels were not statistically significant.

⁃ Please add tables for one-way ANOVAs for both studies for sake of completeness

Tables for one-way ANOVAs have been added to Study 1 and Study 2.

⁃ As far as I see, there is still no main effect of outcome in Study 2. Please acknowledge this.

As per request of reviewer 2, we do now focus on the change score as our dependent variable in Study 2. As our new ANOVAs show, there is a main effect of outcome on the change score. There is, however, still no main effect of outcome on the label change of the investment. We now acknowledge this in the limitations of our study.

⁃ Williams reference: Thanks, now I see where the talk of moral luck as an oxymoron is coming from. Williams (“Moral Luck”, 1981) is a locus classicus for the term and Williams is generally regarded as being supportive of moral luck, so the way the term is introduced currently gives the misleading impression that Williams thought moral luck was an oxymoron. Instead, he wanted to draw attention to a puzzle. Please adjust this.

Thank you for pointing this out. We rephrased the respective passage to make this clear now.

⁃ Tables 1 and 2 contain three sub-columns (under “profit”) for “bank”, shouldn’t two of these be “company” and “municipality”?

Thank you for pointing this out. The table was changed according to a request by Reviewer 2.

Reviewer #2:

Tables: a. For descriptive statistics (tables 1& 2), it would be helpful to see the means for gain, loss, and overall because the main analysis collapses across the context factor. That is – the authors are most interested in the comparison of the profit and loss conditions. The way the descriptives are currently presented seems to emphasize the context factor (bank, automotive company, and municipality) but doesn’t provide the means of most interest (profit and loss). The tables should also include the sample size, n, for each cell. i. There is an error in labeling the conditions in these tables (bank, bank, bank…) ii. I recommend the authors find a similar paper published in the journal and ensure that tables are formatted similarly. b. The authors should include a table of descriptives for the change measures from experiment 2. A table for demographics should also be included (as it was for Study 1).

Thank you very much for this helpful remark. We have changed the tables accordingly and do now focus on the outcome conditions of profit and loss which are indeed at the core of our interest. Sample sizes were added and the formatting was checked. A table of descriptives for the change measures from Experiment 2 and a table for demographics have been included.

The results and implications of study two are not well described. Please expound on what the analyses mean in terms of the overall research question addressed by Study 2: Is the moral luck bias in the investment context conscious or unconscious?

We added a clearer interpretation of this finding in the second paragraph of the conclusion of the paper where we discuss the results of Study 2.

I do not believe the title of the paper appropriately describes the research. a. The paper is not about “morally unlucky investors,” per se. Rather, the paper investigates moral luck in the investment context. b. The word “lossy” is not typically used in the investment context. It has specific meaning associated with electrical conduction. I recommend the authors choose one way of describing the two possible investment outcomes (perhaps, “profitable” vs “unprofitable”) and use that terminology in the title and consistently throughout the paper.

We appreciate this comment very much and have altered the title according to your suggestion. It now reads as follows: Moral Luck in Investment Contexts - We Consciously Find Unprofitable Investments Less Moral.

I recommend the authors carefully proofread and consider having the paper professionally copyedited prior to publication.

We sent the article to a proofreading agency and had the language revised.

Krische (2019) is cited to justify the participants in the study. However, Krische used a sample of all MTurk workers, while this study’s sample is drawn from a CloudResearch Prime Panel. Notably, the CloudResearch sample seems to be significantly older than the sample drawn by Krische. I recommend de-emphasizing Krische as support for the participants and better describing any filters that were used to screen participants recruited from CloudResearch

This hint is very helpful. We have removed the reference to Krische from the article and added information on the filters that were used to screen participants.

Reviewer #3:

Some simple explanation regarding why the treatment assignment is not symmetric is needed (when we read Table 1) For instance, we have all categories of context (bank, auto and municipality) for loss, but only bank for profit. Since the authors says it is 2 x 3, I am wondering is it a typo? Sam for Table 2.

This was indeed a typo that is corrected in the present version of the manuscript.

Table 3 (the authors on page 12 referred to Table 3a, which I believe is a typo)

Thank you for pointing this out. We have corrected this typo.

We see a significant interaction between outcome and order, if so, wouldn’t it be cleaner to just analyze the data that comes first? I think the authors shall provide some explanations for this.

Please notice that there is in fact no interaction effect between outcome and the order in which the questions where presented, but rather between outcome and whether the ex-ante label was investment or speculation and gambling.

Other minor comment: I am slightly confused which part of the paper I shall read. As I was reviewing it, I noticed that there is another version of the paper again from Page 42. I think in the future, it might be easier not to include the original submission to avoid such confusion (but I understand it could be part of the journal’s requirement).

We would like to sincerely apologize for the confusion this has caused and have ensured that this did not happen in the present submission.

A kindly future suggestion to the authors: This response to reviewer can be provided with more details to facilitate the review process. For instance, the authors can provide more details regarding the exact revisions they have made. And mention where these revisions are, on which page, which section?

All changes in the manuscript are now tracked.

Attachment

Submitted filename: 01b_Response_Reviewer1_minor_revision.docx

Click here for additional data file.^{(15.4KB, docx)}

PLoS One. doi: 10.1371/journal.pone.0278677.r005

Decision Letter 2

Alfonso Rosa Garcia

8 Nov 2022

PONE-D-22-02964R2Moral Luck in Investment Contexts: We Consciously Find Unprofitable Investments Less MoralPLOS ONE

Dear Dr. Max,

There are some mistakes that need to be solved, as well as some points that need to be clarified, as pointed by Reviewer 3. Please, consider carefully her/his suggestions.

Please submit your revised manuscript by Dec 23 2022 11:59PM. If you will need more time than this to complete your revisions, please reply to this message or contact the journal office at plosone@plos.org. When you're ready to submit your revision, log on to https://www.editorialmanager.com/pone/ and select the 'Submissions Needing Revision' folder to locate your manuscript file.

Please include the following items when submitting your revised manuscript:

A rebuttal letter that responds to each point raised by the academic editor and reviewer(s). You should upload this letter as a separate file labeled 'Response to Reviewers'.
A marked-up copy of your manuscript that highlights changes made to the original version. You should upload this as a separate file labeled 'Revised Manuscript with Track Changes'.
An unmarked version of your revised paper without tracked changes. You should upload this as a separate file labeled 'Manuscript'.

We look forward to receiving your revised manuscript.

Kind regards,

Alfonso Rosa Garcia

Academic Editor

PLOS ONE

Journal Requirements:

[Note: HTML markup is below. Please do not edit.]

Reviewers' comments:

Reviewer's Responses to Questions

Comments to the Author

Reviewer #2: All comments have been addressed

Reviewer #3: (No Response)

**********

2. Is the manuscript technically sound, and do the data support the conclusions?

Reviewer #2: Yes

Reviewer #3: (No Response)

**********

3. Has the statistical analysis been performed appropriately and rigorously?

Reviewer #2: Yes

Reviewer #3: (No Response)

**********

4. Have the authors made all data underlying the findings in their manuscript fully available?

Reviewer #2: Yes

Reviewer #3: (No Response)

**********

5. Is the manuscript presented in an intelligible fashion and written in standard English?

Reviewer #2: Yes

Reviewer #3: No

**********

6. Review Comments to the Author

Reviewer #2: The authors have addressed all of my comments. Nice work! .

Reviewer #3: The authors really need to read their paper before their submission, in this submission, Table 2 has a table that is completely empty. And the table below it is also broken by pages.

In one of my comment (maybe I said Table 4, but it is Table 5 this time) it did show "outcome x order" has a significant effect. I don't think the authors have addressed my comments and barely responded to it. I read what is on their table. If it was a misunderstanding, then the authors need to clarify it in in depth.

Moreover, the tables generally can be formatted a bit better (please refer to some other publications either on plosone or other journals).

- e.g. spaces between figures/tables and text do not appear to follow any systematic pattern (e.g. see those above Figure 1a's title)

- tables just generally appear to be a bit like raw presentation. Some of the boarders looks thicker while others are thinner.

**********

7. PLOS authors have the option to publish the peer review history of their article (what does this mean?). If published, this will include your full peer review and any attached files.

If you choose “no”, your identity will remain anonymous but your review may still be made public.

Do you want your identity to be public for this peer review? For information about this choice, including consent withdrawal, please see our Privacy Policy.

Reviewer #2: No

Reviewer #3: No

**********

PLoS One. 2023 Jan 17;18(1):e0278677. doi: 10.1371/journal.pone.0278677.r006

Author response to Decision Letter 2

18 Nov 2022

Reviewer #3:

We are grateful for Reviewer 3’s careful reading of our manuscript and apologize that we did not address all concerns in the previous revision of our manuscript. We are confident that the current revision takes care of the reviewer’s remaining concerns. In what follows, we address each remaining concern individually.

Reviewer #3: The authors really need to read their paper before their submission, in this submission, Table 2 has a table that is completely empty. And the table below it is also broken by pages.

ANSWER: We are very sorry for this mistake. We have deleted the empty table and corrected the broken table.

ANSWER: We apologize for not having addressed this comment sufficiently. In the revised version of the manuscript, we follow the previous suggestion of Reviewer 3 and perform an additional analysis that focuses on the condition where the labeling of the decision was done first. This analysis is now summarized in Table 6 which is discussed on p. 15 of the revised version of the manuscript. It indeed turns out that the influence of the investment’s outcome no longer predicts the labeling of the decision, if only those respondents are considered who label the investment before it is evaluated.

Moreover, the tables generally can be formatted a bit better (please refer to some other publications either on PLOS ONE or other journals).

- e.g. spaces between figures/tables and text do not appear to follow any systematic pattern (e.g. see those above Figure 1a's title)

- tables just generally appear to be a bit like raw presentation. Some of the boarders looks thicker while others are thinner.

ANSWER: We referred to other PLOS ONE publications where the tables have an upper and a lower frame as well as inner frames. Tables are now formatted consistently and spaces between figures and tables have been checked for consistency as well.

Attachment

Submitted filename: 01b_Letter_to_Reviewer_minor_revision2_Reviewer3.docx

Click here for additional data file.^{(13.2KB, docx)}

PLoS One. doi: 10.1371/journal.pone.0278677.r007

Decision Letter 3

Alfonso Rosa Garcia

22 Nov 2022

Moral Luck in Investment Contexts: We Consciously Find Unprofitable Investments Less Moral

PONE-D-22-02964R3

Dear Dr. Max,

We’re pleased to inform you that your manuscript has been judged scientifically suitable for publication and will be formally accepted for publication once it meets all outstanding technical requirements.

Within one week, you’ll receive an e-mail detailing the required amendments. When these have been addressed, you’ll receive a formal acceptance letter and your manuscript will be scheduled for publication.

An invoice for payment will follow shortly after the formal acceptance. To ensure an efficient process, please log into Editorial Manager at http://www.editorialmanager.com/pone/, click the 'Update My Information' link at the top of the page, and double check that your user information is up-to-date. If you have any billing related questions, please contact our Author Billing department directly at authorbilling@plos.org.

If your institution or institutions have a press office, please notify them about your upcoming paper to help maximize its impact. If they’ll be preparing press materials, please inform our press team as soon as possible -- no later than 48 hours after receiving the formal acceptance. Your manuscript will remain under strict press embargo until 2 pm Eastern Time on the date of publication. For more information, please contact onepress@plos.org.

Kind regards,

Alfonso Rosa Garcia

Academic Editor

PLOS ONE

Additional Editor Comments (optional):

Reviewers' comments:

PLoS One. doi: 10.1371/journal.pone.0278677.r008

Acceptance letter

Alfonso Rosa Garcia

1 Dec 2022

PONE-D-22-02964R3

Moral Luck in Investment Contexts: We Consciously Find Unprofitable Investments Less Moral

Dear Dr. Max:

I'm pleased to inform you that your manuscript has been deemed suitable for publication in PLOS ONE. Congratulations! Your manuscript is now with our production department.

If your institution or institutions have a press office, please let them know about your upcoming paper now to help maximize its impact. If they'll be preparing press materials, please inform our press team within the next 48 hours. Your manuscript will remain under strict press embargo until 2 pm Eastern Time on the date of publication. For more information please contact onepress@plos.org.

If we can help with anything else, please email us at plosone@plos.org.

Thank you for submitting your work to PLOS ONE and supporting open access.

Kind regards,

PLOS ONE Editorial Office Staff

on behalf of

Dr. Alfonso Rosa Garcia

Academic Editor

PLOS ONE

Associated Data

This section collects any data citations, data availability statements, or supplementary materials included in this article.

Supplementary Materials

S1 Data. Data of Study 1.

(XLSX)

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S2 Data. Data of Study 2.

(XLSX)

Click here for additional data file.^{(41.3KB, xlsx)}

S3 Data. Vignettes.

(DOCX)

Click here for additional data file.^{(21KB, docx)}

Attachment

Submitted filename: 01d_Answer_to_Reviewer_3.pdf

Click here for additional data file.^{(96.2KB, pdf)}

Attachment

Submitted filename: 01b_Response_Reviewer1_minor_revision.docx

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Attachment

Submitted filename: 01b_Letter_to_Reviewer_minor_revision2_Reviewer3.docx

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Data Availability Statement

All relevant data are within the manuscript and its Supporting Information files.

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PERMALINK

Moral luck in investment contexts: We consciously find unprofitable investments less moral

Raphael Max

Matthias Uhl

Roles

Abstract

Introduction

The concept of moral luck

Study 1: Do people base their evaluations and interpretations on outcomes?

Aim and design of Study 1

Results of Study 1

Table 1. Age and gender by outcome in Study 1.

Table 2. Immorality scores and proportions using label “investment” by outcome.

Fig 1. Immorality score by outcome.

Table 3. One-way analysis of variance using immorality score as the criterion.

Table 4. Multi-way analysis of variance using immorality score as the criterion.

Fig 2. Proportion of respondents labeling the decision “investment” by outcome.

Table 5. Logistic regression with a dummy for label as the dependent variable.

Table 6. Logistic regression with a dummy for label as the dependent variable for label first.

Study 2: Does the bias against unprofitable investments persist upon reflection?

Aim and design of Study 2

Results of Study 2

Table 7. Age and gender by outcome in Study 2.

Table 8. Change scores and proportions relabeling decision by outcome.

Fig 3. Change score by outcome.

Table 9. One-way analysis of variance using change score as the criterion.

Table 10. Analysis of variance using change score as the criterion.

Fig 4. Proportion of respondents relabeling the decision by outcome.

Table 11. Logistic regression with a dummy for label change as dependent variable.

Implications and limitations

Conclusion

Supporting information

Acknowledgments

Data Availability

Funding Statement

References

Decision Letter 0

Alfonso Rosa Garcia

Roles

Author response to Decision Letter 0

Decision Letter 1

Alfonso Rosa Garcia

Roles

Author response to Decision Letter 1

Decision Letter 2

Alfonso Rosa Garcia

Roles

Author response to Decision Letter 2

Decision Letter 3

Alfonso Rosa Garcia

Roles

Acceptance letter

Alfonso Rosa Garcia

Roles

Associated Data

Supplementary Materials

Data Availability Statement

ACTIONS

PERMALINK

RESOURCES

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