The Pinocchio Tax

In ‘On a Supposed Right to Lie from Altruistic Motives’ (1797), Kant stipulated that one should never lie, under any circumstances: ‘To be truthful (honest) in all declarations is […] a sacred and unconditionally commanding law of reason that admits of no expediency whatsoever.’

This absolute standard is plainly not observed in everyday life: deception is so widespread and takes so many forms that there is an entire encyclopaedia devoted to it. In fact, more than a quarter of executives of publicly listed companies surveyed in a 2024 research paper reported at least one form of earnings manipulation at their firm over the preceding five years.

Lies have been benefiting from a softer vocabulary. Statements contain ‘inaccuracies.’ Executives ‘misspeak.’ Public figures tell ‘untruths.’ False claims become ‘alternative facts.’ This euphemistic language acts as a mechanism of moral disengagement: renaming harmful conduct can make it acceptable to those practicing it. An ‘untruth’ becomes a lie with the moral price removed. Lower the price, and demand rises.

Worse, honesty becomes expensive when dishonesty comes cheap. ‘Deepfakes’ in political campaigns are a case in point. Consider the ‘liar’s dividend’: awareness that evidence can be fabricated makes genuine evidence easier to dismiss.

In that vein, Kant argued that the damage caused by lying extends beyond the person deceived: it undermines confidence in declarations generally: ‘For a lie always harms […] humanity in general, inasmuch as it vitiates the very source of right.’ Call it the Pinocchio tax: some people lie; everyone pays.

But why do people lie? Research suggests that people lie more readily to avoid a loss than to secure an equivalent gain. People need not be fundamentally dishonest for loss aversion to push them into a lie. They may then lie to themselves about not lying.

Technological, political, and geopolitical change threatens established sources of income, influence, and professional worth. These trends are creating a growing category of people with much to lose. For those facing such losses, lying can be a rational act of self-preservation, or even survival.

Corporate transformations concentrate these pressures. Those asked to report on progress may simultaneously be defending the relevance of their role, their unit, or their previous decisions. Declarations of integrity through compliance modules achieve little if reporting an unwelcome fact runs against primal instincts. The danger is that the need for reliable information grows just as the personal cost of providing it rises.

In such an environment, the ‘Columbo method’ discussed in ‘Just One More Thing’ (2026) offers one way to investigate the truth. Management can also make truth-telling cheaper by publicly recognizing candor and giving it weight in decisions about trust, responsibility, and advancement. The reception given to the first unwelcome fact determines whether the next one arrives.

Since the price of lies is paid collectively, the price of honesty should not be borne by the person who speaks.