That's the first I've heard that it had anything to do with saving money, and I spent 4 years there. It does, however, make life easier for professors and students when you can trust each other.
I don't know what Caltech is like today. I attended in 70's, and the honor system was considered sacred by the students. If there were cheaters, they never bragged about it, and I don't know of any. I know one who fell asleep during his takehome exam, woke up and finished it, and so exceeded the time limit. He noted this on the exam. The professor replied back that he was very sorry and was forced to give him an F. The student repeated the (required) class next year.
The number of students who did poorly on exams argues that cheating was not widespread.
If the culture has changed in the intervening years, that makes me very sad.
I don't know what Caltech is like today. I attended in 70's, and the honor system was considered sacred by the students. If there were cheaters, they never bragged about it, and I don't know of any. I know one who fell asleep during his takehome exam, woke up and finished it, and so exceeded the time limit. He noted this on the exam. The professor replied back that he was very sorry and was forced to give him an F. The student repeated the (required) class next year.
The number of students who did poorly on exams argues that cheating was not widespread.
If the culture has changed in the intervening years, that makes me very sad.