Honor codes work
As a working university teacher, I have to disagree with this somewhat. Cheating happens of a massive scale, I'd say at least 1/3 of all coursework I have graded involved some degree of cheating, and I've seen cases where clearly everybody in the course had copied from one person (who had an ingenious but false solution). Whenever I discuss this with former students, they think 1/3 is too low. When I give out coursework, it shows on sites like rent-acoder.com. One meets people who make a living out of writing dissertations for rich students.The universities accept this tacitly for two reasons.
1. They need the income from the students. If they'd fire every student caught cheating, they'd go bankrupt pretty quickly.
2. It's an extreme amount of administrative work for the professors to deal with. In my experience, I need to invest a day's worth of work per cheating student, all things considered. I really have better things to do in life.
To put it pithily: the students pretend not to cheat, and the universities pretend not to notice.
This is nothing new, students have been cheating since time immemorial, the world keeps on spinning ... there are lot's of stories about cheating in what may be the oldest exam system in the world, the Chinese Imperial examination. (As an aside, if you want an alround fascinating story that involves the Imperial examination, check out the history of the "Taiping Rebellion".)