Results for “reduce bribery” 4 found
To Reduce Bribery, Make it Legal
India’s chief economic adviser Kaushik Basu argues (pdf; WSJ report) that to reduce bribery we should make the paying of bribes (not the demanding!) legal.
Under the current law…the bribe giver and the bribe taker become partners in crime. It is in their joint interest to keep this fact hidden from the authorities and to be fugitives from the law, because, if caught, both expect to be punished. Under the kind of revised law that I am proposing here, once a bribe is given and the bribe giver collects whatever she is trying to acquire by giving the money, the interests of the bribe taker and bribe giver become completely orthogonal to each other. If caught, the bribe giver will go scot free and will be able to collect his bribe money back. The bribe taker, on the other hand, loses the booty of bribe and faces a hefty punishment.
Hence, in the post-bribe situation it is in the interest of the bribe giver to have the bribe taker caught….Since the bribe taker knows this, he will be much less inclined to take the bribe in the first place. This establishes that there will be a drop in the incidence of bribery.
Basu notes that he intends this to apply to bribes where the person paying the bribe is receiving only what they are entitled to receive, e.g. when you have to bribe to get a business license that you are entitled to or to get your rice rations or get an income tax refund.
Hat tip to Sanjiv.
Econ 101, the Drug War, and Afghanistan
Jeffrey Clemens has an excellent piece summarizing his work on the economics of opium production and foreign policy:
From the perspective of Eurasian heroin traffickers, raw opium accounts for a small share of the cost of reaching either their middle- or high-income consumers. Most of the cost is driven by the expenses and risks associated with trafficking itself—bribery, money laundering, document forgery, and, when attempts to evade the authorities fail, violence. As a result, traffickers’ demand for the opium produced by Afghan farmers is inelastic, meaning that even a substantial change in the prices required by farmers will have a modest effect on the quantity the traffickers choose to acquire. This meant that the government’s efforts to reduce poppy cultivation had a greater effect on prices than on the quantity produced—the government drove up opium prices without reducing the quantity demanded by and produced for traffickers.
While overall opium production did not decline, it did undergo an important shift. Predictably, opium production shifted out of the government’s most tightly held provinces and toward provinces in which the government struggled to exert control. This stemmed from a straightforward issue of targeting and state capacity. Prohibitions can only be enforced on territory that the state governs. As a result, opium suppression efforts reduced poppy cultivation in provinces in which the Taliban had historically been weak. Before the increase in counternarcotics spending, poppy cultivation was prevalent in districts across the country. By the late 2000s, however, it had consolidated in areas dominated by the Taliban in the country’s southwest provinces, in particular in Helmand province, which regularly accounts for half of the land cultivated with opium poppies.
Thus, not only did the war on opium fail to reduce opium production it increased the strength of the Taliban. There are general lessons:
When a policy impinges on people’s livelihoods, it risks alienating the very population on whose loyalty the government relies. When state capacity is low, pursuing such policies is thus likely to be unwise. And it is precisely those who oppose the government’s authority, and have the means to resist it, who will tend to thrive in illicit markets. By creating such markets, then, prohibition policies can create economic environments that enrich the government’s adversaries. Similar dynamics have long been at play in the conflict between the Colombian government, drug cartels, and assorted paramilitary groups, where US aid has historically been linked to efforts to suppress cocaine production
…Economic prohibitions can thus have the unintended consequence of enriching the government’s opponents. When a state is weak, it should thus forego, or at least deemphasize, the imposition of economic restrictions. The ability to enforce prohibitions is a luxury reserved for stronger and more stable regimes.
This piece and the underlying research make for excellent undergraduate teaching material as it show the power of simple economic principles to understand the world.
Addendum: On the last point about weak states foregoing the imposition of economic restrictions, see also my piece with Shruti Rajagopalan on Premature Imitation.
Picture Credit: “Poppy Field (Chollerford)” by wazimu0 is licensed with CC BY 2.0. To view a copy of this license, visit https://creativecommons.org/licenses/by/2.0/
From the comments, on UID
This is concerning the forthcoming Indian attempt to register individuals through unique eye scans and implement more cash transfers:
The domestic debate in India has largely been around :
1) This is just a sop before elections, a kind of brazen legitimised bribery. 2) The welfare architecture will not simply be migrated, it will be expanded. 3) Is conditionality critical to success? There remains no clear method to establish conditionality. 4) Identification of deserving families remains the problem. Until that is solved, nothing changes. 5) This is basically a turf war between ministeries and the previous operational/financial failures of the UID program are being hidden through the hasty implementation being planned now. 6) Getting in-kind subsidised goods through regular intervals during a month is superior cash flow management for a poor family than a lump-sum cash transfer at the end of the month
All the criticisms could be partially true. But the operational costs of the welfare delivery infrastructure will surely go down. Food and fertilizer have not yet been shifted – too politically sensitive – but amazingly, fuel has been. The biggest no-distortion gain is likely to come from there – the consumption of kerosene will most likely take a massive beating. It reduced by about 90% in a pilot.
The other corollary benefit – of using an Aadhar card as a means of establishing identity and for KYC norms in banks – is also absolutely tremendous.
It is indeed a top 5 most important economic policy issue in the world. But India is generally a low-trust society and in particular this gov’t is distrusted in most policy circles. Hence the rabid skepticism all around. I tend to be a lot more optimistic than that.
The great public choice question is – will they ever manage to bring food under this? For one, the PDS system was showing signs of an organic improvement. Second, the popular imagination has always conceived of the ‘man of the house’ frittering away hard earned money on country liquor if the woman of the house is not given grains directly. Third, giving away PDS distributorships has been an effective method of giving favours to those who the dirty work for national politicans at local levels – it is perhaps the longest running and biggest scam in India.
If they actually conclude that the greater ease for a poor family will convert into more votes than the losses they might take on the previous three fronts, it would be absolutely amazing. My sense is, like most great policy decisions, this will go through simply because it’s an idea whose ‘time has come’, and we will invent post-facto justifications of how it was politically rational to go through with this.
That is from Ritwik, who started off his comment with this sentence:
Privacy is actually a non-issue for most Indians.
Kaushik Basu named as World Bank chief economist
Annie Lowrey has the scoop. Excerpt:
A paper he released last year caused a bit of a stir: While advising the Indian government, Mr. Basu argued that countries could reduce the incidence of “harassment bribes” – e.g., “I’ll approve this home renovation project for you for a small fee…” – by making it legal to give a bribe, though not to receive one.
“This will cause a sharp decline in the incidence of bribery,” Mr. Basu said. “After the act of bribery is committed, the interests of the bribe giver and the bribe taker will be at divergence. The bribe giver will be willing to cooperate in getting the bribe taker caught. Knowing that this will happen, the bribe taker will be deterred from taking a bribe.” (Mr. Basu notably argued against giving an amnesty for past incidents of bribery.)
Mr. Basu is to start at the bank Oct. 1. In the meantime, you can follow him on Twitter.
And do not forget:
He is also the creator of the two-player board game Dui-doku. He is also a Woody Allen fan.