Corruption

by on June 25, 2006 at 7:02 am in Economics | Permalink

Joel Waldfogel covers an interesting new study of corruption in the motor vehicle department in India.  Some eight hundred Indians were randomly assigned to one of three groups: the first group got a cash bonus for getting a license, the second group was given driving lessons, the third group was a control.

If government worked well we would expect the second group to be the most likely to get a license in the shortest period of time.  Instead, the first group bribed their way to a license.  In addition to taking the shortest period of time, most of the first group never even had to take a test!

Waldfogel has more details.  He misses, however, what I think is the most important finding of the study.  The delay in the Indian DMV is "endogeneous," i.e. it’s not due to torpor or constraint but instead is a result of corruption.

How can the Indian bureaucrats make the most of their control over licenses? First, make the line long.  But that can increase the bribe-price only so much – especially given how cheap it is to hire someone in India to wait in line for you.  The real value is in the license itself so the Indian examiners randomly fail many applicants, even those with good driving skills.  Paying the bribe, therefore, is really the only route to a license.  The net result is long lines and unsafe drivers.

Corruption like this is endemic throughout the world.  Libertarians should take note, however, the problem in this case is not so much that there is too much government but that government is too weak. 

1 Jody June 25, 2006 at 8:20 am

It’s also a cultural thing and libertarians in favor of open immigration should take note.

2 Jim Bim June 25, 2006 at 10:20 am

Being ignorant of many things libertarian, I wonder how doing away with driver licenses would work. Would I choose not to drive or take any kind of transportation so that I could avoid unsafe drivers? How would we try to gain some level of safety on the roads? (Granted that the current level of safety isn’t that great, but if this is what you get when people have to take tests, I wonder what we’d see with no regulation.)

3 triya June 25, 2006 at 11:39 am

We used to joke in college that the reason traffic was so bad in India was because people who were used to driving bullock carts were forced to use motorised transportation and could not get rid of their bullock cart driving skills. Its not license that makes good drivers. There are several problems in India, the main reason I believe is not enough roads, forget good roads. While cheap vehicle loans have made it easy for middle class families to own atleast one scooter, there aren’t enough roads to accommodate this boom in vehicles. What is more, now individuals have the purchasing power to buy cars (which is good) and that is leading to more congestion on already heavily burdened roads. The solution is to build better and bigger roads and all the government needs to do is stop monopolising road projects. There are several real estate guys stuck in red tape waiting for clearance so that they can build roads.

As to the comment about culture, well if all of us Indians were culturally bad drivers how come we do not crash everytime we drive on American roads? 🙂 If the culture comment was aimed at bribing, easing up regulations and letting markets work freely would take away the incentive to bribe. We are not fond of giving up our hard earned money as bribes. It is simply a transaction cost aimed at reducing time spent getting things done.

4 Charles June 25, 2006 at 12:04 pm

“Libertarians should take note, however, the problem in this case is not so much that there is too much government but that government is too weak.”

Could someone please explain this comment to me because, as I understand, it is economically incoherent. Government is able to influence (or currupt) because it is so powerful in India — not because it is weak.

Inreasing the bureaucracy’s size and authority will only add to the wait times and inefficiencies. For example, India closed its borders to the rest of the world because of its overzealous government. Do you think that a weak government could single-handedly stop trade for an entire country?

Love the blog but this comment has left a bitter taste in my mouth.

5 Jav June 25, 2006 at 12:38 pm

Excellent post. I’m from India. No, I did not have to pay any bribe but I went through a driving school and paid him money to teach me how to drive and presumably the bribe was included in the bill. I say this because I got my license driving a car that did not have a functioning reverse gear!!

6 Christopher Rasch June 25, 2006 at 12:59 pm

Oops, forgot the reference:

(1) http://psyc.queensu.ca/target/index.html#contents

7 Taeyoung June 25, 2006 at 1:14 pm

“When we use the internet, each one of us runs the risk of transmitting or acquiring a virus to other users of the internet. Fortunately, most (or at least enough) computer users want to protect themselves from viruses that they install anti-virus and anti-spam software.

Would anyone suggest requiring licenses to access the internet? Would this be a more effective system than what we currently have (i.e. “use at your own risk”)?”

My computer won’t kill me though. And more importantly, other peoples’ computers won’t kill me through the internet either. So I don’t feel licenses to be particularly needed in the computing context. I suppose my attitude might change if someone could accidentally kill me via the internet, or even just maim me accidentally, through negligence or sheer incompetence. But that’s not the case.

8 Chris Monnier June 25, 2006 at 2:01 pm

> My computer won’t kill me though.

People die in crowds (“pedestrian traffic”) from suffocation or being trampled on. Should we require licenses to attend concerts or political rallies?

Many people are injured or die while skiing and/or snowboarding, sometimes because of the negligent actions of other skiiers/snowboarders. Why not require licenses for these activities?

People get injured or die from the negligent actions of themselves and others while particpating in a variety of activities. Can you imagine if we required licenses for all such activities?

9 David Wright June 25, 2006 at 3:18 pm

Jim Bim: I don’t think that doing away with driving licenses is a particularly “libertarian” solution. (Anarchist would be more like it.) Libertarianism has to do with reducing state regulation of private spaces, but roads, as currently consistitued, are manifestly public spaces.

Christopher Rasch transforms the problem into one libertarianism has something to say about by proposing to privatize roads. But another approach is just to accept that libertarianism has nothing to say on this issue, and try to find a ways to regulate the problem and/or change the bureaucrat’s incentives.

10 Chris Monnier June 25, 2006 at 3:48 pm

> A further distinction, of course, is that a car makes it rather easy to kill someone accidentally…

Yes, but a car makes it just as easy to kill yourself accidentally. Hence the self-preservation argument. My whole point is that the risks one takes upon themself when driving are great enough to encourage drivers (or their parents) to become properly trained before driving on their own.

The fear of dying is a far better motivator than the fear of getting caught without a license.

11 Damien June 25, 2006 at 4:05 pm

> If government worked well

Of course, as acknowledged later, the evidence points to failings of the Indian government, not of government in general.

> The fear of dying is a far better motivator than the fear of getting caught without a license.

If people were rational, and accurate judges of their own competence relative to others, then this would be the case. But we know teenagers tend to think they’re immortal, we know people tend to overestimate their own competence, especially when they’re incompetent; we know the elderly sometimes refuse to acknowledge decreases in their skills or eyesight. Licensing allows someone who is somewhat more objective to say “no, you in fact suck, go get more training” or “no, you’ve gone too blind” and make it stick. And then you’ve got all the ones who get drunk and drive — so much for the fear of dying.

It is my understanding that Britain has rather stricter licensing than the US; since much of the US has been shaped to need a car to get around, our licensing tends more toward “not an obvious and immediate danger” vs. “really competent”. I got licensed in San Francisco without being tested in freeway driving or parallel parking or parking-on-a-hill.

12 Chris Monnier June 25, 2006 at 4:35 pm

> And then you’ve got all the ones who get drunk and drive…

Do these people have licenses?

> It is my understanding that Britain has rather stricter licensing than the US…

Are there not drunk drivers in Britain?

> … we know the elderly sometimes refuse to acknowledge decreases in their skills or eyesight

Good point. But the drivers in the “elderly man drives through a crowd of people” stories have licenses.

The problem is a lack of personal responsibility (or more precisely, a lack of objectivity over their own skills). If anything, possessing a license allows a person to shrug off suspicisions of inadequate skill. “Hey, the state says I’m alright to drive…who I am to argue??”

The solution to making people better drivers (which is what the ultimate goal is) is to increase personal responsibility. Make people more aware of their own mortality and/or their own shortcomings.

13 Bernard Yomtov June 25, 2006 at 6:33 pm

What’s the renewal for?

They do test your eyesight. That’s worth something.

14 Damien June 25, 2006 at 8:29 pm

> Do these people have licenses?

Of course, why not? (Though I thought there was a movement to take away licenses after an offense.) The point is that many people clearly make decisions which don’t have their safety as a top interest, and their decisions risk the rest of us.

> certifications

While I’m a fan for certifications in lots of things, such as turning the FDA into a certifying agency and letting people decide whether to go beyond the FDA ‘brand’, I don’t see how driver’s certs would work. Okay, I can see them lowering insurance rates and opening up jobs as truckers, but they wouldn’t directly keep unsafe drivers off the road.

The fact that licenses may have a function in raising state revenue doesn’t mean they can’t also serve a function in road safety.

15 Constant June 26, 2006 at 8:17 am

They do test your eyesight. That’s worth something.

Not very well, sadly. If I could get my lens prescription from the DMV then the hour long wait would be worth it.

16 Noah Yetter June 26, 2006 at 2:47 pm

“Libertarians should take note, however, the problem in this case is not so much that there is too much government but that government is too weak.”

No the problem IS too much government, that is the government owns the roads and controls access to them.

17 BillWallace June 26, 2006 at 6:51 pm

“Of course, as acknowledged later, the evidence points to failings of the Indian government, not of government in general.”

As a libertarian, I find this statement hilarious. Damn those crazy Indians giving government a bad name.

“No the problem IS too much government, that is the government owns the roads and controls access to them.”

This is of course, exactly right.

18 David Nieporent June 29, 2006 at 6:16 am

What’s the renewal for?

They do test your eyesight. That’s worth something.

In Maryland, where I was first licensed, they do. In New Jersey, where I am now, they do not. Renewal involves paying a new fee. That’s it.

19 levan September 11, 2006 at 2:38 am
20 isidora February 6, 2007 at 8:32 pm

triva said: “As to the comment about culture, well if all of us Indians were culturally bad drivers how come we do not crash everytime we drive on American roads? :)”

That’s because other drivers are busy avoiding your horrendous driving and generously veer off the road everytime you obliviously veer into their way. More than 90% of the time (I live in Malaysia where there’s a substantial population of Indians), Indians are the cause of my woe on the road. I should be given a grant to conduct a study on this because I am convinced that statistics will show that an overwhelming majority of Indians are bad drivers. I’m not being racist here, just stating the evidence.

21 aion kina March 20, 2009 at 4:44 am

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