Corruption Re-analysed

Corruption, I had always thought, quite foolishly, was something far removed from the world I lived in. A social evil, maybe even a necessary one, but nothing I had ever experienced myself. I was in for a rude shock when one day in the first year of my college, a PhD student from Denmark wanted to organise an experiment of sorts. He had a set of questions regarding how we perceived corruption as and how we thought others perceived it as. Without going into the details, the end result was to be that if your answer matched with the majority you would be paid a sum of Rs 220, otherwise Rs110. When the results came, I was surprised that most of the people in my class thought corruption was mildly acceptable, they would indulge in bribery if necessary without giving it a thought. Needless to say, I went back with 110 rupees in my wallet. The other and the more valuable thing that I took back was a lesson in life and a lot to think about. This article is perhaps, a tribute to that afternoon.

Corruption, no doubt is one of the most significant factors preventing countries like India from progressing socially and economically. However, eliminating corruption is no easy feat. It is so elaborately and intricately rooted in the society that even scaling back the level of corruption can appear to be supremely difficult. The reasons of corruption are likewise multiple and layered. But the most intriguing aspect is perhaps the rationality behind being corrupt. With corruption, individual opinion doesn’t seem to matter much in ones decision whether to engage in it. Most people in fact believe it to be ethically wrong. Often what motivates people’s behaviour in such situations is their perception of what others would do in a similar situation. Other than that, there are various other factors which would render both the bribe taker and the giver in a better position if they indulge in bribery.

corruption_664345For example let’s consider two people, Person A who is say, a government employee, working in say, the Block Development Office in a town. Person B is a student who needs a domicile proof in order to take admission in an academic institute. (We can replace the certificate by any other document and the student by any person for whom it is essential, for a job, for availing a government scheme, etcetera). B needs to go to A and A is supposed to do the job. For that, A will not get anything extra above his salary. So, if A demands a bribe of say 200 rupees, it will be an extra income. From point of view of B, he needs to get the work done within a certain time failing which he will lose a greater amount of money, say, a late fine of Rs. 500. If he pays the bribe his work will be done. If he decides not to then A will simply delay and B will have to pay Rs 500. In the rare case that B decides to file a complaint against A, due to the ineffective state machinery, there is a very low probability of A actually being caught. For this B will have to furnish sufficient evidence and will have to go through a lot of administrative and judicial processes. The whole affair will, in all probability cost him way more than Rs.200 in terms of time and resources invested. Say in monetary terms probably Rs 500. So as a whole he ends up; losing Rs1000 if he decides to report the problem. Now, another option is that A does not demand any bribe but delays the work. This causes B to offer a bribe which A accepts. The final option is the ideal one. No bribery at all.

Let us now formulate a backward induction game considering utilities derived from various situations as the payoffs. Here we consider A as the first mover.                                            

Let us now look into each of the possible paths.

  1. If A does not ask for any bribe and does the work, A does not derive any extra utility from working. He is doing his job. But this is the optimal situation for B. So the payoffs are (0, 50)
  2. If A asks for a bribe, then the ball moves to B’s court. If he agrees to pay the bribe, their payoffs are (c, 30). A derives maximum utility while B despite paying the bribe derives some positive utility since his work was done.  c>0

If B does not pay the bribe then A does not derive any extra utility. But since B’s work was not done either, he has a disutility. So the payoffs are (0, -10)

If B decides to report the issue, A gets caught and has to bear a huge cost. But B in this case still suffers from the disutility of his work not being done in time and going through the whole process of filing a complaint and providing evidences etcetera. Considering he still derives a positive utility, we have the payoffs (-100, 10)

  1. If A does no ask for a bribe but then delays the work. Then B can again choose two paths. If he offers a bribe, the payoffs are (d, 20) since B has some disutility due to the delay. d>0  

If B chooses not to pay, the payoffs are (0, -10)

Solving this game, we find that the Nash equilibrium is either (demand bribe, pay bribe) or (do not demand but delay, pay bribe) depending upon c<d or c>d.

In either case, the dominant strategy for A is to demand bribe and if not then delay the work and let B offer a bribe; depending upon c<d or c>d.

So, this very rudimentary game shows us that a government employee has an incentive for demanding bribe under the situation that the probability of his being caught and punished is very low. This is generally true in India where the ‘sarkari babu’ enjoys certain immunity against the illiterate masses.

The one basic assumption of this game was that the government official doesn’t have moral scruples. That is to say, he does not derive any disutility from demanding or being offered bribe. Such exceptions are definitely present in the society for whom the notion of bribery is repelling. In that case, the structure of the game will disintegrate. But sadly, such examples are a minority. A person who has a low probability of being caught (which becomes lower still if person B is a poor illiterate) and derive higher utility from higher consumption and no disutility from demanding bribe, will find it rational to demand for a bribe!

Also, looking it from the person B’s perspective, the temptation to get the work done is often higher than protesting. Another important factor is how others perceive the act of bribery as. If everyone around has done it and got their work done, then often the temptation is to give in. A collective protest is often more successful than an individual one.

These results lead us to two basic solutions. One of them is enforcing severe laws against accepting bribe and speeding up the process. This is equivalent to increasing the probability of being caught sufficiently. The second solution needs a wider horizon, thorough implementation and persistent efforts. This involves increasing awareness, providing easier means to register a complaint and increasing literacy. We need to tackle corruption at a micro level and try to bring about a change at the individual level. The incentives to accept bribe must be brought down. One way might be to increase wages, but that might not often work in a country like India where in some regions corruption is a way of life. So, it is not only stricter rules, but also working bottom-up which might help.

Corruption is the cause of a lot of evil and absolutely handicaps any economy. But we also need to look into the incentives and reasons behind it at a micro level. We find a case of irrational rationality playing a role. A change in the societal mindset and structure needs to be brought in. Unless a change happens from within, we will remain trapped in the vicious clutches of corruption and hence a morally, economically degrading society.

Anushka Mitra

M.A (F) Economics

Delhi School of Economics

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