The Hindu Business Line : Extortion fee

Recently, workers from the State electricity board furiously dug up earth in front of our house to repair the underground cables. After they finished work, they forcefully collected some money and then left, leaving the excavated stones on the road. Why do we bribe these workers to do their jobs?

As Walt Kelly said “We have met the enemy and he is us”. In other words, we are the reason why these workers demand bribes. How?

Supporting corruption

Suppose a clerk at a government office offers to attend your case immediately for Rs 5,000. If you agree to pay, you support corruption. The clerk, encouraged by your bribe, may now demand such amount from others as well.

Now, all of us may be willing to pay to save time so that we can engage in more productive work. The clerk, realising that, will expect money from us just to do his job. When bribe is no longer voluntary, it becomes extortion. We are essentially subsidising the government; otherwise, it has to pay a higher salary to these workers.

It is not surprising that we complain about extortion but never take action. Why? The extortion fee is to “To Insure Prompt Service”. The workers will not otherwise attend to our job the next time around.

Lessons from game theory

We can break-away from this habit by drawing lessons from game theory. Consider “Prisoner’s dilemma”. Two prisoners are kept in separate rooms. If they both confess to a crime, they get rigorous imprisonment. If one confesses, he is set free while the other faces heavy sentence. If both keep quiet, they serve a light sentence.

The “Nash Equilibrium” or the optimal solution to this game is for the prisoners to keep quiet. Similarly, if we all stop paying extortion fees, the workers may eventually decide to work without demanding money. But as in “Prisoner’s Dilemma”, there will then be an incentive for each of us to break the rule (bribe) — to insure prompt service! Does it then pay to be virtuous?

(The author is a self-styled investment psychologist. He can be reached at enhancek@gmail.com)

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