Economics of bribery

Updated on: Jan 28, 2011

Corruption in the form of bribes assumes curious dimensions in India, frets Madan Sabnavis in ‘ Eco-Quirks: An economist's journey into your world ' ( ). He cites the finding of the Centre for Media Studies that in 2005, those living below the poverty line paid as much as Rs 880 crore as bribes for eleven services. “The main bribe-takers were the police and the judiciary. The other corrupt services, as expected, are education, hospitals, electricity, water supply, legal, taxation, gas, etc.”

Rhetorically posing the question, ‘Why does the average cop look corrupt?' the author reasons that if a cop were to just stand at the road junctions and do nothing, traffic flow would be orderly with people generally not flouting the signal. But, more often than not, the cop positions himself where he can catch people breaking a rule out of confusion, adds Sabnavis.

“Most policemen position themselves where there is a left turn. As a motorist, you are not sure whether it is a free turn, or there is a signal. If there is a signal, the bulb may not be functioning, and you think that it is not operational, and take the turn. There is a belief that the cops disable these signals so that the driver is confused.”

To those who angrily ask why a cop should feel inclined to take the bribe, the author puts forth the frequent argument of policemen that for the kind of salary they get, it does not make too much sense to risk their lives to catch an armed criminal because by taking such a risk, the reward is a certificate, which has little value, and may be a sum of Rs 1,000. “There is more to be made in the safe confines of the traffic department where he can vent his frustration, and earn a tidy sum in the process.”

An interesting table in the book has three columns – viz. offence, penalty (Rs), and negotiated penalty – drawing inputs for the first two columns from the Delhi Traffic Police Web site, while the third column is based on ‘observation.' For instance, the official penalty for ‘no licence' can be Rs 500, but you can negotiate it down to Rs 200; for ‘negligent driving,' the reduction could be ten-fold, from Rs 1,000 to Rs 100. Considering that only 1 in 5 offences is officially booked, the loss to the police revenue could be Rs 400 crore per metro city which, summed up across the country could well cross Rs 3,000 crore per year, the author computes.

He notes that the same revenue loss could be interpreted as perks given silently to the police forces. “Since the government is not in a position to raise their salaries, it probably is better off allowing them to take these bribes as it is what in economics is called a Pareto Optimal situation – where someone is better off, and no one worse off.”The author suggests that a simple system of issuing coupons for offences and reducing the amount of fine would bring in greater revenue for the police. He cautions that if the amounts are disproportionately high, there is always scope for a bargaining game, which results in a win-win situation for the offender as well as the cop. Instructive read.


Published on January 29, 2011

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