Bribe-o-nomics: the dirty game of corruption

| Updated on: Mar 02, 2016
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What’s new about corruption?

It’s the same old heartburn about corruption in government, but the Economic Survey, released last week, takes a slightly different tack. It believes that the clamour over excessive corruption has gone too far and has had a “chilling effect” on honest bureaucrats, freezing them from taking any decision for fear of being branded “corrupt” in hindsight.

So, what does it suggest?

An amendment to the Prevention of Corruption Act, 1988, to shield bona fide decision-making from “criminal misconduct”.

Sounds like a dilution of the anti-corruption law.

Yes and no. Sometimes well-intentioned laws can have unforeseen consequences. Here, as the Survey notes, “draconian legal provisions... seem to be resulting in decision-taking with fear.” The Survey wants to grease the tracks of decision-making, not grease the palms of civil servants.

But won’t the determination of what makes a decision bona fide be a bit subjective?

It will, and that’s not always a bad thing. Contrary to the shrill discourse that characterises debates on corruption, the issue isn’t all black-and-white. In fact, this isn’t even the most controversial policy idea on corruption that has emerged from the Finance Ministry. Remember Kaushik Basu’s recommendation to declare the act of giving a bribe legal?

Whoa! Why would he say so?

Again, it’s a nuanced point, and Basu, who was Chief Economic Adviser under Manmohan Singh, intended it only in instances of “harassment bribes” — where individuals or corporations are asked by officials to pay bribes for something to which they have legal entitlement.

So, how would Basu’s suggestion work?

Basu argued that under the current law, once a bribe has been paid, the interests of the bribe giver and the taker become fully aligned. If the criminal act gets exposed, both will be in trouble, and so they collude to keep the act of bribery hidden.

But if bribe-giving was made legal, as Basu suggested, the interests of the two parties — the bribe-giver and the taker — diverge after a bribe is given. The bribe-giver will no longer be compelled to keep his end of the “secret” as he would be immune from the charge of criminality. And knowing that the bribe-giver could then blow the whistle, the bribe-taker would be a lot more inhibited about asking for a bribe in the first place. Over time, the incidence of bribery would drop sharply, Basu argued.

Sounds like wishful thinking.

Actually, Basu’s argument is rooted in game theory, a strand of behavioural economics pioneered by mathematician John Nash.

Him of A Beautiful Mind

That’s right. The theory is called subgame perfect equilibrium, which is a complex idea that builds scenarios in situations of complicated interactions between individuals. But in this case, Basu felt it was rather more commonsensical.

So what came of it?

Nothing. Basu’s idea was erroneously portrayed as an alibi for corruption. That effectively buried it.

Has the idea been tested elsewhere?

Economists are always spinning out game theory scenarios to check corruption, without much success, though. In 2014, Jim Greer, a Silicon Valley entrepreneur, applied game theory to try and cleanse electoral politics in the US — with some success at the local level. But it didn’t gain wider traction.

So what about will become of the latest Survey’s idea?

Going by precedent, nothing. That’s not a cynical view; it’s just that rationality has very little elbow room in politics today.

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Published on January 20, 2018

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