Bryan Caplan  

The Cause of Corruption

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Fellow Templeton prize-winner Kevin Schmiesing revisits our Cato dialogue on corruption, culture, and growth. Background:

Among the symposium’s exchanges was one between George Mason University economist Bryan Caplan and me about the relative importance of “political culture” and “personal culture” in the development of a thriving economy. I confess to not yet being certain about what the two terms are supposed to mean, but, operating on my guess about the distinction between the two, I wonder what Professor Caplan would do with the problem of corruption.

Here's an earlier piece where I explain my distinction between personal and political culture. Using the current example, I'd say that the widespread belief that "It is OK for an individual to give and accept bribes" indicates that personal culture is soft on corruption; the widespread belief that "We should not have laws that harshly punish corruption, or hold leaders responsible for the level of corruption" indicates that political culture is soft on corruption.

Kevin goes on:

Obviously it [corruption] increases transaction costs and therefore is a major drain on economic productivity. It seems to me that it is also clearly a matter of personal culture. Not that it is not also a matter of political culture, but that is the point I tried to make in the course of my remarks: one cannot ultimately separate the two.

Corruption is a nice illustration of one of my main claims in the Cato talk: While both personal and political culture matter, political culture matters much more. Even if most people are personally willing to give and accept bribes, they aren't likely to do so if corruption is harshly punished. And if voters want less corruption, and hold leaders responsible for the level of corruption, leaders have a strong incentive to impose harsh punishments.

Kevin objects that "you can't separate the two," but it's not clear what this means. Are personal and political attitudes toward corruption perfectly correlated? Hardly. So while personal and political attitudes are positively correlated, they are separable. And if they are separable, you can sensibly ask: "Is it better to live in a country where corruption is mildly punished, but perceived to be shameful, or a country where corruption is harshly punished, but not perceived to be shameful?" As I explain in my talk, international comparisons strongly recommended the latter choice.

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The author at De Gustibus Non Est Disputandum in a related article titled Corrupção writes:
    Ontem e hoje, com dois colegas e uma turma, acabei por discutir a tal corrupção. Há algo que me incomoda no tema: eu não consigo explicá-lo (o que me deixa feliz é que os (s)ociólogos e amigos não estão na... [Tracked on April 3, 2007 8:29 PM]
The author at Economic Investigations in a related article titled News of the World #30 writes:
    Though some may reach for the stars Others will end behind bars What the future has in store no one ever knows before Yet we would all like the right to find the key to success That elusive ray of light that will lead to happiness Flax tax extravaganz... [Tracked on April 7, 2007 1:34 PM]
COMMENTS (13 to date)
Matt writes:

In China the punishment for corruption can be death, and it occurs frequently. I would think that a personal culture is difficult for politics to overcome because the culture can adjust to the restrictions. There are many ways to bribe someone.

SheetWise writes:

I think of it a lot like sexual harrassment -- who has power over who?

The tolerance of behavior between co-workers is a lot different than between employer-employee, as it should be.

While both politicians and the electorate have lost their bearings on who's the employee -- it's clear who has the power. And as such, the tolerance of corruption in politics should be dealt with far more harshly.

Bruce G Charlton writes:

Another problem with corruption is that it introduces 'noise' or uncertainty into decision-making.

Even a straightforward decision is not necessarily made on the basis of procedures because there may (or may not) be a bribe which alters the decision - so its outcome becomes more random, less predictable.

Corruption can hinder or even prevent the development of a modern society characterized by long complex chains of decisions based on standard procedure (eg. in bureaucracies). When each step in the information processing is open to corruption, then the final outcome becomes almost random.

So, from a systems perspective, corruption reduces the level of complexity of decision-making, reducing efficiency.

SheetWise writes:
So, from a systems perspective, corruption reduces the level of complexity of decision-making, reducing efficiency.

I think it often reduces the level of complexity and increases efficiency.

Deviation from the rules is the issue. And deviation will not occur on an even playing field. It occurs when one party solicits the service of politicians or one party is a politician.

MattS writes:

Lets be sure we have this political/personal culture distinction (continuum?) down. I take personal culture to refer to the traditions and norms about what individual people do and should do while political culture is the traditions and norms about what the law should do. Is this correct?

Corruption exists like beauty, in the eyes of the beholder. Was the character Schindler (in Steven Spielberg's movie "Schindler's List") corrupt, or was he a hero? How about the prosecutors recently fired from the Bush administration? Your answer depends upon what you believe states should do.

One can perceive corruption in the act of an officeholder only against a background of a "correct" pattern of behavior, a background which must exist in the beliefs of the perceiver. As such I would say that when a person reports seeing corruption in an agent of the state then this person shows belief that the state could be operated correctly. I differ with that belief.

Christina writes:

Of course personal culture informs political culture, but in the end political culture is far more powerful.

My dad frequently flew to Mexico in his own little Beech Bonanza. On one occasion he was grounded by Mexican officials for some maintenance issue, and it was made clear to him that he could leave if he greased a few palms. My dad, a steadfastly ethical person who would rather alert every newspaper in town than kow-tow to extortion, refused and prepared to spend whatever time it took to get his plane. Then suddenly the officials reversed their position and he was allowed to return to the States. It was only after the fact that he found out that my brother had paid the bribes secretly, knowing that Dad would be furious at the notion.

In politically corrupt societies the ethical actions of a few conscientious people are wasted and ultimately those people are destroyed if they don't get the hell out first. This is why corrupt societies are doomed to increasing corruption: those who find it intolerable leave, and the cynical folks left behind just make the place worse and worse.

Bruce G Charlton writes:

Richard O Hammer writes: "Corruption exists like beauty, in the eyes of the beholder."

Totally wrong. Talk to someone who has lived in a corrupt country then lived in one of the least corrupt countries (eg. New Zealand, Canada, Iceland) - there is a large and objective difference in the way that life is conducted. The difference is obvious every day, dozens of times a day. Talk to someone who has done business in both types of country.

Sheesh! Only a post-modern, multi-cultural, cultural-relative, non-rational analysis could conclude that corruption was subjective.

Less-corrupt countries, like the Anglosphere and Scandinavia, have _huge_ advantages over the most corrupt countries (eg. much of sub-saharan Africa, Pakistan and Bangladesh).

sourcreamus writes:

How can laws against corruption survive in a culture that does not see corruption as a bad thing? Wouldn't personal corruption inevitably lead to political corruption unless the government was lead by an anti-corruption autocrat? Are the currently countries that have laws that are harsher about corruption than the population of that country?

Mr. Econotarian writes:

Isn't there a connection between bad laws (ones that are economically igrorant, like a minimum wage that is higher than the average personal income) and corruption?

It is easier to have corruption if there are more laws to break to carry on normal business...

TGGP writes:

Theodore Dalrymple says corruption gets a bad rap.

Tom Grey - Liberty Dad writes:

As a current Free Market Christian and Libertarian Paternalist, and former secular Libertarian, let me suggest that far too many "L"-Libertarians are smart but sexually frustrated men, who really don't know how to relate to women as different people (much less as being from Venus).

Whether it is the free sex - equal love on Heinlien's Moon (is a Harsh Mistriss), or the irresistible love/lust semi-rapes of Ayn Rand's characters, the secularists have a problem with sexual=personal commitment.

Bryan makes an excellent point about punishment vs shame in his post about this:
"Is it better to live in a country where corruption is mildly punished, but perceived to be shameful, or a country where corruption is harshly punished, but not perceived to be shameful?"

Consider, on a personal level, the commitment to remain married and faithful. Cheating is personal corruption. Too many Libs accept personal cheating.

There is also the democracy issue of "voting for a benefit" of Other People's Money -- if it's generally OK for popular benefit (education, health, farm, industry), why not for a bureaucrat's personal benefit?

Matt G writes:

Certain amounts of corruption are going to exist in every society; however, to what degree that corruption exists remains the difference between the United States and countries overrun by man's most evil characteristic such as Mexico and Columbia. Of course in America we have corruption on all leels of society, from crooked cops to politicians "Scratching each other's backs". Yet, our watchdog journalism and strong government allows our nation to rid itself of most of the corruption that ruins a country's ability to progress and succeed.

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