Recently a veteran Indian activist, Anna Hazare, was arrested for threatening to starve himself to death. His cause is corruption. He is protesting until the government passes a stronger law to combat corruption. The government rather disingenuously has thrown him in prison. Prime Minster Singh claimed that Mr. Hazare’s methods of protest, which include hunger strikes, posed “grave consequences” for Indian democracy.
Still, Mr. Singh remarks and his government’s actions are hardly surprising and go to the heart of the problem of corruption. For contrary to its definition corruption is not a moral issue, it is an economic issue, a law and economic issue.
Laws are provided by the state. Each and every law guides behavior by providing incentives and disincentives. For example a law governing criminal conduct, like stealing, provides the disincentive of incarceration. Some laws provide economic disincentives like fines. Other laws provide economic incentives. An example would be a tax law that provides you with a special tax rate if you take certain actions.
Most legislatures and governments feel that they can solve problems with laws. They can’t. There are very real limits to what laws can do. The reason has to with enforcement. Some laws cannot be enforced. For example laws relating to certain goods or services like drugs and prostitution are basically impossible to enforce. The reason is that the economic demand for these goods and services are wide spread.
Other laws concerning the market are also difficult to enforce. The Chinese feel that they can control inflation with laws relating to price controls but these always fail. Their attempt to restrict exports of rare earth metals just led to smuggling. Any international investment banker worth their salt can circumvent regulations or utilize regulatory arbitrage to lessen their effect.
The same problem exists with corruption. The problem is that the government is trying to use law to cleanse itself, but that is an enormous conflict of interest. It is really an agency problem.
In game theory managers, elected officials and even police officers are agents. Managers are the agents of a principal, the owner or shareholders. Elected officials, bureaucrats and security personnel are agents of citizens. The best move for an agent is to cheat the principal. The principal hires a watchdog and the agent’s best move is to suborn the watchdog. As long as the institution has the job of policing itself, it will fail. The economic incentives of the agents, who run the institution, are to enrich themselves and they will either corrupt or prevent other members of the institution who might have the task of stopping the theft. So in many ways it does not matter how strong the anti corruption law is. As Prime Minister Singh has aptly illustrated it is not in his best interests to stop what has helped keep his party in power.
This does not mean that citizens are helpless. It does mean that there are limits to what a strong anticorruption law can do. The solution though might lie elsewhere. The best way to control corruption is to deal with the asymmetries of information and economic incentives. If corruption is exposed and if the disincentives are so high, then the corruption would cease.
Fortunately we live in a time where each and every owner of a cell phone has access to millions as never before. You don’t even need a computer. Your cell phone allows you the ability to network and that power allows all of us to expose corruption. The other part is to provide economic and social disincentives.
One thing that Mr. Hazard’s campaign has shown is that you can market anti corruption. But why stop with just hunger strikes or inflammatory editorials? Make it a contest. In the US and even Afghanistan there are televised contests and prizes for amateur performers. Why not televised contests for whistle blowers? Whistle blowers or enforcement personnel should not only receive some sort of immunity, but celebrity status, cash rewards, honorary medals, titles, sinecures or automatic political office granted not by the government, but by cell phone vote. Cash could be generated by fines from both personal and corporate liability.
Corrupt officials should not be neglected. There should be contests for them as well. The most corrupt official should be the subject of both weekly, monthly and an annual vote for town state and country perhaps on a specially designated Corruption Day. Annual lists should also include all past win year’s winners. Shame can be as powerful a disincentive as incarceration.
Stopping and preventing corruption is certainly possible, but to do so we have to recognize the limits of the law. If the institution is corrupt, which it is by definition, so will the law. But that does not mean that society is completely helpless. It just has to know how to advertise
