The Bribery game: Changing incentives of the bribe giver and taker

We usually assume in a bribe, both the giver of the bribe and taker of the bribe are equally responsible and  punished equally as well.

Kaushik Basu, Chief Economic Adviser of Ministry of Finance gives this game an interesting twist.

  • He says the punishment to the giver and taker should be asymmetric.
  • The giver should not be penalised but the taker should be doubly penalised. Hence, the total amount of fine remains the same.
  • This should apply to bribes which are harassment bribes i.e. those bribes where the giver is entitled to something but only gets it after paying a bribe. Like passport, driving licence, income tax refund etc
  • THis change will do two things. One the giver will try and get the taker trapped. Two, this might discourage the taker itself from taking the bribe.

🙂

It first appeared in Financial Express but I ignored it. Only to realise he has written a paper explaining the broad idea. In FE he said we can’t stop growth to bring down corruption:

The way we devise our critical policies has a huge role in controlling corruption. Of course, the executive agencies — CBI and vigilance authorities — have well-defined roles. But there is a need to look at the policies themselves,” he said. He said the government need to be careful while handling the issue of corruption. “One can’t bring the economy to a halt in the name of combating corruption. We need more intelligent policies. Even if it means that we have to compromise on growth a bit, one wouldn’t mind that , but a ham-handed approach is indeed not what we require,” he said. 

He points to the current act on bribes:

In India, the main law concerning bribery is a 1988 legislation called the Prevention of Corruption Act, 1988. According to this law, bribe taking by a public servant and bribe giving are equally wrong and, in the event of conviction, both are punishable by anywhere between 6 months and 5 years imprisonment and they shall also be liable to fine. For the most part, the act of giving and taking a bribe are treated on par under this law. As section 12 states, ―Whoever abets any offence [pertaining to bribery], whether or not that offence is committed in consequence of the abetment, shall be punishable with imprisonment for a term which shall be not less than 6 months but which may extend up to five years and shall also be liable to fine.‖ It may be added here that the giving of a bribe is treated by lawyers as abetment to the crime of bribery, and so bribe giving is covered under this section.

Though as with al;l acts there is a loophole:

There is, however, an exception to the bribe giving or abetment law in the form of section 24 of the Prevention of Corruption Act 1988. I reproduce this section in full here:
“Notwithstanding anything contained in any law for the time being in force, a statement made by a person in any proceeding against a public servant for an offence under sections 7 to 11 or under section 13 or section 15, that he offered or agreed to offer any gratification (other than legal remuneration) or any valuable thing to the public servant, shall not subject such person to a prosecution under section 12‖.

However, this section has a lot of ambiguity. In a case three years ago, Bhupinder Singh Patel v. CBI, 2008 (3) CCR 247 at p. 261 (Del): 2008 Cri LJ 4396, it was ruled that this exemption would apply only if the bribe giver could establish that the bribe was given unwillingly and in order to get the public servant trapped. But the word ―unwillingly‖ is itself so ambiguous that the use of this judgment as precedence is not easy either.

As a consequence, section 24 is increasingly becoming a clause meant for those wanting to carry out a sting operation to trap a public servant in the act of bribe taking and seeking protection from the law. This was clear from a ruling of the Delhi High Court in the Bharadwaj Media Private Limited v. State, 2008 146 DLT 108 (Del): 2008 (1) CCR 11: 2008 (2) Crimes 244.

The paper asks for a change in the current law:

What this paper argues for is a much clearer statement concerning the legality of the bribe giver‘s action in the context of harassment bribes. In other words, this would amount to a revocation of section 12 in the case of harassment bribes. In addition the law should say that once the fact of bribery is established in court, the amount of the bribe has to be returned to the person who gave the bribe.

He says non-harassed briberies are a problem but we can do something similar there as well:

I have confined the above analysis to harassment bribes3. The question that naturally arises is about other kinds of bribe, for instance, the kinds of bribery that are believed to occur when government gives out big development contracts. Should the bribe giver be given full immunity in such cases? The simple answer to this is a ‗No‘.

But what should be the optimal policy be in such cases? We need to give this much greater thought and subject it to formal law and economic analysis before we have an answer. The main problem arises from the fact that in such cases the bribe giver is likely to have got something by giving a bribe that she does not deserve to get. Hence, in the event of bribery being established in a law court, the issue remains about the bribe giver being in possession of an object that is not supposed to be in her possession.

A full answer to how the law should treat such cases will have to await further analysis. But I am inclined to believe that even in such bribery cases there ought to be an asymmetric treatment of the bribe taker and the giver. In particular, the punishment meted out to the bribe taker should be substantially greater than on the giver. This will mean that the collusive bond between the bribe taker and the giver will be weakened and the bribe giver will be more likely to cooperate with the judiciary in exposing the crime than under the current circumstances.

He adds that this change will not remove bribes completely. As most bribes are paid and taken amidst known people, so not much changes there. But still it alters the incentive structure for bribes not paid between known people. More reforms are needed along with this to lower incidence of bribes:

However, the fact that the changes in the law suggested in this paper will diminish the incidence of bribery should not lull us into the fact that there are many other actions needed to tackle this ubiquitous phenomenon. Among these is the effort to use e-technology to make procedures rule-based and to minimize the interface between ordinary citizens and the public servant. Fortunately, important steps along these lines have been initiated in recent  times.

He goes to Arthashastra to weed out corruption from the Indian society:

If we want to really get at corruption, what we need to build up are values of honesty and integrity in society. In the language of the Arthashastra, we have to wean fish off water. This has received so little attention and even to make such an argument sounds like moral claptrap because mainstream economics has taught us that human beings are endlessly self-seeking. In truth, they are not. Honesty, pro-social preferences and a sense of right and wrong constitute a part of the human psyche (Hauser, 2006), even though we can create societies where such traits are barely visible.

It is possible to go further and argue that we cannot have an efficient market economy unless human beings are endowed with a minimal amount of integrity and pro-sociality (Basu, 2011). Because of the propensity of economics to ignore these traits, these are under-researched areas. But if we want to substantially cut down the incidence of corruption, such as bribery, and want an efficient and vibrant economy, alongside getting our laws and economic policies right, we need to work on building up appropriate social and cultural traits, which provide the foundations for such an economy.

This is what he had also mentioned in Chapter 2 of Eco Survey:

For India to develop faster and do better as an economy, it is therefore important to foster the culture of honesty and  trustworthiness. Thanks to the fact of this social prerequisite of economic development remaining unrecognized for a very long time, this has not received adequate attention in the scientific literature. Fortunately, a large body of recent economics research has been stressing the importance of these social and cultural factors. While it is true that we do not as yet have a hard science of how to develop these cultural qualities in a population, we know that even the mere understanding of the importance of certain qualities for promoting the economic development of a group of people, helps nurture these qualities in people.

After all, people have learnt not to smoke in a crowded room even when not smoking is not in their self-interest simply because they have come to understand that this is not in their collective interest. These good values are then further  supported in society through mechanisms of social stigma, which help bring individual and social interests into alignment. So once we recognize that honesty, integrity, and trustworthiness are not just good moral qualities in themselves but qualities which, when imbibed by a society, lead to economic progress and human development, people will have a tendency to acquire these qualities; and that should help build a more tolerant and progressive society.

So may be after redoing the law bribe giving and taking becomes a stigma in India…Interesting thoughts by Prof Basu…The paper is much like the papers written by Gary Becker all these years….

Though I am wondering how would it be implemented. Passing this change in law itself will be a huge task and receive massive opposition. After all the change is likely to effect the ones passing the law the most…

2 Responses to “The Bribery game: Changing incentives of the bribe giver and taker”

  1. SRINIVASAN Says:

    really an innovative law to crush the evil of our society… India needs this right now. Damn.. bribing officers pls go away from this…
    applause to Kausik…..

  2. UD Says:

    Please see here on follow up work based On KB’s idea: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2166221

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