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How to Beat Bribery

Bribery is a huge problem in India and many other countries. What can we do to prevent bribery? This article explains current penalty for getting caught for bribery in India and the suggested a change to the penalty system that may prevent bribery in future. According to the article, more than half of Indians have paid a bribe last year. Many of those are “harassment bribes”, which is illegal payments to get basic services, such as some extra money to get a driver’s license. Even though sometimes bribe giver doesn’t really have a choice but to give a bribe, bribe giver and bribe taker are both penalized under current Indian law. When they get caught, they are fined the same amount. India’s Chief Economic Adviser, the economist Kaushik Basu proposes a change to current bribe penalty. The bribe taker should be fined double the amount of bribe he accepted and the bribe giver is not penalized at all. Under this change, not only bribe giver will not get penalized, but he will also get his bribe money back. This will reduce corruption because people who are asked for bribes do not have to worry about being prosecuted, while bribe takers will be risking the penalty of twice the amount they ask for.

 

This relates to what we learned in class about game theory. Let’s say that there is a corrupted official A who asks person B for bribe of X rupees. Since penalty for getting caught for bribery is greater than the payoff the official A will get, A will be leaning more towards not asking for bribe. If he is risk averse, he will not take a chance to earn X amount when he knows potential net payoff can be -X. Of course, expected payoff for official A will highly depend on how good the government is at catching corrupted officials. If the probability of getting caught is low, then it may be worth it to take the chance and ask for bribery. However, if the probability of getting caught is 1/3 or higher, then the better strategy is not to ask for bribe. Bribe givers do not risk anything under this change. Either they give bribes and get what they want or do not spend any money. It is good to provide protection for people who are asked for harassment bribes, but it also protects bribe givers with bad motivations. This change in bribery penalty seems like it may prevent bribery, but it is still controversial.

 

“How to beat bribery” by Fareed Zakaria

http://globalpublicsquare.blogs.cnn.com/2011/05/16/fareed-zakaria-how-to-beat-bribery/?iref=allsearch

 

“Why, for a Class of Bribes, the Act of Giving a Bribe should be Treated as Legal” by Kaushik Basu

http://www.kaushikbasu.org/Act_Giving_Bribe_Legal.pdf

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