The Indian Economy Blog

June 24, 2006

Corruption: A License To Kill

Filed under: Basic Questions,Miscellaneous,Regulatory reforms — Amit Varma @ 11:23 am

Corruption, in some cases, can have an economic benefit. Joel Waldfogel explains:

Since access to government clerks is normally allocated on a first-come, first-served basis, people pay with their time rather than their money. This is inefficient: Suppose you’re in a big hurry and would be willing to pay a lot to avoid waiting, while I don’t mind waiting. Then you could go ahead of me, making you a lot better off and me only a little worse off, which reduces our collective frustration. One way to achieve this efficiency would be to charge a higher price for expedited service. Yet, an expedited government service option typically does not exist. So, in some countries, the offer of a bribe in exchange for quicker processing is a common form of corruption—reducing the social cost of waiting in line.

However, Waldfogel finds that “[t]he benefits of corruption are not worth the costs,” and illustrates this by telling us about The Department of Motor Vehicles in New Delhi, where you don’t have to know how to drive to get a driving license. Read about it: it’s quite astonishing, and yet, if you live in India, utterly normal.

In fact, I can’t think of any kind of corruption in India where the benefits outweigh the costs. In most that come to mind, any benefits lie in avoiding costs that shouldn’t exist in the first place. Example: Until some years ago, one expedited getting a phone line by paying a bribe. Well, there shouldn’t be a waiting period for getting a phone anyway, the waiting period was there solely to get bribes out of people — discretion inevitably leads to corruption.

So what’s changed there? Competition. The private sector was allowed into telecom, and now I’m spoilt for choice in terms of who to get a telephone line from. No bribes required. Wherever there’s a government monopoly, and especially in a centralised system as in India where there is little accountability, there will be corruption. And corruption, as Delhi’s example shows us, can kill.

Of course, even if government involvement is removed from all spheres where it is not necessary, there will still be some areas where it will remain. For example, in granting driving licenses. (Can I provoke Yazad into writing a post about why driving licenses need not be given by the government?) So how are we to remove corruption from The Department of Motor Vehicles in New Delhi without removing the government. Well, here’s one way I can think of, off the top of my head, to enforce accountability:

Let every driving license bear the name of the officer who approved it. And in every accident case, let penalty points accrue against that officer’s name. After a threshold of points to account for bad luck, let fines be levied on the officer himself, with increments and promotions halted. With something concrete at stake, the licensing officers will thus be careful while giving out licenses.

Er, I really shouldn’t say things off the top of my head. Who’s going to enforce all this?

(Link via email from David Boyk.)


  1. Quote from your article
    “Let every driving license bear the name of the officer who approved it. And in every accident case, let penalty points accrue against that officer’s name. After a threshold of points to account for bad luck, let fines be levied on the officer himself, with increments and promotions halted. With something concrete at stake, the licensing officers will thus be careful while giving out licenses.”

    Believe it or not, few days ago, i took my brother in-law to a DMV for driving License in NH-USA. While my Brother in-law was going through the paper work/written test/driving test , i got the same thoughts you did. I will summarize those thoughts and few other i got few years ago, when i received a speeding ticket.

    I agree with you that every officer who approved/granted the license should be recorded. There should be a points based system, where by his points will be accrued/substracted depending on the accident rate of all the drivers he has approved. Every year, these points should be totalled and the officer be given incentives (+/-).
    This way the officers will do their job better than they would.

    Regarding speeding ticket.
    I am a responsible driver and never got a ticket in my 4 years of driving. I was always frustrated that i did not receive any incentive for my responsible driving. The promise of reduced Insurance premium was too little to see any change in my monthly payments.
    Suddenly on one fine morning (early morning 6:00 AM) after driving all night from Chicago to Columbus i received a speeding ticket for driving 20 Miles above speed limit. There were hardly any cars on road and i was bit frustrated driving long hours and pressed the GAS.
    I payed 90 bucks for ticket and mt insurance payments went too high.

    So, where was my track record of responsible driving all these years? It did not come to my rescue here? I was way too much frustrated for not receiving any credits but paid too much for one offense.

    I believe same points based system should be applied for drivers too. Even though this system exists in United States, it is far too less to make any real difference and lure us to drive responsibly. We continue to drive within limits for fear of life. Thats all.


    Comment by sri — June 24, 2006 @ 10:38 pm

  2. Amit,
    corruption has become a way of life and ordinary Indians like me have become accustomed to it. It is not that I like but there is no other alternative. Can you think of any other place where an ‘amount’ has to be paid for getting the monthly salary from the state treasury? Even people who retire have to pay for their pensions and other post retirement benefits. Worse, the kin of dead also have to pay to get their work done. Gunnar Myrdal’s take on corruption and the causes responsible for it in Asian Drama are true even today.

    Comment by y v saimadhav — June 24, 2006 @ 11:15 pm

  3. y v saimadhav,
    While i leave amit to make a comment on your question, i would like to pass on my take on corruption.
    Corruption will not change. Only, how you look at it should change.

    I would like to quote few of my observations regarding corruption.

    Take an example of a firm/govt agency inviting bids for a software project.
    Assume there are 10 bidders to this project. Each one of them will try to quote less to win the project. Don’t you think even this as a corruption? I mean to say bribing?
    You are luring the concerned party to award you a project by quoting him less.
    Most of the bids are awarded based on lowest quote. Only few of them are awarded based on quality of work and the strengths of the bidder.

    We can only attempt to reduce corruption by improving the system and bringing in IT in all fields.
    1) If we had automatic deductions/deposits in Banks most of the corruption/bribing will go away. But for this to happen, Banking sector should reall speed up their reach of services
    2) Atleast we can reduce corruption by 20-30% if we move all paper based processes into IT bases systems.

    What iam trying to say is, over time with newer systems we can control the menace.

    Comment by sri — June 25, 2006 @ 1:24 am

  4. Surprisingly, the Tirumala Tirupati devasthanam at Tirupati – arguably the most visited shrine in India offers differential access to darshan with reduced waiting times for payment. This is in a case where we would expect that since all are equal before God, you would not have such a system. Morally repugnant or merely practical?

    I do believe the answer to limited access to Govt. officers lies in disintermediation through IT, re-engineering of processes to eliminate unnecessary work and capacity creation rather than differntial access.

    Sorry for the extreme example of TTD- but I thought it serves to spotlight the issue well. Incidentally, some technology devices are deployed at thsi shrine now that have greatly eased the process and reduced the waiting time.

    Comment by little Ram — June 25, 2006 @ 2:54 pm

  5. Sri:
    the new technology and IT will go only a certain way. It is the ultimately the people and the attitudes that have to change. In a society where corruption is not frowned upon but rather is something of an asset, it is dufficult to wish is away. There is probably few instances elsehwere in the world where the taxpayers are honoured by the government and urban legends spread around sincere and honest government officials.

    Comment by Y V SAI MADHAV — June 25, 2006 @ 11:50 pm

  6. YV, your question is obviously rhetorical so I shall not attempt an answer! Agree entirely, it’s a sad situation, but the root cause of it is the discretion given to government servants. Heck, if salaries from the state treasury etc, in the example you mention, were disbursed in an automated fashion, with no human intermediaries, there would be no scope for corruption.

    Sri, agree with what you say about bringing in IT, but there really is no parallel between corruption and bidding for a project. The first involves deceipt and involves the breaking of a contract between the person taking the bribe and his employer — the GoI in the case of a government servant. The second doesn’t.

    Little Ram, I see nothing wrong with a private party charging for differential access. (I don’t know the status of the temple in question.) Sure, all are supposed to be equal before God, but God is also supposed to reside everywhere, and not just in temples.

    But being an atheist I should probably not comment on that!

    Comment by Amit Varma — June 25, 2006 @ 11:56 pm

  7. Amit Varma,
    Interesting to know that you are atheist. I do pray to God and go to temples for worshipping, but i strongly don’t believe in existence of GOD and do have some opinions on how humans started believing in GOD.

    Anyways, coming back to Corruption and how IT can change….
    Bribing was and is a shortcut to getting things faster. Why we want to get things faster? Because the system we are in and the processes we execute on a day to day basis are so in-efficient that people have no patience to go through them. The Officials are lazy and are not ready to fix those in-efficiencies. They lack the zeal to complain about them to higher ups. Govt doesnot get proper feedback and or lack funds to streamline those processes. This is true even in Private organizations we deal on a day to day basis. The end result is piled up files, long queues and months of waiting time. In this case, people who can afford to pay bribes will get away from this sarakari loop. People who can’t will wait for ever.

    So, i am strong believer that IT can change lives. I agree that even people’s perspective have to change. You cannot expect people to change though. The only thing that can force people to follow rules and regulations is fool proof system.
    In United States, i cannot cheat the system. No matter what i do, i will get caught. I am forced to follow rules not out of respect for the rule of land, but out of fear.
    Fear should be the begining for putting things in order.

    Now comming back to Amit Varma’s atheism. I am sorry Amit to highlight this without your permission. But this is the place, where i can put forth my other observation about GOD.

    The term GOD was invented to bring an order to human lives. Fear was deliberately created to make people follow rules and bring an order.
    They created the terms Good, Bad, Heaven , Hell only to force people do Good and shun bad. What is Good and bad is all together a different story for another day.
    So fear should be there and this can only happen, if Govt can implement a fool proof system and there by reduce corruption. Over time this fear will go away and people will folow rules out of respect and stop paying bribes.

    Comment by sri — June 26, 2006 @ 4:01 am

  8. Er, Sri, God isn’t quite the subject of discussion here, but as you bring it up, I can’t help merging it with the topic of this post and stating that if God did exist, He’d be rather corrupt: consider how everyone’s always rushing to bribe God with prayer and offerings and suchlike.

    And since it is said that He made us in His own image…

    Comment by Amit Varma — June 26, 2006 @ 4:15 am

  9. Hi Amit: There is an important point missing about corruption in general here.. that it is a result of “arbitrary” power. The DMV inspector has arbitrary power to grant of deny a licence. The customs officer has arbitrary power to charge or not charge tarrifs. Without arbitrary power one can not be corrupt. As long as our politicians create laws and tarriffs that confer arbitrary power on certain people, there will be corruption.

    Also, I disagree that God would be corrupt for though HE is all powerful, HE does not exercise his power frivolously, but allows the world to run its natural course, which often makes us question whether HE does exist. Our politicians could take a cue.

    Comment by Ketan Malkani — June 26, 2006 @ 8:45 am

  10. I think the question of privatisation points us to another reason why corruption is a bad idea. Joel’s argument for corruption as a means of achieving efficiency assumes that demand for speedier service is the only differentiator between those who pay bribes and those who don’t – in other words, it’s all about willingness to pay. Which is why corruption becomes socially efficient – those who care enough about getting their work done faster, pay for it; those who don’t, don’t.

    The trouble with that argument (aside from the institutionalisation of corruption) is that it implicitly assumes that everyone has an equal ability to pay. This may not be true, however. There’s no reason to believe that the person who can afford to pay the highest bribe is the person who most values the quickest service. Even if corruption was ‘efficient’ in Joel’s sense, then, it’s not clear that it would be welfare optimal.

    Of course, you could argue that inequities in ability to pay are true for practically any good, and that it’s generally true that the utility of marginal purchases to high income individuals is lower than the utility of marginal purchases to low income individuals. The trouble is we’re talking about a government service here. To the extent that we’re unconcered about income distribution and the consequent social welfare effects, it’s not clear why we need to keep the service public and why we wouldn’t open it up to the free market (as has been done with telecom). If we are keeping the service in government hands, it’s often because we want the service to be available to all citizens independent of their income levels. Corruption undoes that purpose entirely.

    Comment by Falstaff — June 26, 2006 @ 10:34 am

  11. Topic of GOD was forcefully added because i want to make a point here that Fear can be used to reduce corruption. Fear of punishement for corrupts and this is possible, only if you have a perfect system.

    Fear of GOD was created long long time ago to bring order in our lives.
    So, i don’t think topic of GOD is unrelated.
    Anyways i had a nice brush up with this never ending Corruption debate.

    Comment by sri — June 26, 2006 @ 8:51 pm

  12. Little Ram, I am not sure how clearly advertised rates for walking into the temple, put in place to reduce the long lines outside TTD while capturing fees from those who can afford, is corruption.

    I think corruption blossoms from the culture of expediency and non-accountability. Expediency because we want stuff done now instead of following rules – bribing a police officer instead of wearing that helmet. Non-accountability because no one can stop a nurse from asking payment from a poor mother to release the new born baby from a government hospital because she shares the money with doctors. No amount of IT based process engineering will change these practices.

    Only active legal punishment can impose high cost on demanding bribe. But the practice is so wide spread with any interface with government.

    Comment by Chandra — June 27, 2006 @ 12:22 am

  13. Chandra,
    “No amount of IT based process engineering will change these practices.”
    Are you looking at one sultion for solving corruption puzzle?
    IT can only solve few issues. Over all there will have to be multiple approaches to this menace.
    If economy improves, average income of an individual increases automatically bribes at places like Hospitals, Schools, government offices decreases.

    Taking bribe is a second source of income for many. Let me explain.
    Most of the people at lower levels are not receiving proper wages. In order to support their families and maintain a proper living standard, these employees are taking bribes.
    Low wages are a direct result of many of us not paying taxes to government.

    So, implementing IT, paying our due taxes and Government doing its job of utilizing financial resources properly will result in cutting down the corruption levels.
    When average income rises, people who take bribes now may be hesitant to ask bribes in future. So, this may dicourage few in seeking bribes.
    Again, this is just an opinion.

    Comment by sri — June 27, 2006 @ 4:39 pm

  14. Ahem…. Just a thought…. What if those points “mysteriously” “disappear” overnight after a visit to a “superior”‘s resident ?:D

    Comment by Yuvi — June 27, 2006 @ 9:02 pm

  15. “Most of the people at lower levels are not receiving proper wages. In order to support their families and maintain a proper living standard, these employees are taking bribes.
    Low wages are a direct result of many of us not paying taxes to government.”

    I hope you are kidding, Sri. If you still believe bribes are demanded because of need (to maintain that elusive proper living standard), I doubt you have any experience with corruption. In fact the opposite is probably true – the larger the money involved, high the seniority of a bureaucrat or politician (who is already in top percentile per capita income bracket), higher the bribe. Corruption exists because it can, not because it needs to.

    Comment by Chandra — June 27, 2006 @ 9:48 pm

  16. Chandra,
    I am not saying or even intended to mean that corruption is done by people with lower wages only. If i did, then please read it as “some percentage of total corruption is done by people with lower wages”.

    When iam suggesting solutions, i am breaking the problem into smaller categories and attacking each one of them with a different solution.
    IT, fear, proper wages are all different approaches to solve this menace.

    Comment by sri — June 27, 2006 @ 11:09 pm

  17. I hit the Submit button too sooon.
    Previous post contd….

    Corruption at lower end (people with lower per capita income bracket) can be solved to some extent with better wages. Corruption at higher end (people with higher per capita income bracket) can be solved with fool proof system and IT combined.

    Again zero tolerance for corruption is impossible to implement.
    Even in United States, bribing/courruption occurs at the very top.

    Comment by sri — June 27, 2006 @ 11:14 pm

  18. [...] g concrete at stake, the licensing officers will thus be careful while giving out licenses. Responding to an article by Joel Waldfogel at Slate, Amit over at The Indian Eco [...]

    Pingback by DesiPundit » Archives » Corruption: A License To Kill — June 30, 2006 @ 12:00 am

  19. Corruption is rampant and practices openy in several crucial government departments across India.

    Try to register your property. You will meet many palms you are expected to grease, OR ELSE!!
    Try to get your passport thru the police verification step, it is common knowledge, what happens. OR ELSE !!

    It’s such a shame.

    Read more:

    Comment by Apun Ka Desh — September 4, 2006 @ 7:20 pm

  20. elkay stainless sink elkay stainless sink

    Comment by elkay stainless sink — September 9, 2006 @ 2:40 pm

  21. Corruption is everywhere, even in countries like Canada and Japan. However, corruption in the West does not affect the common man like it does in India. Unfortunately, it affects the poor more than anyone else.

    Comment by Neeraj — June 21, 2007 @ 8:30 am

  22. I can think of a few reasons why corruption is prevalent in India. I’ll just focus on one cause here – poor parenting or many times no parenting.

    As a society, unquestioning obedience is commonly enforced on children, at home and in school. This discourages independence. Lack of independence results in lack of motivation to question authority.

    The aim of parenting should be to make children as independent as possible. This can only be accomplished by trying to reason with children instead of forcing them or bribing them with gifts.

    In the short term, it might seem easy to use force or yell at a child, or promise them goodies, to elicit desired behaviour. Both these approaches don’t prepare a child to an adulthood of social responsibility.

    Parenting also requires a lot of mental resolve. Mental resolve is directly proportional to good health. The lifestyle in India de-emphasizes good health.

    For example, I have seen many daily wage earners saving all their money to buy gold, while just eating plain rice and salt. With their wages, they could afford to get additional nutrition like an egg or some milk every day.

    Improving the way we bring up our children is the only way to improve our society.

    Comment by Mani B — August 20, 2008 @ 8:44 pm

  23. Well, we all know that things are not in place. Corruption is eating up the properity and our politicians are busy making money.

    Let us stop complaining and do something about it. Let us start by casting our votes to the leaders who are well educated and know their responsibility well.

    Comment by Madhuri — November 28, 2008 @ 11:27 am

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