In economics and much of life, the definition of a rational actor is closely grounded in decision-making that promotes self-interest or maximising the payoff that we receive from our actions. While there is a heated debate in psychology about whether human beings are innately wired to cooperate or compete, we have enough clarity on the fact that much of our conditioning orients us towards selfishness.
However, this fact is not yet reflected in policymaking. The most explicit example of this can be found in The Prevention of Corruption (Amendment) Bill, 2018. The Prevention of Corruption Act, 1988, has not been significantly successful in reducing corruption. Estimates of public sector corruption range upto 5% of our GDP and over 50% of Indians have admitted to bribery in 2019.
Under the original act, the receipt of a bribe by a public servant was criminalised, and the bribe giver could only be penalised for abetment of the offence conducted by the bribe taker. Immunity from prosecution was also previously available for the bribe giver if they provided a statement against the public servant during a trial for corruption.
One of the most important provisions of the amendment is the symmetric criminalisation of collusive bribery. Now, bribe giving has been made a direct offence, at par with the act of taking bribes. The provision for immunity no longer holds. This is a move contrary to suggestions of many prominent policymakers, who have suggested treating bribes as legal in some cases.
For a class of bribes known as “harassment bribes”, in which citizens are forced to pay bribes in order to obtain goods or services that they are legally entitled to, policymakers have suggested a radically different approach. Kaushik Basu, the former Chief Economic Adviser, makes a case for this in his seminal paper, “Why, for a Class of Bribes, the Act of Giving a Bribe should be Treated as Legal”.
He begins with examples of bribery from everyday Indian life: having to pay money under the table to obtain an income tax refund, or to purchase a train ticket. These are not uncommon situations in India. Transparency International’s Global Corruption Barometer for 2013 states that 54% of citizens have paid bribes for common government services. The prevalence of harassment bribes leads to widespread inefficiency and distortions in the economy. Basu argues that the symmetric treatment of the bribe giver and the bribe taker by the law contributes to it. Once a bribe is given, the bribe giver and the bribe taker are both “partners in crime”.
As long as the act of bribe giving and bribe taking are criminalised, the interests of the bribe taker and bribe giver align. Their payoff would reduce if either one chooses to report the other, as they would both face punishment. Therefore, there exists a clear incentive for the bribe giver to not report the bribe taker. However, if the act of bribe giving is legalised, the bribe giver is free from any punitive action from the state. Hence, the interests of bribe taker and the bribe giver diverge. The bribe givers payoff remains unaltered if they choose to report the harassing official.
An experiment using an asymmetric liability mechanism for harassment bribes (such as the one Basu proposes) conducted by Abbink et al. is consistent with this analysis. The percentage of citizens who were willing to pay the bribe and then report it increased from 25% to 59% when the bribe giver and the bribe taker were equally liable and when there was an asymmetric liability policy. A similar drop was observed in the number of public officials who demanded a bribe. The percentage dropped from 38% in a symmetric liability scenario to 25% in an asymmetric liability scenario.
It is clear to us that a law sets the rules of the game, and attempts to nudge individuals to act in certain ways through incentives (setting aside the capacity of the law to change normative attitudes for now) and disincentives. The government will possibly see more success with an anti-bribery law if it is evaluated in terms of the incentives that it offers those citizens who refrain from this practice.
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The opinions expressed in this essay are those of the authors. They do not purport to reflect the opinions or views of CCS.