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What is corruption? Is it taking a bribe? Smuggling millions to a tax haven? Or skipping the line on a public service because the office clerk is your neighbor’s nephew’s kid? “Corruption is what those dirty bankers, politicians, and the referee who conducted the last match my club lost at are guilty of, that’s what it is!” – any of us will enragedly say. “I”- we confidently add – “would never do it”.

But is this really so straightforward? The prevalence of corruption in a given society can be hard to measure, both due to its secretive nature and differences in how it is defined. We rely essentially on what law enforcement records (a biased source if the authorities happen to be corrupt themselves) and on perception surveys, both of the general public and of experts on the matter (which may also be skewed if people have different ideas about what constitutes a corrupt act). But statistical issues aside, the truth is that corruption appears to be a worldwide phenomenon, and a relatively stable one at that. According to Transparency International, the Corruption Perception Index (measured in a 0-100 scale, 100 being the least corrupt), in 2021, was lower than 50 for two thirds of the world. 131 countries “made no significant progress against corruption over the last decade”. Portugal ranked 32nd least corrupt out of 180 countries, at 62 points.

Corruption Perception Index, 2021

So, it seems we don’t really think of ourselves as corrupt, but we perceive corruption around us. Is it external factors and mechanisms that influence a person’s choice to engage in the kind of behavior that we call corruption? We know what an economist’s point of view would be on the matter: each choice is dependent on incentives and preferences (of the agent making that choice), and on a rational cost-benefit analysis of the situation. And, like with any decision process, Behavioral Economics also has something to add on the subject: the agent’s choice is conditioned by cognitive biases and bounded rationality. This means that people could be guided (or should we say, nudged?) towards a different behavior pattern. Let us now explore these ideas.

Why are we corrupt?

If there’s one thing we should remember when dealing with corruption is that it is harmful, undoubtedly undermining the potential for human and economic development. Corruption can be like a disease, spreading all over and destroying a system from within. Corruption, in fact, corrupts.

Perception of Corruption by Institution, 2017

At its core, an act of corruption is a break of trust. An agent is trusted with some power or task and is expected to act according to the best interest of those who deposited that trust in him/her. We can think of it as a contract being made between society and the agentThe agent is trusted by society as a whole to act in society’s best interest. It is easy to see where the problem starts. Two things, together, provide an incentive for the contract to be breached: a conflict of interest between the agent and society, and asymmetry of information. In other words, there is a risk of corrupt behavior if the agent stands to gain something from breaking the contract and can do it without being caught. 

Given this, the economic reasoning for acts of corruption is simple enough – an agent will rationally assess the costs and benefits of breaking ethical rules and do it if the benefit exceeds the cost. So, a public official who is offered a 5-million-euro bribe will simply perform a cost-benefit analysis (5 million in my pocket vs some time in jail if caught) and decide accordingly.

Following this line of reasoning, anticorruption policies should focus on increasing transparency and accountability, decreasing asymmetry of information (making it harder to act without our actions becoming public knowledge), and better aligning the agent’s and society’s interests, so that not breaking the contract becomes in the agent’s best interest.

In a simple, perfectly rational world, this would be all. For better or for worse, that is hardly the picture the world we live in paints.  

A Behavioral Economics Approach

A person’s actions are hardly ever determined solely based on costs and benefits. Any agent is affected by mental shortcuts, reciprocity, context, fast-thinking and social norms. People rarely go about their lives carefully deliberating every choice. Indeed, many decisions are automatic. For example, a public official may hire his friend’s nephew for his office without necessarily thinking about ethical rules or the public good. Nonetheless, this is a textbook case of nepotism.

Another important mechanism is reciprocity – the “you scratch my back, I’ll scratch yours” mentality. This could be seen either in a large-scale favor exchange between two powerful people or in something as small as a driver bribing a police officer to avoid getting a speeding ticket.

Bribery Payers Index, 2011

But it is not all about automaticity in decision-making and ethical blind spots. Although no one likes to see themselves as the bad guy, even when agents are aware of the dubious nature of their actions they may still choose to engage in corrupt acts. Why?

The moral “weight” of corruption is lighter when the agent feels somehow distanced from the action. Experimental evidence shows that having an intermediary as a third party who arranges the bribe (someone to “do the dirty work”, so to speak) significantly increases the percentage of people willing to offer and accept bribes! Thus, bribery is perceived as a common transaction.

Another problem is our tendency to consider only obvious and immediate results (fast thinking). Corruption presents an obvious, palpable gain, and is often thought of as a “victimless crime”. It is easier to break a rule if no one seems to be worse-off by it. However, according to the United Nations, corruption, bribery, theft, and tax evasion cost at least US$1.26 trillion each year to developing countries, money that essentially could have been implemented in much-needed social and economic policies.

Finally, let us not forget that as human beings we tend to abide by the perceived behavior of the majority. As a matter of fact, we are easily influenced by our peers, with the underlying mentality of “If everyone is doing it, what’s the big deal if I do it too?” being heavily present in many of the choices we make, corruption decisions not excluded.

What can we do about it?

So, does this mean that nothing can be done about corruption, that it should be accepted as a feature of humanity, and that we may as well have to learn to live with it? Far from that! Truth is, by identifying the cognitive biases and mental shortcuts that stir people towards corruption, we are also learning which buttons to push to get them away from it.

A simple way to surpass the ethical blind spot problem in our decision-making is to simply reiterate the ethical principles a person is already trying to live by. An experiment was conducted where the participants were asked to solve a math test, while being given incentives to cheat. However, some were asked to write down the Ten Commandments they remembered beforehand. Those participants cheated much less than the control group, having been reminded beforehand of the existence of a moral code (not even necessarily their own). As it turns out, awareness matters

In turn, this opens the door for new anticorruption initiatives. Businessmen could, for example, be asked to sign a document stating their awareness of the organization’s ethical code. Politicians may be required to publicly state all their possible conflicts of interest before taking office. 

5th Pillar, an Indian NGO, created a Zero Rupee note with a pledge against corruption, to be given to officials who ask for a bribe

Moreover, nudges that communicate the ethical standards people have for each other may be helpful, again, as a reminder of the trust society puts in each individual, which may work in itself as an incentive for citizens to live up to that trust.

We know these small nudges are hardly the definitive solution to end corruption once and for all – transparency and accountability measures are still the ones most likely to have a noteworthy impact. However, the nudges we discussed may be just what is needed to curb the small corrupt tendencies in a society in which more sizable schemes are tolerated or even go unnoticed. We may never live in a fully honest world, but awareness of what makes it dishonest is crucial to make sure it never becomes fully, and irreversibly, corrupt.

Sources: Muramatsu, Roberta; Bianchi, Ana Maria. (2021). “The big picture of corruption: Five lessons from Behavioral Economics”. In Journal of Behavioral Economics for Policy. Vol. 5, Special Issue 3: Roots and Branches, pp. 55-62., Muramatsu, Roberta; Bianchi, Ana Maria. (2021). “Behavioral Economics of Corruption and Its Implications”. In Brazilian Journal of Political Economy. Vol. 41 (1)., Ma, Qingguo; Yan Min. (2018). “Psychological, Behavioral, and Economic Perspectives on Corruption”. In International Journal of Psychology and Psychoanalysis., Statista, Our World in Data, India Times.

Mariana Gomes

Leonor Cunha

Joana Brás

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