In my days in college in Pune, we use to ride motorcycles without Driving Licence or PUC, or NOC.. And every once in a while we used to get caught for the cops, if one saw the combined fine being caught by a cop for breaking a signal or parking in wrong location, given the above anomalies would amount to exactly 2000 rupees then, (900 for noc, 700 for driving licence, 300 for PUC, and 100 for breaking the signal)
Every time we got caught, we bribed the cop 100 rupees, but it was not the 100 rupees that was important, but the harassment undergone was huge ordeal, hence we reduced parking in wrong places, stopped breaking the signals and got that occasional PUC done .
Ronald Coase once said if there are two parties in a conflict, and there are well-defined ownership rights, then Pareto optimality can be achieved by mutual consensus by bargaining a middle path. (I know that’s very basic argument and no rocket science involved. but he still got a Noble in Economics for proving this and is called the Coase theorem, that’s what most economist have got their nobles, proving basic arguments)
Why do I say so, well government has a well-defined quasi ownership to road safety and law and order, and the conflict is between me and the protectors of law. Hence a mutually beneficial middle path can be achieved which will be Pareto optimal, by mutual consensus of bargaining. Basically Bribe.
Lets make it simple in a way: The cop who gets peanuts of a salary finds it incentive enough to catch hold of the person breaking the signal for that Rs. 100 as a bribe, he will calculate a suggest 2000, but I will pay 100, if I had Paid 2000, then he would not find it incentive enough as he had to make a challan of the same, and the money goes to the Government not him.
Also its beneficial for me as I am get away paying 100 rupees instead of 2000 but the harassment is something I don’t like.
So I make sure from next time I don’t cut the signal, have a PUC, NOC, DRIVING LICENCE, and do not park in no parking.
This becomes socially beneficial, and doing so attains a social optimum.
Now take away the bribe scenario, what happens I always Pay 2000 rupees, so the cop does not have an incentive of catching me as His salary is not a Function of number of law breaker he catches, so he shirks his duty, and I break the signal and go scott free.
So the social optimum is not attained.
Hence what do I conclude, Bribes good???
No I would not say that exactly, I would put it this way, a Law Enforcers slary should be a function of the variable x plus a Constant C.
Or f(y) = fx + C (Hebrew?? Sorry I had to do it, at the end I am an Economist by Education)
Where y= the law enforcers salary
X= the incentive derived from catching a law breaker
C= Constant, or the basic salary he receives from the government irrespective of number of law breakers he catches.
With the basic Economic Assumption of Ceteris Paribus as mentioned by my fellow economists.
The basic hypothesis is to remove bribe and still have a social optimal the policy makers should increase the law enforcers basic salary (C) by giving him an incentive to catch the law breakers (x) to reach a Social Optimum situation or else the Economics of bribe will allow the society to achieve the Pareto –optimality between law breakers and enforcers.
4 comments:
thought is good, but i have a few queries
in order to give incentives to the cops, that needs to be covered in the fine amounts, and more than what we can bribe. in ur 2000 rupees example, if we consider the cop will have a 10% incentive, then he would gwt 200 for prosecuting u, whereas if he doest, u give him 100, which is lesser. if u know cops get 10% then u offer him 400 rupees, which is more, so cop might accept, and u still save 1500. now see
case 1 (cop prosecutes you) - you lose 2000, govt gets 1800, cop 200
case 2 (cop takes bribe) - you lose 400, govt loses 2000, cop gets 400
its a win win situation for the cop, but a win lose situation for other parties. further, the average income of govt given a 50/50 probability of both events is negative 100, i.e, implementing the above situation will average in loss for govenrment. also, a win situation for a person at fault is not acceptable. so what can be done?
lets suppose, government increases the penalty to 4000 rupees, of which he gives 3600 to the cop, that is 90% of the penalty. in this case, the person at fault has no option to bribe, as the cop will know he'll be happier man penalising the man, rather than accepting a meagre 200 300 rupees. for the man as well, a bribe is not a happening option as will need to bid higher the 3600 to bribe the cop.
in such a scenario, the govt and cop are always at a win win situation, while the man at fault will always lose. and lose a lot of money, which will go to governments pocket and strengthen the economy of the cop. thus the man will avoid breaking the law so he doesnt have to pay a huge sum.
that is my take on it. your comments?
you are right, and i must have added the cost of shirking must also be made high.. that happens automaticaly when your salary increases
earlier the cop was getting say 2000 rs Plus bribe as a salary.. he could have gone to the job market and easily found a job paying him 5 k but because of other facilaties of a cop and the bribe he thought he will carry on as a cop
so tomorrow if he is chucked out he still can go to the job market and get a 5k job..
now if his salary suddenly increase to 7k , thanks to the incentives... then he will not shirk.. as his cost of shirking has suddenly increased.. and cant go to the labour market and get a 7 k job plus the the other facilities of a cop??
so now he has reasons no to take bribe and safe gaurd his job
when i read any economic theory......i first look out for assumptions. but out here......i do not see any....not even the famous ceteris paribus.
hence, my view is.....no matter how much you increase the penalty.....and also if you give the full amount of money collected, to the cop, who catches a culprit.....you can not stop people from bribing.....and cops from taking it.
you see, by paying penalty you get in to the record book as a law breaker....which is kind of a negative remark. and it matters to a lot of people.....they do not care about the money they have to pay.....but they just do not want to be known as an offender of law. so for them.....bribing is the perfect solution.....and so also for cops.....because this section of the people are even ready to pay more than the penalty amount as bribe.
so what is your take on that unless and until you take the assumption of ceteris paribus.
sandeep biswal.
dear bisu,
As i mentioned in my second comment the cost of shirking for the cop increases .. hence he will not be ready to take the bribe even if it is paid to him... as hif caught he wont get the similar job in the market..( simple labour wage shirking model)..
and yes as it is theory i will assume Ceteris Paribus.. A point well made and well taken
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