In the fourth case many low-level officials deal with large numbers of citizens. As in the case of mafia-dominated states, this situation could occur in a democratic state with weak legal controls on corruption and poor public accountability. It might also be the way a weak autocrat dispenses public services. We discussed this case in detail in the first part of the book. There we made clear that the competitive corruption case is not analogous to an efficient competitive market. Here, we stress a serious, systemic problem that can arise from competitive corruption – the possibility of an upward spiral of corruption. The corruption of some encourages additional officials to accept bribes until all but the unreconstructed moralists are corrupt. Several theoretical models produce this result along with a second equilibrium with little corruption – a low level of corruption in one period encourages even fewer to be corrupt in the next period.

Suppose, for example, that some people are committed to honesty under all conditions, some are always willing to bribe, and a large intermediate group decides how to behave by observing what others are doing and balancing the benefits and costs. They judge their own corrupt acts by asking how common they are in society. Each person has a tipping point; he or she will bribe if a certain proportion of others are “paying bribes”. This model, identical to Thomas Schelling’s models of neighborhood tipping in the housing market, can produce a cascade over time as more and more people opt into the corrupt regime until all but the extremely honest are involved. Conversely, there may be an equilibrium where the honesty of some breeds honesty in others. Bardhan (1997) graphs this to make clear the multiple equilibria nature of such a corrupt market. If the corrupt equilibrium prevails, the only solution is a massive effort to shift the system to the “good” state. The good news, however, is that once the new equilibrium has been established, it will be stable – no ongoing coordination is needed.

A somewhat more subtle version has people imagining an honest society that they view as better than one riddled by corruption. Even when they engage in corruption, they understand that it is wrong from the point of view of society, but they feel trapped in the corrupt status quo. This model appears to describe people’s feelings, at least in some societies where interview studies have been conducted (Persson, Rothstein, and Teorell 2012). This is a somewhat more hopeful situation because people could be induced to move away from corruption – if given plausible options – even if many others are still corrupt. In other words, they do not actually believe that the moral value of corruption is reduced just because it is widespread.

Susan Rose-Ackerman, Corruption and Government: Causes, Consequences, and Reform – Cambridge University Press 1999, NY, Apple Books