Saturday, June 5, 2010

Corruption as the market for official discretions

This is extends a comment I made here.

If corruption is the market for official discretion, then one would expect that—other things being equal—more corruption where there is more official discretion and/or official discretion has bigger financial rewards.

In Australia, for example, corruption most often occurs in (1) zoning/land release matters, where there is a lot of official discretions which are extremely valuable and (2) drug and "vice" control, where the basic official discretions of enforcing the law or not are extremely valuable.

An obvious way to reduce corruption, therefore, is to reduce the market for official discretions by minimizing official discretions through simpler, more-rule-based regulation: regulation that improves the operation of a given market for participants (both current and future, voluntary and involuntary). A great deal of current regulation—particularly in the more corruption-ridden countries and areas of life—would not past that test.

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