Corruption is an archetypal topic for students of public choice. It brings together the private search for economic gain with the government’s efforts to supply public goods, correct market failures, and aid the needy. Public choice’s insistence on viewing politicians and government bureaucrats as motivated by the same economic interests asprivate individuals and ﬁrms provides a background for understanding why corruption occurs and why it is difﬁcult to combat. Corruption in my formulation is the misuse of public ofﬁce for private gain. This deﬁnition leaves open the issue of just what constitutes misuse, but it recognizes that sometimes public ofﬁce can legitimately provide private beneﬁts to politicians and bureaucrats. Thus, targeted‘‘pork barrel’’ projects and special interest legislation are not corrupt. They result from the day-to-day operation of a representative political system. If a legislator works to pass a statute that is favored by his or her legal campaign donors, this is not corrupt even if it violates democratic ideals. Those who seek to discredit government across the board often put the ‘‘corruption’’ label onall kinds of government actions. Although many of these phenomena are indeed proper subjects of study and the loci of reform efforts, it will not help the analysis of democracy to put them all into the corruption pot. There are several reasons for maintaining a distinction between bribery, fraud, and self-dealing, on the one hand, and quid pro quo politics, on the other. First, a political systemthat encourages legislators to ‘‘bring home the bacon’’ for their constituents may also be one that encourages voters to monitor their representatives to be sure they are not beneﬁting personally from their position. Voting systems that ´ limit constituency-based politics may encourage corruption (Kunicova and RoseAckerman 2005). Second, strict rules on legal campaign donations may simply drivecontributions underground into a corrupt netherworld. Thus, it is valuable to maintain a distinction between legal donations from wealthy interests and illegal, secret gifts. Third, some reform proposals designed to deal with bureaucratic corruption involve the use of legal incentive payments. Mixing ﬁnancial incentives
This chapter is a revised and updated version of an essay that ﬁrstappeared in The Encyclopedia of Public Choice edited by Charles K. Rowley and Friedrich Schneider and published in 2004 by Kluwer Academic Publishers, Volume I, 67–76.
C.K. Rowley and F.G. Schneider (eds.), Readings in Public Choice and Constitutional Political Economy. # Springer Science þ Business Media, LLC 2008
with the provision of public services is notinvariably corrupt. Often it is an efﬁcient method of service delivery. This chapter concentrates on corruption that involves a public ofﬁcial, either a politician or a bureaucrat. However, corrupt incentives can also arise in purely private interactions. Corruption is, in essence, an agency \ principal problem. An agent violates the trust of his or her principal through self-enrichment or throughillegally enriching a political party. A public ofﬁcial may take a bribe in return for a favorable decision or may simply steal from the state’s coffers. Clearly, corporate managers can face similar incentives, and with the growing privatization of former state enterprises, the locus of some forms of corruption will shift into the private sector. Private-to-private corruption has been little studied,but ought to be the object of future work (for one example see Andvig, 1995). I proceed as follows. The ﬁrst section outlines the underlying causes of corruption and its consequences from a political-economic point of view. The second section discusses reform options in the light of the discussion in the ﬁrst section and the broader literature behind the summary presented here. This note...