Welcome back to our course on corruption. This is week four, lecture one, and today we're going to talk about theories about the control of corruption. There are two main groups of theories with respect to corruption control. I want to say from the outset, this is the area of corruption study where we really know the least. So when I say these are theories, I mean that these are theories. There is not a great deal of empirical testing on these theories that I can tell you about although we'll try. The two groups of theories tend to be those that focused on institutions and particularly on creating strong institutions, and those that focused on the way that people think, particularly the way they think about corruption or social norms or things like that. Now, if you have a background in criminology, or in sociology, at this point you may be saying wait a minute, there are other theories out there about the commission of crime or the transgression of rules and that is absolutely correct. What I'm talking about today are the two main groups of theories that exist in the corruption literature with respect to corruption. And therefore the two main groups of theories that people actually have applied and then we know a little bit about with respect to corruption. Now, institutional theories are perhaps best illustrated by the work of the non-profit organization Transparency International. Transparency International is an organization dedicated to research on, exposure of, and eventual eradication of corruption. And one of Transparency International's programs is called the National Integrity System in which they evaluate the institutional strength of different polities. They evaluate the institutional strength with an eye toward either explaining or eventually reducing corruption. This is the symbol that Transparency International uses to teach people about the National Integrity System. And I want you to think about a couple of things. First, just take a look at this symbol. Each of the columns within this symbol are called pillars. Now, the word pillar in the English language certainly implies strength, strong institutions. But the symbol in general to those who come from a Roman or Greek background, looks like a court house. And a court house is symbolic of institutional strengths. So right away, without them explicitly telling us, we know that this is a theory about strong institutions. We can also spend some time looking at each of the pillars, the pillars of strength, right? And I'm not going to go through each one of them with you. But there are things like executive, judiciary, in other words, institutions. We can turn to another project by Transparency International. A specific project to get at what they're really trying to tell us. This is a project that followed the Arab Spring. And they promulgated a plan of action for the country of Egypt to include the eradication of corruption in what was then thought to be the process of democratization. All right? It was a very well thought out project, a lot of very smart people worked on it. But look at the kinds of things that Transparency International is focusing on. In excerpts from this report, you see the word law over and over again. You see words like the national body. The creation of the role of an Ombudsman right over and over again. Accountability rules. These are institutions. And what this project embraces is strengthening institutions to eradicate corruption. Now, the theory is that its weak institutions that allow corruption to flourish. That if institutions were strong, people who were incline towards corruption wouldn't have the opportunity to express the corruption even if they have the opportunity to engage in corrupt relationships. If institutions were strong, people wouldn't even be tempted, it wouldn't enter their mind to engage on these kinds of relationships. And that's a pretty good theory, it makes a lot of sense. But there are few aspects of this theory, that if one steps back a little bit, are not quite as strong as we might want them to be. In particular, there's nothing about this theory that tells us which institution should be made strong or what is the relationship between a particular kind of institution and the actual behavior of people who engage in corruption. Before I turn to that, I want to turn to the other kind of the other general body of theories. And these theories have to do with the way people think. Now, these theories go back to a Nobel Prize winning economist named Becker, who actually won his Nobel Prize for using rationality to describe the way people process rule-breaking. He himself began this line of inquiry when he ran through a stop sign, when he didn't stop at a stop sign. And he spent the rest of his drive wondering, self reflecting, why didn't I obey the rules, right? Now, since Becker, of course, a lot of work has been done and in particular, a lot of work has been done to try to apply this form of analysis to the decision by an individual person to engage in corruption. And roughly, again, we're talking about a body of theories here, but roughly the theories promulgate something like this. On one side, people consider what is the benefit that is to be accrued by engaging in this corrupt act, by acting corruptly. And we're going to called it perceived benefit because it's not the actual benefit itself. Here we're talking about the way people think, so what do they think is the benefit, all right. Now, weighed against the benefit are a number of things. One of those things is the psychic costs. Now, psychic costs are induced or crooned when a person does something that violates an embedded norm. Right? I feel bad if I do this. I feel guilty if I do this. That imposes a psychic cost. All right. Psychic costs are added to the perceived probability and again, we're talking about the way people think. So how do they perceive the probability that criminal costs and social costs will be imposed. Now, criminal costs is a portmanteau for any kind of externally imposed rule-oriented cost. It may be I will go to jail if I do this, or I will be punished in my office if I do this. I will be fired from my job if I do this. Right, it's actually a little more sophisticated than that. It's, well, if I do this, there's a chance I will be caught. And if I'm caught, there's a chance I will be prosecuted. And if I am prosecuted, there's a chance I will be punished by going to jail, by being fired, by being somehow administratively punished by my office, etc. Social costs are similar, but they're the costs that aren't imposed to some kind of rule process. Instead, they're the costs that are imposed by society in general. So, if I engage in this kind of behavior, society will frown on me, society will shun me. On today, society will Twitter blast me, or society will pose death threats on Facebook, or somehow otherwise antagonize me and impose costs on myself and my family. But again, it's a little more sophisticated than that. Again, it is, well, if I engage in this kind of behavior, there is a chance that it will found out by society and if it found out by the society, there's a chance that they will take up this particular transgression. And if they take up this particular transgression, there's a chance that I'll be Twitter bombed or I'll be shunned, etc. All of these costs are conditioned by the perceived probability. Now, the fact that social costs are conditioned by perceived probability gives us an opportunity to distinguished social costs from psychic costs. If I engage in this behavior, I will know that I've engaged in this behavior, and I will or I will not feel bad about it. Some people can rationalize behaviors, and that's an important thing to consider as we become ever more sophisticated in our understanding of why people engage in corrupt behavior. But in general, I'll know I'll feel bad. On the other hand, that same behavior may or may not be detected by society. May or may not be shunned, resulting in other kinds of sanctions that society can impose. And lastly, there's the actual cost of bestowing the favor. If as a teacher, a person were to attempt to bribe me to change their grade, right. It's not a simple matter of alphabet about it, which I would. Society would impose costs on me which I hope they would and there would be sanctions which I definitely hope there would. There's also the fact that I have to somehow figure out how to change that person's grade. It may be as simple as a few keystrokes or it may be that I have to go to an office and actually put in a piece of paper, look somebody in the eye and say, change this grade. Those are two different kinds of costs. And they're figured into the calculation a supposedly rational person makes when they're weighing the benefit against all of the costs. Just as Transparency International illustrates the use of strong institutions approach, the world is full of examples of people trying to change the way that people think about corruption. One of the most interesting examples of this that I ever witnessed was in Bolivia where for a short period of time, behind low level clerks that issued licenses and other things, stamps to which people were entitled, the Bolivian government put up a huge poster and this poster said this is what this particular transaction costs, and this is what this particular transaction costs, and this is what this particular transaction costs. And if the person sitting in front of this poster charges you anymore for that, they are robbing you, and they are robbing from the future of Bolivia. Right? That's not an attempt to strengthen an institution. That's an attempt to change the way that people feel internally and externally about a potentially corrupt transaction. That's an attempt to use psychic costs and social costs to raise them so that they outweigh any potential benefit that a person might get from engaging in a corrupt transaction. The problem with these kinds of theories is that although the example from Bolivia is an example that makes a certain amount of sense, the theory itself, these kinds of theories themselves, don't really tell us how to change psychic costs, how to change social costs. They tell us that, well, you can increase the cost of bestowing a favor. But they don't tell us how that relates to all of the other costs. So we're kind of left to drift just as we are with the purely strengthening institutions theories. And that's where we get to reality. In reality, and I say this meaning no disrespect to theorist who passionately believe in rigor and vigor of their theories. In reality, on the ground, these theories converge. If we think about strengthening institutions, why is it that transparency, that access to information, tends to reduce corruption? It's not simply because we have access to information. It's not simply because people to whom a polity is accountable have information. It's because that kind of information increases the cost of bestowing the favor, increases the likelihood that there will be social penalties imposed on corrupt actors. When we think about why is it that an ombudsman may, and then of course, this is very speculative, may reduce incidences of corruption. It's not simply because there's an ombudsman. It is because now parties are talking to one another. Increasing potentially the likelihood of psychic costs or of social costs or again, increasing the cost of bestowing the favor. Similarly, when we think about how do we increase psychic cost, how do we increase social cost, how do we increase the probability that a party who is engaged in corrupt transactions will be detected, prosecuted, and sanctioned, we do that through institutions. Particularly with respect to criminal or other kinds of ruler in sanctions, but also with social sanctions. Again, an example that I thought was very interesting, in Pakistan a number of people who were concerned with issues of corruption talked about something they called the big man theory, the big man problem. The big man problem was that in Pakistan, even though people despise corruption, even though they think that corruption is doing extraordinary damage to the country that they love, they're happy to go to dinner when that invitation comes from the big man, the wealthy man, all right? Well how do we reduce the privilege that the big man feels? How do we impose social costs? We do that through institutions that teach people not to go to dinner with the big man. Not to accept the invitation to impose social costs. Now, as we go through in the next few lectures, actual programs for reducing, controlling, or limiting corruption in a variety of spheres, we will come back to these theories and we'll push down with real examples of people who've used them, organizations that have used them, institutions have used them. Right now, what we should probably understand about these theories is that when they're used, they tend to converge. So, in the corruption realm, there are basically two bodies of theories about controlling corruption. One of those bodies of theories has to do with institutions. One of those bodies of theories has to do with the way people think. Both of these bodies of theories inform one another. Each of them is dependent on the other, even though they may not acknowledge it. So in the field, these theories seem to converge. Thank you, and I look forward to our next lecture together.