SOWING INTRIGUE AND MISTRUST

HOW TO BREAK JUDICIAL CORRUPTION OFF FROM THE INSIDE

AUTOR: PATRICIO ALVARADO LUZURIAGA

PALABRAS CLAVE: judicial, corrupción, soborno, recompensa, delator

INTRODUCTION

This paper is about using rewards and Game Theory to break up corruption from the inside. In this paper, we will use the definition of corruption set forward by Transparency International, a worldwide private organization devoted to studying corruption since 1993. They have issued the “Corruption Perception Index” since 1995 to the date (the most recent in 2015), the world’s most influential research on corruption. They define corruption as: “the abuse of an entrusted power for private gain.” However, that definition, as pointed out by Roser-Ackerman is problematic in the sense that the power could have been taken by force, not necessarily “entrusted”. This situation has happened in countries with non-democratic regimes which are, nonetheless expected to act on behalf of the people’s best interests (Cuba with Fidel Castro for example; or Chile with Augusto Pinochet are a couple of examples) (Rose-Ackerman & Palifka, 2016).

As explained by Rose-Ackerman, corruption is a principal-agent problem (Rose- Ackerman & Palifka, 2016). Indeed, for corruption to take place, we need an agent who deceives and a principal who is deceived. The agent is supposed to perform a task in a certain way for the benefit of the principal. This mandate and its conditions could be imposed either by law or by a contract. This agent could be a police officer, the head of a contracting authority under public procurement law, a judge or any other private or public person with sufficient power to decide (directly or indirectly) in the interest of the other corrupt party. The principal, in this context, could be the populace (as in the case of police officers and judges), the State, the shareholders of the company or any other individual, group or entity who the agent is supposed to act on behalf of.
It is important to distinguish the different scenarios where corruption can take place. Let’s take for example a couple of driver’s license applicants. The first one does not comply with the legal requirements to obtain it, while the second one does. The first applicant could bribe the officer to get the license, which is a benefit that he is not legally entitled to. The second applicant could consider bribing the officer to get faster that benefit that he is actually entitled to, without going through all the paperwork and tests that he is required to prove his driver skills. In a third scenario, our second applicant could be confronted with a corrupt officer who asks him some money to issue the license, which otherwise, he would have gotten without the need to pay a bribe.

Corruption also takes place in the judicial field. This specific type of corruption takes place between a judge (or any other judicial authority, like a public prosecutor for example) and a lawyer (or occasionally the party directly). It constitutes a breach of the judge’s public mandate to decide cases exclusively on the merit of law. It may or may not harm the other party because, as in the case of the driver’s license used above, it could be the case that the party who arranged the case with the judge was legally entitled to win the case. In this case, the party who is harmed is, oddly, the one who paid the bribe to get what he was legally entitled to.

Several causes have been appointed for this misconduct of the agent. Serra, for instance, refers to historical causes (colonial heritage is highly correlated with corruption), religious causes (countries where population is mostly Protestant, are reported to have less corruption) and political causes (countries, where democratic institutions are and have been strong and stable for long periods, score very well on corruption indexes) (2006). Also, many scholars have studied the economic factors that eases corruption (the International Handbook on the Economics of Corruption is one of the most influential works in this regard). We can highlight: a) the need to align the economic incentives of both the agent and the principal; and b) the importance of the institutional design as a factor that may as well facilitate or dissuade corruption (Kaufmann, Kraay, & Mastruzzi, 2006).

The consequences of corruption can be more or less obvious. Stiegler suggests some that are rather straightforward such as overpriced government contracts (which could cause less public goods or services provided), civil servants being selected for reasons different than their merits (which could result in a poor quality in the provision of public services) (Stiegler, 2011). However, there are some other consequences that require deeper analysis, such as the hypothesis suggested by Depken, who proves with empirical evidence that high corruption levels cause the corresponding State bonds interest rates to be higher (Depken & LaFountaine, 2006).

An even more complex issue is the academic debate between the correlation between corruption and low rates of growth. It could be the case that the low rates of growth cause corruption since people, under the strong economic pressure, start seeking rents in illegal ways. But, it could also be the case that corruption causes low growth rates because it scares away potential investors who have no certainty to undertake important economic activities under the extreme uncertainty posed by high corruption rates. Both hypotheses are plausible, and the definitive answer is yet to be found (Kaufmann et al., 2006).

We encounter possible solutions to corruption from many different disciplines: morals, law, economics, sociology, just to name a few. This paper will focus on the ones advanced by the most influential scholars in economics, which includes a brief analysis of the economic incentives behind bribery and extortion (albeit corruption can take very different forms apart from bribery and extortion) from the game theoretical approach.

The economic model of bribery and extortion has several elements, which are: the briber, the bribee, the bribe, a possible intermediary, the probability of getting caught and each player’s payoff. But the most important element to highlight is that it is a contract. Hence, it demands the acquiescence of both parties. However, since it involves an illegal transaction, it is non-enforceable. All that parties have is trust.
This characteristic turns bribery into a cooperative game, i.e. where both players
can make the most out of it if (and only if) they cooperate. Cooperation, in this context, entails not accusing each other before the authorities, who can impose severe penalties upon them. This cooperation reduces the chances of getting caught since public prosecutors will need information to take the corrupt parties into court and impose a sanction.

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