A former academic economist and game theorist is now the Chief Economic Advisor in the Ministry of Finance in India.  His name is Kaushik Basu. Via MR, here is a policy paper he has just written advising that the giving of bribes should be de-criminalized.

The paper puts forward a small but novel idea of how we can cut down the incidence of bribery. There are different kinds of bribes and what this paper is concerned with are bribes that people often have to give to get what they are legally entitled to. I shall call these ―harassment bribes.‖ Suppose an income tax refund is held back from a taxpayer till he pays some cash to the officer. Suppose government allots subsidized land to a person but when the person goes to get her paperwork done and receive documents for this land, she is asked to pay a hefty bribe. These are all illustrations of harassment bribes. Harassment bribery is widespread in India and it plays a large role in breeding inefficiency and has a corrosive effect on civil society. The central message of this paper is that we should declare the act of giving a bribe in all such cases as legitimate activity. In other words the giver of a harassment bribe should have full immunity from any punitive action by the state.

This is not just crazy talk, there is some logic behind it fleshed out in the paper. If giving a bribe is forgiven but demanding a bribe remains a crime, then citizens forced to pay bribes for routine government services will have an incentive to report the bribe to the authorities.  This will discourage harrassment bribery.

The obvious question is whether the bribe-enforcement authority will itself demand bribes.  To whom does a citizen report having given a bribe to the bribe authority? At some point there is a highest bribe authority and it can demand bribes with impunity.  With that power they can extract all of the reporter’s gains by demanding it as a bribe.

Worse still they can demand an additional bribe from the original harasser in return for exonerating her. The effect is that the harasser sees only a fraction of the return on her bribe demands. This induces her to ask for even higher bribes.  Higher bribes means fewer citizens are able to pay them and fewer citizens receive their due government services.

The bottom line is that in an economy run on bribes you want to make the bribes as efficient as possible.  That may mean encouraging them rather than discouraging them.