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CHAPTER 10
BEHAVIORAL AND
EXPERIMENTAL ECONOMICS
AS A GUIDANCE TO
ANTICORRUPTION
Johann Graf Lambsdorff
ABSTRACT
This chapter argues that reciprocity provides a key to understanding
corrupt behavior and its limitations. It allows for an understanding why
agents not only are guided by explicit incentives but also serve those to
whom they owe gratitude. It allows to observe how citizens disregard their
narrow-minded interests and engage in altruistic punishment, potentially
exercising negative reciprocity toward a corrupt leadership. It shows how
reciprocity is at the center of criminal networks and how reform
sometimes enhances rather than inhibits this dismal form of reciprocity. It
finally reveals how humans are at risk of reciprocating toward their own
self-image, which may inhibit them from impartially assessing their
misdeeds. A thorough understanding of the power of reciprocity can
inspire novel avenues for reform, some of which are presented here.
At the beginning there is no specific, unambiguous word for bribe. There are only a
range of reciprocities. (John T. Noonan, 1984, p. 3)
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New Advances in Experimental Research on Corruption
Research in Experimental Economics, Volume 15, 279–299
Copyright r2012 by Emerald Group Publishing Limited
All rights of reproduction in any form reserved
ISSN: 0193-2306/doi:10.1108/S0193-2306(2012)0000015012
279
INTRODUCTION
Some economists wonder why there is not much more corruption, in
particular those who follow Becker (1968) and regard criminal behavior as
being driven by rational calculus. A fully rational, risk-neutral actor opts
for criminal behavior if the expected benefit exceeds the sanction
multiplied by the probability of being convicted. But considering the
mild sanctions that are often imposed in many countries around the world
and the miniscule probabilities of detection for the sophisticated
corruptors, illegal opportunities should be chosen more often. Why would
citizens ever expect fair treatment by public servants? Why would
prosecutors impose sanctions rather than striking side deals with suspects?
What keeps politicians from milking the citizenry even more? But contrary
to this calculus, we find heads of state who aim for serving their people,
public servants who stick to the rules, businesspeople who abstain from
profitable bribery, and citizens who risk their lives when fighting
corruption. The rational, self-regarding calculus of detection and punish-
ment seems to be only half of the answer to explain human decision
making. What is the other half?
There is another strand of rational-choice theory with the opposite
conclusion. If someone takes a bribe, why should he or she reciprocate?
Why not sack the money and cheat the briber? Technically, bribery is not a
subgame perfect Nash equilibrium and thus cannot be implemented
(Buccirossi & Spagnolo, 2006, p. 1287; Pechlivanos, 2004). There is no
legal enforcement that helps corrupt actors. Many acts of corruption are
one-shot, such that issues of reputation and repetition may not help. In
other cases, an enduring exchange is known to terminate, suggesting that the
final corrupt exchange ceases to be reliable and by help of backward
induction all the previous ones as well. In this perspective, theorists wonder
why there is not much less corruption. As we all know, also this is only half
the answer. Corruption does exist, bribes are paid, and favors are
reciprocated.
Rational choice theory emits two opposing messages, one with
omnipresent and another with inexistent corruption. Both are only half of
the truth and they do not add up to one inclusive answer. What is the
missing link that helps us obtain a comprehensive viewpoint toward
corruption? One approach has been to employ institutional economics. In
the tradition of Williamson and North, with a focus on transaction costs it
investigates the capacity to commit and thus determine future behavior
upfront. It tells us about the many tricky methods employed for privately
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JOHANN GRAF LAMBSDORFF280
enforcing illegal contracts (Gambetta, 2009; Lambsdorff, 2007). At the
downside, institutional economics is not very specific with respect AU :2to
behavioral assumptions but exchanges Homo economicus with a less rational
but somewhat blurred substitute. Another approach has been to closely
investigate human behavior AU :3.
At the 1997 anticorruption conference in Lima, Peru, I met John T.
Noonan, whose excellent book on bribes provides a comprehensive
historical review of the matter, starting with early documents from Egypt
and Mesopotamia (Noonan, 1984). The focus of norms of these early
societies refers to reciprocity. Documents ranging from 3000 BC until 1000
AD deplore failure to reciprocate and herald threefold punishment to
nonreciprocators. No evidence can be found that public servants should
behave differently. No legal codes are known that prohibit gift-taking
(Noonan, 1984, p. 9). Citizens would thus not approach public officials
empty-handed, nor even gods. They are not outraged about greedy public
servants but about those who fail to keep their promises. But this marks
only the beginning of societal organization. Noonan describes how the
thought of impartial justice is introduced and conflicts with the norm of
reciprocity. More and more historical documents show how the importance
of gifts starts to be balanced against claims for justice, in particular for
those who have little to offer. I still recall John Noonan’s reply to my
question as to why corrupt acts would ever function in reality: ‘‘It is the
power of reciprocity.’’ For an economist like me, who had only two half
answers without the bridge in between, this was a thought-provoking
challenge.
Reciprocity is at the center of behavioral approaches to human conduct
and should be placed at the center for understanding corruption. To
illustrate the point, take a quotation from Holger Pfahls, who was charged
with taking bribes during his time as state secretary for defense in Germany
from 1989 to 1992 (Lambsdorff & Frank, 2011, p. 124). He was accused and
found guilty of accepting the equivalent of almost h2 million from German–
Canadian businessman Karlheinz Schreiber to push through a deal to
deliver 36 armored vehicles to Saudi Arabia that required support by the
German government. In court Mr. Pfahls provided the following description
of the alleged briber (own translation): ‘‘Schreiber told me that I was just
one out of many who receives bribes. When Schreiber hates someone, his
hatred is so profound that he wants to destroy him, even if that involves his
own demise. On the other hand, he is a real buddy, highly talented in
creating a pleasant atmosphere.’’ Mr. Schreiber is portrayed as a person
committed to reciprocity. He is kind to friends but retaliates when being
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Behavioral and Experimental Economics as a Guidance to Anticorruption 281
cheated. This reciprocal attitude, alongside with being perceived in such a
way, serves as his device to enforce transactions.
Studying corruption from such a behavioral viewpoint is more than just
bringing games on corruption to the lab or experimentally testing corrupt
behavior in the field. Experimentally one can study the behavior of subjects
within the orthodox paradigm of Homo economicus AU :4. In this spirit a variety
of laboratory studies have determined the link between corruption and
punishment or risk. Sequeira (2012) in this volume surveys a wide range of
field studies that are helpful in estimating the extent of corruption in
specific sectors. Many of these studies bring about interesting insights while
leaving unchallenged the notion of humans as rational, self-seeking
maximizers. I am concerned here more with experiments that follow a
behavioral notion of man, recognizing nonstandard types of preferences,
beliefs, and decisions.
Behavioral economics has changed economists’ (and many others’) view
of man (Camerer, 2003; DellaVigna, 2009). Humans are not only driven by
own-regarding motives but also by social motives. The preference function
is more complex, including inequality aversion and reference points that
invoke reciprocal action when being missed. They include ethical
considerations and intrinsic motivations. Experiments on corruption show
that this paradigmatic shift can be relevant for anticorruption. And
behavioral economics can provide the missing link that integrates the two
half answers that I raised above. It can explain why some corrupt acts are
enforced by the power of reciprocity, but also why some public servants and
politicians serve the public rather than following their narrow self-interest.
This chapter reviews the relevant literature and puts it into the perspective of
a behavioral economist, trying to show how the two half answers can add up
to one.
The second section asks whether delegated tasks might be honored even
when side deals are profitable. Are agents intrinsically motivated to
reciprocate their principals, and if so, when? The third section asks whether
citizens may engage in altruistic reciprocity and how this may be relevant to
anticorruption. The fourth section deals with the reciprocity required among
corrupt actors. How should anticorruption be organized if trust among
criminals is scarce? The fifth section investigates how easily morality
dissipates. It uses insights from experimental ethics to show how subjects
seek justification for their misdeeds rather than ending them. In each of
these sections, I will try to draw conclusion for anticorruption. The sixth
section summarizes.
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JOHANN GRAF LAMBSDORFF282
AGENT’S RECIPROCITY
The principal–agent relationship, for example between employer and
employee, has been widely applied to corruption. A key conclusion from
theory is that agents must be incentivized by help of penalties or bonuses to
such an extent that serving the principal is preferred to striking side deals. In
a nutshell, principals are requested to outbid the briber. It requires little
imagination to observe that this is a costly method that is often disregarded.
Whether failure to implement this prescription would actually increase
corruption has been widely investigated in the laboratory. Two results
deserve notification. At first, as well reviewed by Abbink and Serra (2012) in
this volume, imposing penalties on misbehaving agents does impact
behavior, but this impact can exceed or fall short of rational choice
predictions. As shown by Abbink, Irlenbusch, and Renner (2002), penalties
imposed on agents with a miniscule probability can heavily influence
behavior. The differences between a treatment with penalties and one
without were substantial. With penalties the experimenter thus framed an
environment where bribes are not tolerated and this was observed by
subjects. Penalties seem to contribute to framing the normative environ-
ment, their impact thus going beyond consequentialist ethics. The second
finding relates to a conflict between penalties and agents’ intrinsic
motivation to serve their principal.
The first experimental investigation of corruption, carried out by Frank
and Schulze (2000), focused entirely on the behavior of public officials (or
agents, more generally); bribe payers were fictitious and simulated by the
experimenters. Subjects were students who attended the showing of a film
organized by the students’ film club, a self-financed nonprofit organization
which volunteered as the ‘‘principal’’ in this experiment. Like many real
world victims of corruption, the potential victim of corruption was deemed
to be entirely passive. Before the film started, subjects were asked to make a
decision on behalf of the film club in the following situation: a 200 DM
banknote (about h102) which belongs to the film club has fallen into a
drainpipe. It will be lost unless one of ten competing plumber firms retrieves
the banknote. Each firm made a bid composed of two parts: the price which
the film group would have to pay, and an amount of money the decision
maker would receive from the plumber for obtaining the contract. Prices
were positively linked with bribes, ranging from DM 20 (combined with a
bribe ¼0) to DM 200 (leaving a zero rent for the film club, combined with a
bribe of DM 144). It was credibly announced that payments would actually
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Behavioral and Experimental Economics as a Guidance to Anticorruption 283
be made by the experimenters to the film club (DM 200 minus the payment
to the successful plumber) as well as to two randomly chosen subjects (one
per treatment).
In one treatment, corrupt agents could not be detected. In another
(Schulze & Frank, 2003), there was a certain (publicly known) probability
for detection, its size depending on the amount of the bribe taken, being up
to 67% for the highest bribes (and hence for the most inefficient plumber
firms). Subjects whose corruption was detected lost all income (which for
some included a fixed income, reinforcing the deterrence). Unlike in the no-
risk treatment, it was no longer income maximizing to take the highest
bribe. This was observed by subjects, leading them to request more rational
levels of bribes. The average bribe taken, however, did not decrease, as
complete honesty (taking no bribe at all and choosing the most efficient firm
for the principal) was almost completely crowded out due to the
introduction of monitoring.
Another finding on agents’ reciprocity relates to prosecutor’s willingness
to serve the public. Azfar and Nelson (2007) let students play in groups of
eight, one taking the role of an executive who faces corrupt incentives and
another taking the role of a monitor. In one treatment this monitor was
randomly determined, in another he was elected. The elected monitor was
observed to be more vigilant and devoted more resources to uncovering the
executive’s malfeasance. Election in this game, rather than random
appointment, created bonds of reciprocity and cultivated a desire among
monitors to serve their electorate. Barr, Lindelow, and Serneels (2009)
found similar result with Ethiopian nursing students.
Jacquemet (2007) shows that a principal can lower the agent’s
willingness to engage in corruption by deliberately choosing a higher
wage. Agents who take bribes are in a conflict of interest, being
confronted with two people who request reciprocity. Should they serve
the principal or the briber? With a higher wage obtained from the
principal, some agents more often reject bribes. Others take bribes but
have a (slightly) higher tendency to cheat the briber. Interestingly, this
effect is not explained by income. Richer agents are not more honest. The
causation does not run from principals paying higher wages, thus
increasing income and causing more honesty. Agents who are endowed
with a higher initial payoff reciprocate even more often to the briber, thus
showing less reciprocity toward the principal. The key to understanding
agents’ behavior is reciprocity toward the principal. It must be the
principal rather than nature who causes an increase in income if he or she
wants to achieve the agent’s gratitude.
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JOHANN GRAF LAMBSDORFF284
These studies fit into the broader picture of agent reciprocity. Principals
can often choose either controlling their agents or believing in their
voluntary engagement AU :5. Principals who opt for control have more pessimistic
beliefs about the agent’s performance and are thus regarded as distrusting
and as expecting little effort – and they are served according to their
expectations (Falk & Kosfeld, 2006). The explicit incentives they set may
then backfire. Gneezy, Meier, and Rey-Biel (2011) review the widespread
evidence where explicit, monetary incentives have been found to reduce
performance in areas such as blood donation, collection of charitable
contributions, or charging late-coming parents in daycare. Principals who
want to limit the corruption among their agents may not be successful when
they focus only on extrinsic motivations, such as bonuses, punishment, and
detection. They must instead also shape the normative environment.
This induces a dilemma. Penalties have been found to be effective not only
for the rational calculating subject but also for those who observe how
penalties shape societal norms. But a principal who implements penalties is
regarded to distrust the agent, thus undermining an intrinsic motivation.
Due to this the impact of penalties on corruption are heterogeneous. One
may conjecture that the perfect environment may thus be one where a
division of labor is implemented, the role of the principal being split into
two: The ideal public employer cultivates strong ties to the agent, shows how
much he trusts, and provides a good precedent. His position would be
separated from that of an ideal law enforcer who controls and imposes
penalties without regard of personal matters. Such a division of labor
replicates the classical ‘‘good guy bad guy’’ game, that is successfully
implemented for the interrogation of suspects. When agents are confronted
with these two principals, they might deliver fear of punishment and respect
of norms to the law enforcer and reciprocate effort to the public employer.
CITIZEN’S RECIPROCITY
Punishment is not only exercised by courts. It is widely employed by regular
citizens in their attempt to uphold civic cooperation. Citizens penalize by
ending cooperation, by discriminating, destroying ones reputation, or even
by physical violence. Citizens defend the collective morality and altruisti-
cally impose punishment, even if this is costly to them (Bowles & Gintis,
2011, pp. 24–45). This type of altruistic punishment among citizens often
complements the legal sanctions. In the laboratory, it has been observed
how public goods provision is supported by expressions of disapproval
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Behavioral and Experimental Economics as a Guidance to Anticorruption 285
ry engagement
. Principals who opt for control have more pessimistic
toward free-riders (Masclet, Noussair, Tucker, & Villeval, 2003), or by
costly altruistic punishment (Fehr & Ga
¨chter, 2000). If someone spends less
for the public good than the group average, he or she runs the risk of being
sanctioned. Some subjects are willing to spend money for sanctioning these
free-riders.
Yet, the possibility to sanction others is not always employed to advance
cooperation. Herrmann, Tho
¨ni, and Ga
¨chter (2008) run public goods games
with opportunities for punishment in 15 different cities and find that in some
of these not free-riders are punished but those who contribute the most to
the public good. These are suspected for having punished free-riders in
previous rounds and are thus the target of retaliation. The extent of this type
of ‘‘antisocial punishment’’ is depicted in Fig. 1. As can be seen, there is
correlation with the level of perceived corruption in the respective countries.
Simple least squares regression analysis confirms that the correlation is
significant and is not driven by income per head. This finding suggests that
countries shape the normative environment that accounts for the type of
punishment exercised. Countries with low levels of corruption cultivate
societal norms of group solidarity and the punishment of free-riders. Where
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Bost on Melbour ne
Nott ing h am
Che ng du Zur ic h /St.Galle n
Bonn
Cope nh ag en
Dnipro pe tr ovs'k
Se oul
Ist anb ul
Minsk
Samara
Riy adh
Ath e ns
Musc at
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
012345678910
Anti-Social Punishment,
Herrmann et al. (2008)
Absence of Corruption in Respective Country
(Transparency Int. 2008)
Fig. 1. Antisocial Punishment and Absence of Corruption AU :1
.
JOHANN GRAF LAMBSDORFF286
levels of corruption are high, the group-minded are ostracized for showing
their moral superiority.
People do not only punish those who hurt them but also those who hurt
others. Negative reciprocity is thus not confined to guarding ones selfish
long-term interests and reputation (Bowles & Gintis, 2011, pp. 31–32). This
type of indirect reciprocity has been observed in dictator games, where
greedy dictators were punished by third parties. Punishment seems to reflect
more general ethical norms.
In this spirit some researchers set up experiments to investigate issues of
corruption more closely. Cameron, Chaudhuri, Erkal, and Gangadharan
(2009) and Alatas, Cameron, Chaudhuri, Erkal, and Gangadharan (2009)
observe how (students allotted to the role of) citizens react to collusion
among firms and officials and the subsequent reduction of their payoff.
1
These citizens were given the opportunity to punish officials or firms.
Interestingly, the authors find that this type of altruistic punishment was
more pronounced among female participants. Where corrupt actors
victimized innocent actors, women appear to be more willing to contribute
to collective morality by penalizing this malfeasance. In a similar
experiment, as described in this volume by Banuri and Eckel (2012), the
authors observe more punishment exercised in the United States and link
this to the distrust in governmental institutions in Pakistan, suggesting that
bribery less violates social norms there.
The findings by Cameron et al. (2009) and Alatas et al. (2009) are
noteworthy also with respect to cross-country comparisons. Contrary to
Fig. 1, they do not find levels of corruption, nor those of punishment, to
correlate with countrywide perceptions. Experimental results for Singapore
reveal high levels of corruption and little altruistic punishment in contrast to
perceptions for the country as being largely free of corruption. While some
authors suggest that more recent institutional changes in Singapore may
account for this finding, from my point of view Singapore’s particular
anticorruption strategy may better explain the findings. Unlike other
countries reputed for low levels of corruption Singapore obtains bad scores
with respect to press freedom. Anticorruption is driven by top-down
implementation rather than bottom-up cooperation among citizens. These
top-down methods may correlate with a failure in cultivating citizens’
resistance toward corruption and altruistic attitudes toward punishing free-
riders.
The strength of bottom-up in contributing to anticorruption is more
systematically investigated by Serra (2011). Her game involves five
‘‘officials,’’ five ‘‘citizens,’’ and five ‘‘other members of society.’’ The official
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Behavioral and Experimental Economics as a Guidance to Anticorruption 287
ly investigated by Serra (2011). Her game involves five
can initiate a corrupt transaction and request a bribe from a client in
exchange for preferential treatment. When paid, a favor is delivered to the
client but negative externalities are imposed on the other members of
society. Serra investigates two regimes for punishing the official, one ‘‘top-
down regime’’ where the transaction is detected with 4% probability and
another ‘‘bottom-up regime’’ where this probability of detection arises only
at the client’s request (who is never punished for his involvement in bribery).
The official should observe that the latter treatment implies a lower risk of
detection. Nonetheless, bribe demands are observed to diminish. It remains
difficult to trace the reasons for this finding. The official may regard the
citizen no longer as being reliably complicit in the corrupt transaction but as
being assumed also for the role of the whistle-blower. The involvement of
clients in the anticorruption regime may thus contribute to fostering a norm
of anticorruption. Overall, this is a wonderful piece of evidence, suggesting
how important societal norms contribute to a lasting culture of antic-
orruption. One may contend, still, that the clients option to pressure the
official may also backfire and serve as a method for ascertaining corrupt
reciprocity, an issue to which we turn in the fourth section.
While laboratory experiments provide us with a clear mandate to involve
citizens as watchdogs, they are not specific on how this should be done in
practice. Olken (2007) describes results from a natural field experiment,
comparing the extent of missing expenditures with respect to funds granted
to Indonesian villages for the construction of village roads. Grassroots
monitoring was increased in some of these villages either by circulating
invitations to attend local meetings, where officials account for how they
spent the resources. In a second treatment, this invitation was accompanied
by an anonymous comment form. Participation of the meetings was
successfully increased by 40% relative to a control treatment where no such
invitations were circulated. While Olken finds some significant effects for
other treatments of his study where government audits were more often
implemented, grassroots involvement remained insignificant, helping only
more open debate at the meetings but no measurable impact on missing
expenditures. One explanation he provides relates to how the invitations
were distributed. Circulation via village schools guaranteed a broader
participation while controlled distribution by village governments fostered
fears of elite capture of the participatory process.
This is an important insight which brings laboratory and field experiments
into perspective. Participation seems to limit bribery in experiments, but
only if it is perceived to be unbiased and not at the risk of capture. For
example, the field studies surveyed by Gallego and Wantchekon (2012) in
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JOHANN GRAF LAMBSDORFF288
this volume show how well vote-buying can be contained if experimenters
run treatments with unbiased and extensive participation mechanisms.
Similar to the laboratory, the experimenters perfectly control the delivery of
information and the participatory process. Yet, the success of participation
may diffuse if citizens fear the process to be biased and suspect local capture.
If such suspicions arise in the real world, experimenters are at risk of
overestimating the external validity of bottom-up mechanisms.
CRIMINAL’S RECIPROCITY
Bribery is an arduous enterprise. It requires trusted relationships, supported
by reputation-building or surrounding networks that safeguard against
opportunism. Institutions that support enforcement are often scarce.
Corrupt businesspeople retain considerable uncertainty as to whether they
will be served after having paid a bribe. More often than not, bribers hope
for reciprocal attitudes rather than being sure they will be served.
Reciprocity, in a word, exists but it falls short of operating with certainty.
The extent of illegitimate reciprocity is investigated in a field study on
Japanese Sumo Wrestling by Duggan and Levitt (2002). They note
wrestlers’ urgency to win the 8th out of 15 fights in a tournament in order
to advance in ranking and observe that few end up with only 7 victories.
This opens the door to collusion as wrestlers can trade the more valuable 8th
victory against a less important victory by the opponent. The authors show
that in a succeeding match the opponent is more likely to win, this way
being reciprocated for his willingness to loose.
Because of the difficulty of enforcing corrupt transactions these are often
carried out only among insiders, limited to a network of trusted actors and
repeat customers (Lambsdorff, 2007, pp. 136–163). This generates a form of
inefficiency of its own. Efficient firms may not obtain contracts when they
are not part of a trusted circle of insiders. Even if they are willing to pay
bribes, they are set at a disadvantage. Insiders to a corrupt network are
preferred because applicants are screened according to the likelihood to
reciprocate favors. An interesting experiment on this issue is reported by
Banuri and Eckel (2012) in this volume. They run a trust game in the United
States and Pakistan. Subjects in the role of a trustor pick with whom to play
a trust game, either with a peer from their own primary group or with an
anonymous player from the population. Choosing a peer may enhance
confidence that investments will be reciprocated but comes at a cost,
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Behavioral and Experimental Economics as a Guidance to Anticorruption 289
resembling the fact that nepotism reduces competition and diminishes the
chances of contracting with high-quality applicants. The authors find that
peers are chosen by 44% of subjects in the United States and by 69% in
Pakistan, revealing that nepotism is less pronounced in the United States.
Similar results on reciprocity as an impediment to organizational efficiency
have been obtained by Fiedler, Haruvy, and Li (2011).
Investigating criminal reciprocity has also widely inspired reform. Rather
than deterring bribery by help of detection and punishment, the idea is to
seek methods for inhibiting corrupt reciprocity and rather encourage
corrupt actors to cheat each other. One method for achieving this relates to
the recruiting process. Applicants might be screened according to their
attitudes toward corrupt reciprocity, giving preference to those who are
willing to cheat bribers. Certainly, preferring honest applicants who never
take bribes will always obtain priority. But honesty is scarce and when
choosing among the second-best those who cannot be trusted in corrupt
transactions can legitimately be preferred.
As surveyed in this volume, Chaudhuri (2012) notes that women are
sometimes found to be more pro-social and more risk averse. This per se
may put them at an advantage for public offices. Another gender effect
relates to the preference for reciprocity. Cox (2002) finds a higher tendency
of men to reciprocate. This invites for more focused research with a corrupt
framing, testing whether women would less frequently reciprocate a bribe.
Lambsdorff and Frank (2011) play a simple one-shot bribery game in a
lecture hall and find 21 men out of 76 to reciprocate a bribe but only 5
women out of 96. This is in contrast to 62 women who cheat the briber while
only 39 men opt for this type of cheating. Men have a higher sense for
positive reciprocity. But they may also have a higher expectation of negative
reciprocity. Bribers were given the option to exercise costly punishment.
This option was exercised by 16 (31%) out of 51 cheated men but only by 5
(16%) out of 32 cheated women. Similar results are reported by Rivas (2008)
who runs a more complicated game across many periods. This suggests that
women may be preferable for routine inspections, in workplace situations
that are comparable to the anonymous setting that was tested in the
experimental laboratory. Men, on the other hand, may need clearer gift-
limit rules, given that they cannot resist reciprocation after taking gifts.
Criminal reciprocity is also key to understanding the effects of the four-
eyes principle. Subjecting individual decisions to peer review is a standard
organizational method. Having a second, independent person supervise
important decisions is seen to ensure that a control mechanism is in place.
Reports on anticorruption in the public sector thus often emphasize a rigid
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JOHANN GRAF LAMBSDORFF290
application of the four-eyes principle as a method for containing corruption.
Bribing two, it seems, is more demanding than bribing just one. What
appears most intuitive to the layman, however, has been critically
challenged by laboratory experiments. Schikora (2010) designs a corruption
experiment where bribe-takers may cheat the briber. He compares a
treatment played among individuals with a treatment where officials decide
in groups of two. Only if both agree to the bribe it will be accepted and
rejected otherwise. This appears as a safeguard against corruption, because
consent among two corrupt officials is required to arrange a bribe.
Nonetheless, there is more bribery in the group treatment. This can be
traced to the fact that the game is played repeatedly such that issues of
reputation become salient. Schikora reviews experimental evidence that
groups are more self-seeking than individuals and they are better at
cultivating a reputation for reliable reciprocity. The mutual control
exercised between two actors backfires, because rather than serving the
public it is employed to serve the actors’ corrupt reputation. This piece of
research thus casts doubt on naı
¨ve expectations toward the four-eyes
principle. How peer review should be organized to better contain risks of
corruption will have to be food for future research.
Whistle-blowing systems combined with leniency provisions have been
widely recommended to destabilize corrupt transactions (Yadlin, 2006). But
an understanding of reciprocal behavior is important to observe the extent
to which leniency can backfire. Imagine a briber who waits for his contract
to be awarded and fears the bribe-taker may cheat. Will the briber be
entitled to obtain leniency in exchange for reporting? Apparently, this type
of leniency would backfire. If those who were cheated are invited to report,
bribe-takers will not dare to cheat. In a rational choice perspective this type
of leniency has been investigated and observed to enhance corrupt
reciprocity, supporting the enforcement of bribe transactions (Buccirossi
& Spagnolo, 2006; Lambsdorff & Nell, 2007). Engel, Goerg, and Yu (2012)
compare a punishment regime where briber and bribee are sanctioned
symmetrically with one, often observed in reality, where the briber is less
severely punished, reducing his costs for whistle-blowing. They observe
more whistle-blowing by cheated bribers in the second regime. As a result,
officials are reluctant to cheat bribers and reciprocate more often. Overall
they observe that mild punishment of bribers brings about significantly
more successful corrupt transactions. This finding is particularly strong in
their experiment in China, while in Germany the effect is more attenuated.
Schikora (2011) investigates behavior in a more complex game where both,
briber and bribe, can initiate a corrupt transaction and the size of the bribe
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is not fixed. He obtains similar results. On the one hand, leniency given to
whistle-blowers deters bribery. Players more often opt for an outside option
although this generates low individual payoffs (but no negative external-
ities). Subjects in the role of officials are thus reluctant to ask for bribes as
they fear reporting by the client (and vice versa). At the downside, once
bribes are paid they are larger and more often reciprocated. Whistle-blowing
thus helps stabilize corrupt transactions. Officials refrain from taking or
requesting bribes without delivering afterward. Interestingly, this effect is
more pronounced among men, confirming the above findings on gender
effects. Men more often negatively reciprocate after having been cheated.
Given these ambivalent findings, Schikora paves an avenue for reform by
help of a third treatment. Based on Lambsdorff and Nell (2007) he suggests
an asymmetric design of penalties, giving leniency to a cheating bureaucrat
who blows the whistle and allowing him to keep the bribe. Corruption was
least frequent in this session. Bribes are rarely reciprocated but often
accepted and reported. This type of an asymmetric design of sanctions
successfully counters the stabilizing effect of leniency.
THE LIMITS OF MORALITY
Moral behavior within the confines of Homo economicus reduces to an act of
consequentialist rationality. Collectively preferred outcomes are supposed
to be attained with minimal costs. Decisions are carried out consciously,
weighing the costs and benefits of alternatives. Issues of reciprocity are
already in conflict with consequentialist ethics. In addition to this caveat, a
growing body of interdisciplinary research has emerged that tells us how
easily ethics is diverted to myopic behavior, self-deceit, or misled by framing
effects or simple heuristics (Appiah, 2008). A new field of experimental ethics
emerged that can help us better understand our limits in moral judgment.
We are not primarily concerned with the goodness of our behavior but with
good emotions that we seek to attach to our behavior. Rather than
balancing the costs and benefits of doing good, we balance costs against the
benefits of feeling good. We may reciprocate toward our own self-image
rather than only to others. This becomes problematic in particular when we
exercise a self-serving bias in how we view the world (Dana, Weber, & Xi
Kuang, 2007).
Anticorruption has been a moral crusade, highly successful in initiating
legal reform at the global level. But we are at risk of falling into some of the
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traps that can be identified in experimental ethics. These risks arise when
reform assumes excessive levels of individual rationality that are in contrast
to us morally fallible creatures.
Monin and Miller (2001) ran a variety of psychological experiments
with undergraduates. In one of them they requested subjects to fill out a
questionnaire to express approval or disapproval of blatantly sexist state-
ments, such as ‘‘most women need a man to protect them.’’ This question
aimed at allowing subjects to voice rejection and provide them with an
accompanying self-esteem of being nonsexist. For a control group the word
‘‘most’’ was exchanged with ‘‘some,’’ which makes it more difficult to answer
and inhibits subjects in submitting emotional expressions of disapproval. The
first group was subsequently observed to more often favor a man for a
stereotypically male job. They had obtained the moral license to such conduct
by having expressed their dislike of sexist statements upfront.
We are at risk of seeking similar moral licenses in anticorruption,
generating reform that paints a favorable image of ourselves rather than
effectively changing reality. While direct evidence in this respect is still
missing, it goes without saying that political and corporate efforts are not
immune to moral licensing. The problem is not only one of hypocrisy and
window dressing. Incentives to those who engage in anticorruption are not
only such that paying lip service is preferred to effective action. The problem
is the inclination to self-deception. Corporations, for instance, have been
busy in designing compliance systems. But these systems can also function
as a moral license (Lambsdorff, 2009). They allow managers to express
outrage at the designing stage so as to be more tolerant when bribery is
thought to be unavoidable.
Delegation is another challenge to the rationality of our moral calculus.
We judge acts differently when we did not commit them ourselves. Action
invokes immediate moral sentiments that are attenuated when the same
consequences result from inaction (Cushman, Young, & Hauser, 2006). We
carry a lighter moral burden if third parties commit the misdeeds on our
behalf. Hamman, Loewenstein, and Weber (2010) showed for dictator
games that contributions to recipients decreased almost to zero when
dictators chose between competitive agents who announced upfront how
much of the dictator’s money they would transfer to the recipient. Acting
through the intermediary allowed dictators to distance themselves from the
norm of fairness. Consequently, they expressed little responsibility for the
recipients’ payoffs when AU :6having made use of intermediaries. Coffman (2011)
introduces a fourth player who observes how fair the game is played and is
provided with the capacity to punish the dictator. Coffmann observes that
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unfair dictators are less punished if they engage an intermediary rather than
acting directly. This suggests that it is not only the dictator’s self-serving bias
that allows him to escape responsibility. There exists a public norm
according to which delegated malfeasance is less bad.
This insight has been applied to corruption by Drugov, Hamman, and
Serra (2011). A citizen can offer a bribe to an official, which entails negative
externalities to be borne by a third, individual player. This bribe can either
be paid directly or, in a separate treatment, via a fourth player, the
intermediary. They find that officials expressed a higher willingness to take
bribes from intermediaries, accepted lower bribes AU :7. Clients more frequently
offered bribes when this was arranged by intermediaries. Intermediaries may
thus enhance corruption by reducing the moral costs of bribery.
We also tend to depart from a consequentialist ethics when assigning guilt
according to levels of knowledge. Criminal judges assess the mens rea, the
guilty mind as a subjective part of a criminal act. This comprises whether the
perpetrator intentionally and knowingly committed the perpetration. As
reviewed by Sunstein (2005), this is in line with folk psychology but it can
generate absurd consequences. He illustrates this with the rule: Do not
knowingly cause a human death (Sunstein, 2005, p. 536), which implies that
‘‘trading dollars for a known number of deaths, is morally unacceptable.’’
Convincing as it appears at first sight, it implies that we give pardon to
someone who fails to know. We would, for example, condemn a car
company that accepts 10 deaths after calculating that avoidance would
amount to 100 mio AU :8. dollars and thus be too costly. But we give pardon if the
company never carried out the cost-benefit analysis. This boils down to
condemning not the behavior itself but the company’s respective knowledge.
It is easy to imagine that we employ a similar logic with respect to bribery:
Do not knowingly bribe officials. This appears to be a convincing anticorru-
ption strategy and has found broad access to legislation (Lambsdorff, 2011).
But it backfires by inducing managers to avoid knowledge and request those
who do the dirty work to leave them uninformed.
Loewenstein, Cain, and Sah (2011) depart from the idea of moral
licensing to write a disturbing paper on the effects of transparency, widely
believed to be a universal tool in anticorruption. They report on experiments
where ‘‘advisors’’ should communicate to a ‘‘chooser’’ the payoffs and risks
involved with two options and submit a recommendation about which
option to pick. While one option involves a higher expected payoff to the
‘‘chooser,’’ the other induces a bonus to the advisor, putting him or her in a
conflict of interest. Contrary to rational expectations, revealed conflicts of
interest increased rather than decreased the chooser’s compliance with
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accepted lower bribes
and has found broad access to legislation (Lambsdorff, 2011).
the recommendation. Choosers may have disliked insulting the advisor with
the suspicion that the conflict of interest corrupted his or her behavior.
Other choosers may have felt pressured to reciprocate and to help the
advisor satisfy his or her personal interests. These findings are in line with
evidence obtained in the field. Voters often fail in showing the expected
outrage to questionable behavior of the incumbent government; their voting
behavior being often ambiguous, as reviewed by Hollyer (2012) in this
volume. While this is often explained by voters’ hopes to profit from
clientelism, the above-mentioned psychological effects may also be at play.
Voters may dislike hurting politicians’ self-respect by suspecting conflicts of
interest. Winters, Testa, and Fredrickson (2012) in this volume note that
some stronger reactions by voters seem to emerge if media campaigns
provide a platform to cultivate disapproval of corruption. It may require a
third party to raise accusations and express public dismay, to provide
‘‘specific information about particular politicians on which voters can
actually take action’’ (Winters et al., 2012). The ‘‘chooser,’’ it seems, is
overburdened when left alone.
‘‘Choosers’’ also reported a lower level of trust in the ‘‘advisor’’ if the
conflict of interest was revealed. In a game framed as one between a doctor
and a patient/chooser they were less likely to seek the doctor’s advice again
in the future (Loewenstein et al., 2011, pp. 425–426). This is strikingly in line
with reduced electoral participation as noted by Winters et al. (2012),
contrary to rational expectations that would motivate all voters to expel
corrupt politicians from office.
Also the behavior of ‘‘advisors’’ is likely to differ once their conflict of
interest has been disclosed. Loewenstein et al. (2011, p. 424) investigated this
in another experiment. ‘‘Estimators’’ guessed the value of a jar of coins,
being paid according to the accuracy of their estimates. ‘‘Advisors’’ were
given better information and put into a conflict of interest with a payoff
being made only if the estimator overestimated. When this conflict was
concealed the advisors mildly biased their advice. When it was disclosed
advisors anticipated that their advice would be discounted by the estimator
and thus engaged in strategic exaggeration, biasing their decision even
further. Estimators, however, did not discount enough and consider also the
advisor’s exaggeration. They ended up suffering from disclosure. Loewen-
stein et al. (2011) link their findings to moral licensing. A person whose
conflict of interest was disclosed may feel a license to offer biased advice,
knowing that responsibility to adjust for the bias has shifted to those who
were informed about the conflict. Disclosure of a conflict of interest may
then undermine the motivation to adhere to professional standards.
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Disclosing conflicts of interests is not an instrument by itself. It transfers
the moral dilemma to the recipients of the respective pieces of information
without resolving it. Disclosure can be justified only if it allows for improved
regulation or clarification of societal norms. If left by ourselves we do not
seem to be rational enough to process information on conflicts of interest in
the way predicted. Transparency, it seems, is not a silver bullet.
CONCLUSIONS
At the beginning of mankind there was no term for bribery. Humans were
occupied with the avoidance of warfare and the organization of coopera-
tion, across families, kin, and ethnic groups. Reciprocity became part of our
genes, supported by cultural transmission and contributing to our
evolutionary fitness (Bowles & Gintis, 2011, pp. 13–18). But the more
complex organizations grew the more it became apparent that reciprocity
needs to be better targeted, directed to the benefit of societies, and avoided
where it counters public interest. Norms of universal justice emerged and
started to fine-tune norms of reciprocity, stating when reciprocity should be
valid and when respective norms need to be prohibited. Along these lines
mankind started to regulate gift-giving and prohibit unjust reciprocity.
This conflict between norms, those of reciprocity and those of justice, are
at the core of an understanding of corruption. Homo economicus is either
horribly corrupt, because he feels no moral impediments, regards all
temptations to be legitimate and takes advantage of risks of punishment
being commonly low. Or Homo economicus is averse to corruption, because
corruption is arduous to enforce. Homo reciprocans provides a better app-
roach to understanding corruption. As now widely evidenced in experi-
mental research, humans are sometimes willing to reciprocate a bribe but
they also devote resources to an altruistic punishment of bribe-takers and
like to serve their principals. These pieces of evidence allow us to develop a
more comprehensive picture of humans who face corrupt incentives.
I surveyed here the widespread findings on reciprocal attitudes. Humans
reciprocate their principals, society at large but sometimes also criminals
and quite often only toward their self-image. These insights should help us
better design systems that contain corruption. Much remains to be done.
Experimental researchers interested in issues of corruption need only take a
look into the behavioral toolbox, which offers a wide range of nonstandard
preferences, beliefs, and decisions, such as overconfidence, loss-aversion, or
lack of self-control. These wait to be readily applied to experiments on
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corruption, shaping a better understanding of the best practice that societies
need for reform.
NOTE
1. Unlike the previous public goods games, citizens are not involved during the
first phase of the game, the one where firms may pay bribes to officials. Given that
they cannot misbehave, they have no reason to dislike the ethical precedent of others
and thus no incentive to engage in antisocial punishment. Considering antisocial
punishments may be an interesting extension also to experiments on corruption.
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