Hello. Welcome back to our course on corruption. This is Week 2, Lecture 2.

Today,
we're going to be talking about
decision makers, and how the effect of corruption on decision makers
imposes a cost on society, a big cost. We're talking about three things. First, the
selection of decision
makers not on their merit but for some other reason. Second, decision makers buying
their position as decision makers. And thirdly, the fact that honest
decision makers might leave. Now remember, as we talk about all of these things,
our general definition of corruption. The abuse or misuse of a position of
trust or power for personal reasons, rather than the reasons for which that
power or authority was conferred. Our decision makers are making decisions
about the use of power or trust. Let's first talk about selection
of decision makers on something other than the merits. And the words we have for
these kinds
of selections are nepotism, which we already talked about, but sometimes
it's also called cronyism or favoritism. What happens here, is that a decision
maker is selected not because her or she, or other gender is qualified,
but instead because there are some kind of relationship,
there's some affinity. Now, decision makers being
chosen on the basis of nepotism, cronyism, and favoritism, we talked about,
there sometimes a reason for doing this. Sometimes it actually makes for
smoother relationships, but it's important to remember that
there are costs imposed by this. In particular, we have found that when
decision makers are chosen on this basis, it damages the morale
of an organization and it creates a situation in which there
is no incentive to be qualified. If I'm sitting in a cubicle and
I see that promotion is based on affinity, that promotion
is based on cronyism, then if I'm rational, and
I use the word rational not to describe real life rationality, but
this kind of cold rationality. If I'm rational, I'm not going to
worry about being good at my job, what I'm going to worry about is how
do I create those relationships. We also find, in general,
that when decisions about decision makers, when we select decision makers based on
affinity rather than in qualification, no surprise, we end up with decision
makers who are not qualified, who don't necessarily make good decisions. We also
know that in many parts of the
world, bureaucrats buy their positions, they buy office. I'm showing you a map of
Indonesia
because Indonesia is one of the places in the world where people have done some of
the best research on decision making. Iif you're really
interested in this subject, I highly recommend putting
the words Indonesia and buy office into some kind of search
engine and looking for the very, very detailed kind of research that
I'll be talking about in general terms. What we find when bureaucrats buy office
is that they tend to pay more for that position than that
position pays in salary. We see this over and over again. The person who buys
office recoups
their investment by demanding bribes,. Rather than buying this
office to get paid a salary, they buy this office to demand bribes and
they do. What we also find is that theses
bureaucrats give themselves raises. They give themselves raises by creating
more delay and by hiding information. They lower, they decrease the quality
of the service that they offer so that they can demand higher bribes,
larger bribes, higher quality bribes for offering the service that they're
supposed to offer anyway. We've seen this, and there's great
research on this in Indonesia, in South Asia, in Southeast Asia,
and also in Eastern and Central Europe, you see this
phenomenon all over the world. Finally, we find that honest people
tend to leave corrupted offices. This again,
is a phenomenon that's been studied, but you can think about it generally. Think
about yourself. If you've been in a group of people,
perhaps at a party, where the general tone is one that doesn't fit
the way that you think about the world. That doesn't fit the way that you want to
be interacting with this group of people. Doesn't fit the way that you
want to be at this party. You've tended to either go
to the corner or leave. And we found this to be the case when
decision makers in bureaucracies are selected for purposes other than
qualification, and in particular, when they're selected in ways that cause
those decision makers to be corrupt. Again, think about your own life, think about
whatever country it is that
your in, and think about the young people. Are young people saying,
I want to work for the government, I want to work for
these large companies? Or are they saying, this doesn't fit
the way that I think about the world and I want to be doing something else? What we
end up with,
with all three of these things going on, is bureaucracies or business firms or
other organizations filled with decision makers whose
skills are not in making decisions. Instead, their skills are in
forming relationships unrelated to the purposes of that
organization or in extracting bribes. We find that there is an incentive to
degrade the quality of the office, to degrade the services to
which people are entitled. And we also find that over time,
there are fewer competent actors. Now, there's a couple of points I feel it very
important to make when we
talk about this in very general terms. The first is that good bureaucracies are
very important to business in particular. Business sometimes thinks of itself as
disassociated from the rest of society or interacting with society on its own
terms. But anyone who studies business and
anyone who in particular studies of relationship between
business and bureaucracy will tell you, that high quality bureaucracies
are very beneficial to business. The world's competitiveness
index devotes a great deal of its attention to
the quality of bureaucracies. Good bureaucracies are good for business. And of
course, and this is something
that probably doesn't need saying, good bureaucracies are important
to society in general. I also want to point out, and
I cannot overemphasize this, that in any country, in any polity, there are lots of
honest bureaucrats and
there are lots of decision makers. Far too often we tend to
paint an entire bureaucracy, we tend to paint an entire government, we tend to
paint an entire
body of decision makers, a business firm, a nonprofit organization, with the color
of a few bad apples,
a few bad actors. I've done field work all over the world. I've never encountered
a bureaucracy that was completely filled with dishonest bureaucrats. I've never
encountered a business
where every single person is dishonest and corrupt. We don't want to dishonor those
that continue to be honest and there are honest bureaucrats everywhere. In sum,
with respect to decision makers, corruption tilts the pool of decision
makers towards incompetence. It tilts the pool of decision
makers away from people who good at making those kinds of decisions
and towards competency in something else. In creates incentives for
even more corruption. These things combined impose
costs on society in the form of low quality decisions, low quality
service, misallocation, distortion, a poor environment for business, and
a poor environment for society in general. On that happy note, thank you very much,
and I look forward to seeing you for the next lecture.