Monday, October 12, 2009

Another nudge to reduce corruption

I have blogged earlier about the demand side origins of corruption and how adaptive expectations among officials about precedents set by citizens/consumers creates, sustains and even amplifies corruption.

Often, the applicants to public services (and contractors executing works) are resigned to the inevitability of speed payments and voluntarily (often without coercion or signals from the official) donate something when the service is delivered. In most instances, it is also an expression of their relief at having received the service without enduring the expected hassles. The result is a chain of adaptive expectations (about receiving something) that get entrenched into the officials at the interface of service delivery. This problem is especially pronounced with the newer set of public service delivery interventions, which seek to minimize transactions and eliminate interface with officials, and whose incentives get distorted with such payments.

How do we turn people away from making such voluntary contributions that sustains corruption? A friend of mine had this excellent suggestion. How about placing "donation boxes" at strategic locations in Citizen Charter Counters or government offices which nudge such "happy" citizens to channel their contributions into these boxes instead of the officials sitting across the counter? To increase its effectiveness, these boxes, like the CRY donation boxes at cash counters in shops, can indicate specific public causes to which the proceeds will be used.

Apart from realizing the citizens' "happiness dividend", such boxes may also stoke their altruistic and civic sensibilities to contribute something to a good cause, and thereby increase the net payouts. These donation amounts would depend on the relative happiness or relief (those with lower expectations of government services would be happiest) experienced by them. Further, as Econ 101 teaches us, under these circumstances, consumers end up paying closer to their actual marginal utilities.



In the graphic above, the P(govt) is the official user charge for the service. Assuming the citizen pays for his entire marginal utility from receiving the service, the difference of P(A) and P(govt) would be the donation made by person A, and that between P(B) and P(govt) the donation of B. The entire consumer surplus would therefore be captured by this intervention and channelled to some good public cause.

Interestingly, this solicitation of donations, without specifying an amount, is similar to the "pay what you like" model that the music group Radiohead pioneered with its album, In Rainbow. The group had bypassed record labels and made their new album available online (in October 2007) and let fans set the price for it. See also this post about textbooks.

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