Power, Corruption, and Lies

After reading yet another article calling for China to embrace democracy as an antidote to their corruption woes, I decided I should throw my own shallow drivel on the subject up on the web [1]. Would-be reformers often get tangled up in good intentions and what they feel should be, while ignoring the many constraints of human nature. Any solution to the problem of corruption must take into account the answers to two questions:

1. Why do people try to buy influence?
2. What is the return on investment?

Obviously, people try to gain influence in the hope of getting officials to do something for them, or not do something against them [2]. This presupposes that the recipient has the power to effect the desired change. If there is no power to force changes there’s no point paying any amount to gain influence.

Having decided money should be directed to an official, the next question is how much, which is a function of the return on investment (ROI). ROI depends on the power an official has to force change, as well as the competition faced in buying influence. Paying $1 million for influence today isn’t much help if someone else pays $2 million tomorrow. Like any other market, if the market for influence is sufficiently large and competitive, the ROI will be lower, and bribes will generally be smaller and less consequential. Great returns on investment require the combination of enormous governmental power, a significant concentration of wealth, and barriers to entry into the bidding war. Following the 2008 financial crisis this is the situation in nearly every major industrial country and, not coincidentally, corruption has become a more pressing issue around the world.

Anything that increases government power or ROI will promote corruption and the paying of larger bribes. So how do the most common solutions stack up?

  • Making bribes or lobbying illegal  – Power is increased to the extent the laws are enforced, and increased further if they are enforced arbitrarily. ROI is increased by removing some bidders from the market. Therefore, it will be as ineffective as making drugs, sex and gambling illegal.
  • Campaign finance reform – Power is increased by a new mass of regulation and enforcement (again, more so if arbitrary). ROI is higher due to enhancing insiders and incumbents ability to stay in office despite ignoring the interests of their constituents [3].
  • Tougher enforcement – Increases power, dramatically so combined with selective enforcement. Increases ROI by decreasing the number of competing buyers..It will tend to leave only the more powerful sellers of influence in place, favoring big money buyers.
  • Increased transparency – Increases power by creating a new body of regulations to enforce. Decreases overall ROI due to increased costs of staying out of the public eye and adding a layer of palms to grease with no direct monetary benefit. Of course, the downsides can also be bypassed by paying up at the legislative level to craft a more easily evaded law.
  • Democracy – No inherent impact on power or ROI – just count the pages in the Federal Register and look at the ROI on lobbying in the US. In every democracy people will eventually try to vote themselves rich, guaranteeing other people will try to buy their way out of paying for that wealth transfer.

Human nature guarantees there will always be a steady supply of officials willing to take bribes in one form or another, so the only real solution to official corruption is on the demand side. Power is the driver of all corruption, yet limiting the power of government is rarely considered as a solution. Instead the solutions generally involve a further expansion of power with more bureaucrats to carry it out, all of whom are potential purveyors of influence.Eliminating the power of government to do anything for or against anyone is the only thing that will eliminate the demand, so unfortunately, unless people are willing to be anarchists, corruption is here to stay.

There are many parallels with the war on drugs – making illegal voluntary exchanges between willing buyers and sellers – so collateral damage minimization through legalization is probably the most compelling alternative for corruption as well. Giving everyone access to the influence market would at least level the field somewhat – particularly with pooling of resources, and diminish power and the need to influence to a degree, as well as remove a host of unintended consequences.

Hey, I never claimed to have a popular solution.

_________________

[1] Most of the wealth accumulated by high officials in the Communist Party is the natural result of running a system designed to loot the rest of society and is more an agency issue than corruption per se. Political systems are designed so that the rulers get rich, regardless of what they call the system of government they run. Here I’m concerned with the corruption of others trying to influence government officials.

[2] Therefore major regulatory initiatives come out of the woodwork in advance of election campaigns, compelling campaign contributions aimed at altering the regulatory trajectory in favor of the contributor.

[3] Most implementations of campaign finance reform also provide a ready-made Nixonian enemies list of people who contributed to opposition parties.

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Reasoned Decision of The United States Anti-Doping Agency

Here is the condensed version (202 pages) of the Lance Armstrong decision. The full file is evidently over 1000 pages. Among the highlights, more than $1 million paid to Dr. Michele Ferrari. Plus, Six former Armstrong USPS teammates receive bans from USADA

The UCI response will be interesting. Beyond numerous examples of organizational incompetence, the report repeats the prior allegations of collusion and corruption by the UCI in keeping positive tests from coming to light. Deciding what to do is therefore an IQ test of sorts for the UCI, and a score of 100 would greatly exceed my expectations..

 

Pseudo Random News and Comment

Amazon’s knock-off book “problem”. Thanks for the publishing strategy! Much easier to write one of those books than a unique one.

China’s Bo backed, then blocked murder probe against his wife: sources Given what happened to Bo I have serious doubts these sources are anything but the official party line, leaked out to make it seem legitimate.

Rotting from within. Investigating the massive corruption in the Chinese military. Unfortunately for the Chinese people this is a systemic problem, not just military. Too bad US journalists don’t focus on the bigger stories like this in the US, rather than focusing on small time prostitution scandals.

Rise of the killer drones. I just got done watching Terminator 1-3 again and it was far more disturbing this time around.

Buffett has prostate cancer. He must have discovered it when he had his head up his ass talking about how he should pay more taxes but found his checkbook somehow absent.

BitTorrent Troll describes his business model. Political competition at its finest. Not too many Louis CKs in the world.

Long-term exposure to air pollution increases risk of hospitalization for lung, heart disease

Brain scans can predict weight gain and sexual activity: study

Brain cancer vaccine proves effective This has been a long time coming.

Parkinson’s protein causes disease spread in animal model Misfolded proteins are getting the finger pointed at them in more and more disease processes. I doubt doing origami helps prevent it.

Knee injuries in women linked to motion, nervous system differences

Babies flick ‘anti-risk switch’ in women but not men There goes my Take Baby to Work plan to prevent the next financial crisis.

Group finds facial expressions not as universal as thought Not as dramatic as the headline implies, merely cultural influence on expression.

Identifying the bad guy Eyewitness testimony is given a lot of weight but has never held up to scientific scrutiny. Memory is a useful but very flawed tool.

Researchers find further evidence of disturbed immune system in autism

Hong Kong’s next leader to ban mainland babies I guess the well-off will have to go elsewhere to have more kids now.

High SPF sunscreens assure protection from solar rays

Pseudo Random News and Comment

I’m glad Yves Smith of Naked Capitalism fame took the time to dismantle Roger Lowenstein’s deification of Ben Bernanke. Otherwise I would have had to take a shot at it.

TRB with a post on the “billion Bernie Madoffs” behind China’s economic statistics. Unfortunately for China the lack of trust isn’t confined to just government statistics. When most of the population pays almost no taxes and even the very richest still want to leave that’s not a good sign. Especially when combined with ugly demographic trends.

Succession problems in China’s political elite.

Cool chart at The Big Picture comparing the current Apple move to the 2007 Google euphoria. Hopefully it isn’t a good indicator of the economic future this time around:

Of mice and men. The Vikings and their house mice tracked by DNA.

A terribly unflattering dissection of Pinterest’s terms of service. They own everything you post for starters.

The dangers of reality distortion fields. Doesn’t help when the entire management/business book publishing biz is based on ignoring survivorship bias to tell you how to succeed either.

How to learn from mistakes. Focus more on the learning process than the immediate outcome.

Interesting, but long, piece on the function and history of debt.

I find this house strangely tolerable. I don’t find the individual elements that appealing but it works well together.

Orthostatic hypotension predicts heart failure. No mention of controlling for fitness levels.

Women find another reason to exercise. And I thought it was who they were meeting at the gym.

The internet age is killing off words. Damn spellcheckers. To counter this trend I offer the following: Breasticulate, the act of gesturing with ones breasts. “But honey, she was breasticulating at me!”