You run an auto repair shop. I come to your garage and ask you to fix my car. Meanwhile, you cut the pay of your mechanics by 10% and have them work in a garage that has poor lighting and tools in disrepair. Rather than quitting and looking for work elsewhere, they come to my home and shove me up against my car, demanding that I tell you to pay them more or I should take my business to a different garage. I call the police to have the mechanics arrested for assault.

The mechanics call a local TV station, stand before a camera and say "We're drawing attention to this to tell these car owners like this gentleman that they need to intercede with the auto repair shops and tell them to settle this before it gets to a strike."

Do they appear on TV?

Why yes, yes they do.

No arrests were reported.

Labels: corruption, unions

I've enjoyed the discussion between Alex Tabarrok and Tyler Cowen on beautiful women. Tyler writes that one should apply location theory:

Pick then a city of your choice in a country of your choice. Ask where, in that city, can the beautiful women be found. Will you find them in the most globalized parts of the chosen city? Probably so. Will the least globalized parts of the city have less attractive women or perhaps even the least attractive women?

I also believe, in accord with my previous hypothesis, that you'll find the most beautiful women in the parts of the city where different income classes mix and there is lots of inequality among passersby. That's in a museum, or in the Village, not in a Tiffany store or even in most of the upper East Side.

This competition is everywhere. When I lived in Ukraine in the mid-90s, there was an area which contained most of the bars that Westerners, particularly men, would hang out. This place had most of the attractive women. Some, of course, um, provided fee-based services. But the more common female was one searching for a mate. They were quite aggressive, much like the Lebanese story Tyler tells from a couple years ago. Many Western males ended up ensnared in trysts that lead to demands that they dump their wives back home and bring these Olgas and Natashas back with them. The success rate of these women with married men was surprising and depressing.

In his interview with Russ Roberts, Christopher Hitchens noted that Orwell once observed that the most attractive, or most intelligent, or most athletic Indian male could not enter the British club in Burma, but the most attractive woman could get in by marrying a British officer. If location theory is right, there should be some excellent colonial stories that fit.

Labels: corruption, economics, Ukraine

We show that capitalism is not common around the world. Outside the US and a small group of rich countries, regulations, leftist rhetoric and interventionist beliefs flourish. We argue that the lack of capitalism is connected to the presence of corruption. For example, we find that within a country, people who perceive more corruption are more likely to favour regulations, government ownership of business and to self-place on the left of the ideological spectrum. As the level of regulation is held constant within a country, this finding is inconsistent with a theory that assumes the only channel connecting these two variables is one where regulation causes corruption. We present a model where corruption reduces the demand for capitalism. This occurs because corrupt capitalists are disliked and voting for left wing policies is a form of punishment that is available to voters (even when the judicial system is weak). Evidence on emotions supports this explanation: the frequency with which people report experiencing anger is positively correlated with the perceived amount of corruption, but this correlation is significantly weakened when business is heavily regulated.

From a new paper being presented at the spring Brookings Papers on Economic Activity conference. It's a challenging read. Many successor countries in the former Soviet Union went through an early period of 'market romanticism' in which Russia, for one, ran fast towards freer markets and paid little attention to the graft going on behind it. The result was a lost election and a stop to reforms in the country, from which it seems never to recover. (See Michael McFaul, for instance.) To imagine that there is a "demand for capitalism" and think about what shifts the demand curve (and to wonder what's on the vertical axis?) is intriguing. This paper goes in the summer reading pile for further thought.

Labels: corruption, economics, regulation

I am still waiting for my own copy of my book. (Bryan says he got his today, so he verifies the book's existence.) One of the things a reader would learn from it is how to measure corruption. You shouldn't do it this way:

Its largest city is legendary for machine-style politics and its elected leaders have been under investigation for years, but by one measure, Illinois is not even close to the nation's most-corrupt state.

North Dakota, it turns out, may hold that distinction instead.

They have a map for this, too! It calculates the ratio of corruption convictions to population. Which is a crazy way to do this: You can lower your corruption index by not prosecuting crooks. That's not what they do in NoDak, they say:

Don Morrison, executive director of the non-partisan North Dakota Center for the Public Good, said it may be that North Dakotans are better at rooting out corruption when it occurs.

"Being a sparsely populated state, people know each other," he said. "We know our elected officials and so certainly to do what the governor of Illinois did is much more difficult here."

Morrison said the state has encouraged bad government practices in some cases by weakening disclosure laws. North Dakota does not require legislative or statewide candidates to disclose their campaign expenses.

The analysis does not include corruption cases handled by state law enforcement and it considers only convictions. Corruption may run more rampant in some states but go undetected.

There are international measures, most commonly used being the Transparency International rankings of bribe payers and corruption perceptions. The large issue found in the paper in our book, by Omer Gokcekus and Justin Myrie, studies the relationship between officials' pay and their level of corruption. Micro-level studies seemed to be more persuasive. I would argue that corruption is higher in places where the top pay of the private sector is greatest, which is not inconsiderable in Chicago. What do you suppose it takes to be in the top 1% of the income distribution in North Dakota?

Labels: corruption, economics, lileks, Mitch Berg, North Dakota