Sofia cannot go anywhere else

• She cannot ask a different officer.
• She cannot bring the goods in somewhere else.
• She cannot wait: her customers will not.
• He controls something she badly needs.

Why the officer has power

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flowchart LR
  A["Sofia needs her<br/>shipment released"] --> B["Only this officer<br/>can release it"]
  B --> C["She cannot go<br/>anywhere else"]
  C --> D["The officer<br/>has power"]
  classDef base fill:#eef1f4,stroke:#334155,stroke-width:2px,color:#1e293b;
  classDef prize fill:#f0e6d6,stroke:#b7943a,stroke-width:3px,color:#1e293b;
  class A,B,C base;
  class D prize;

Where does the bribe come from?

• She will happily pay €20 to avoid losing €500.
• That €500 is what the officer is really selling.

Two words for what we just saw

• Rules create doors: permits, licences, inspections.
• Many of those rules are necessary.
• Every one of them still creates a door.

So what?

• We now know why the officer can ask.
• That is an opportunity, not yet a bribe.
• Somebody still has to say yes.
• So why does Sofia pay, and why does he risk it?

Sofia’s choice

If she refuses

• The shipment waits a week.
• Her customers buy from someone else.
• She loses about €500.

Sofia and the officer, side by side

• Sofia’s best outcome is the bottom row: nobody asks.
• But once he has asked, paying beats refusing.
• They land top-left — the cell neither of them wanted.

Three reasons firms pay

• “Pay €20 and I will stamp it today.”
• “Pay me and I will make sure you win the contract.”
• “Pay me and I will forget the tax you owe.”

The boss cannot see everything

• A minister cannot inspect every shipment herself.
• So she hires officers to do it for her.
• The officer is at the border. She is not.
• He knows what happened. She reads a summary.

Boss, official, firm

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flowchart LR
  P["THE BOSS<br/>the minister<br/>(principal)"]
  A["THE OFFICIAL<br/>the customs officer<br/>(agent)"]
  C["THE FIRM<br/>Sofia<br/>(client)"]
  P -->|"gives the job"| A
  A -->|"serves"| C
  C -.->|"bribe"| A
  A -.->|"reports"| P
  classDef principal fill:#e3ece9,stroke:#4a7c6f,stroke-width:3px,color:#1e293b;
  classDef agent fill:#f0e6d6,stroke:#b7943a,stroke-width:3px,color:#1e293b;
  classDef client fill:#eef1f4,stroke:#334155,stroke-width:2px,color:#1e293b;
  class P principal;
  class A agent;
  class C client;

What he gains, what he might lose

What the officer gains

• The bribe: €20.

When is the bribe too risky?

Figure 1: Catching him more often, not fining him harder, changes his mind.

So what?

• Sofia pays because refusing costs her more.
• The officer asks because the risk looks small.
• Neither of them is unusually wicked.
• Change those numbers and the behaviour changes.

Three warning signs

• No alternative. Can the citizen go somewhere else?
• Unclear rules. Can the official decide almost anything?
• Nobody checks. Will anyone find out, and act?

A way to remember them

more monopoly + more discretion − less accountability = more corruption risk

• Robert Klitgaard writes this as C = M + D − A.
• It is not real mathematics. It is a memory device.
• The terms have no units; you cannot add them up.
• It tells you where to look, not how much there is.

The three signs at the border

Exercise 1 · Find the warning signs

5 minutes · one report-back per place

Is letting officials choose always bad?

• Warning sign 2 says officials should not decide freely.
• But someone must judge which builder can do the job.
• Four economists tested this on Italian public contracts.
• They studied more than 200,000 of them.

Choice becomes dangerous without competition

Figure 2: Letting officials choose is safe, until they also shut bidders out.

Checking everyone is expensive

• Auditors, inspectors, cameras and courts all cost money.
• Chasing the last small bribe costs more than it saves.
• Klitgaard’s blunt version: the best amount is not zero.
• So aim the effort where the harm is greatest.

So what?

• Three warning signs let you inspect any office.
• Letting officials choose is not the danger by itself.
• Choice with no competition is the danger.
• Now: what if Sofia faces more than one officer?

Bribery when the state still gets paid

• Sofia is €20 worse off than if the rules were followed.
• She has a reason to complain.

Bribery when the state gets nothing

• Sofia pays €60 instead of €100. She is better off.
• Now nobody in the room wants to complain.

Where the money goes

Figure 3: When the fee is skipped, the loser is the treasury — and it is absent.

Why almost nobody reports it

• When the fee is skipped, Sofia saves money too.
• An honest importer who pays €100 is undercut.
• To survive, she must find her own friendly officer.
• Both sides now want the same thing: silence.

Sixty tolls on the Rhine

Three ways to arrange the gates

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flowchart LR
  A1["CHOOSE-ONE<br/>two offices,<br/>either can approve"] --> A2["Bribe near zero<br/>Most trade happens"]
  B1["ONE OFFICE<br/>one office approves<br/>everything at once"] --> B2["One medium bribe<br/>Some trade happens"]
  C1["MANY GATES<br/>five offices,<br/>each can stop her"] --> C2["Bribe after bribe<br/>Least trade happens"]
  classDef good fill:#e3ece9,stroke:#4a7c6f,stroke-width:3px,color:#1e293b;
  classDef mid fill:#f0e6d6,stroke:#b7943a,stroke-width:3px,color:#1e293b;
  classDef bad fill:#f4e0da,stroke:#b44527,stroke-width:3px,color:#1e293b;
  class A1,A2 good;
  class B1,B2 mid;
  class C1,C2 bad;

Many gates cost the most

Figure 4: Splitting one bribe between five offices raises it and kills the trade.

Exercise 2 · Which is worst?

5 minutes · be ready to defend your ranking

So what?

• Splitting corruption between many hands makes it worse.
• The many offices even collect less in total.
• Giving citizens a second office drives bribes down.
• Elections and a free press work the same way.

Four questions to ask about any office

1. What valuable thing does the official control?
2. Can the citizen go somewhere else?
3. Who can find out, and who can punish?
4. How many officials can block the same transaction?

References