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Corruption
Joel Waldfogel covers an interesting new study of corruption in the motor vehicle department in India. Some eight hundred Indians were randomly assigned to one of three groups: the first group got a cash bonus for getting a license, the second group was given driving lessons, the third group was a control.
If government worked well we would expect the second group to be the most likely to get a license in the shortest period of time. Instead, the first group bribed their way to a license. In addition to taking the shortest period of time, most of the first group never even had to take a test!
Waldfogel has more details. He misses, however, what I think is the most important finding of the study. The delay in the Indian DMV is "endogeneous," i.e. it's not due to torpor or constraint but instead is a result of corruption.
How can the Indian bureaucrats make the most of their control over licenses? First, make the line long. But that can increase the bribe-price only so much - especially given how cheap it is to hire someone in India to wait in line for you. The real value is in the license itself so the Indian examiners randomly fail many applicants, even those with good driving skills. Paying the bribe, therefore, is really the only route to a license. The net result is long lines and unsafe drivers.
Corruption like this is endemic throughout the world. Libertarians should take note, however, the problem in this case is not so much that there is too much government but that government is too weak.
Posted by Alex Tabarrok on June 25, 2006 at 07:02 AM in Economics | Permalink
Comments
It's also a cultural thing and libertarians in favor of open immigration should take note.
Posted by: Jody at Jun 25, 2006 8:20:24 AM
A micro equivalent of the macro "failed" state or "weak" state argument.
The problem is not the weakness of the state, but the existence of drivers'
licenses.
Getting rid of the license raj would force the bureaucrats to get real jobs.
The solution is to get rid of the government.
The more I read about libertarianism with a small l, the less I like it.
Posted by: Bill Stepp at Jun 25, 2006 9:17:13 AM
Being ignorant of many things libertarian, I wonder how doing away with driver licenses would work. Would I choose not to drive or take any kind of transportation so that I could avoid unsafe drivers? How would we try to gain some level of safety on the roads? (Granted that the current level of safety isn't that great, but if this is what you get when people have to take tests, I wonder what we'd see with no regulation.)
Posted by: Jim Bim at Jun 25, 2006 10:20:57 AM
Most bad drivers in America have licenses. Why didn't the licensing process make them good drivers? Does the licensing process really produce skilled drivers, or is it a driver's own self interest that pushes them toward becoming a skilled driver?
I think that if drivers licenses ceased to exist tomorrow, most new drivers would take it upon themselves (or their parents would take it upon themselves) to ensure that they acquired the necessary skills before venturing out on their own. Of course, some drivers would just start driving on their own at 15 and never look back. Some of those would become bad drivers, some would become good drivers.
But the net result would be just about the same as what we have today, only without the lines and the ever-increasing licensing fees.
Posted by: Chris Monnier at Jun 25, 2006 10:26:41 AM
We used to joke in college that the reason traffic was so bad in India was because people who were used to driving bullock carts were forced to use motorised transportation and could not get rid of their bullock cart driving skills. Its not license that makes good drivers. There are several problems in India, the main reason I believe is not enough roads, forget good roads. While cheap vehicle loans have made it easy for middle class families to own atleast one scooter, there aren't enough roads to accommodate this boom in vehicles. What is more, now individuals have the purchasing power to buy cars (which is good) and that is leading to more congestion on already heavily burdened roads. The solution is to build better and bigger roads and all the government needs to do is stop monopolising road projects. There are several real estate guys stuck in red tape waiting for clearance so that they can build roads.
As to the comment about culture, well if all of us Indians were culturally bad drivers how come we do not crash everytime we drive on American roads? :) If the culture comment was aimed at bribing, easing up regulations and letting markets work freely would take away the incentive to bribe. We are not fond of giving up our hard earned money as bribes. It is simply a transaction cost aimed at reducing time spent getting things done.
Posted by: triya at Jun 25, 2006 11:39:16 AM
"I think that if drivers licenses ceased to exist tomorrow, most new drivers would take it upon themselves (or their parents would take it upon themselves) to ensure that they acquired the necessary skills before venturing out on their own."
Most of the risk we (or at least I) worry about does not come from our own lack of skills, but the lack of skills of other people. You can be a great driver, but if the road is full of people who don't know how to drive, your skills will avail you little.
The licensing regime is imperfect, of course -- people cheat, the skills test is extremely basic, and the system is such that various licensing locations are known to be much more lax than others. And there are paper drivers, like myself, who have a license and a perfect record, but only because we barely drive at all. But I think the licensing process here does filter for really bad drivers somewhat -- however imperfectly -- and that the roads would be somewhat more dangerous otherwise.
I mean, the notion that new drivers would take it on themselves to learn how to drive looks like it conflicts with the Indian example here, no? They don't have to learn how to drive, just how to bribe, so when they're on the road, they drive badly. When Indians go to the US, of course, they take (mostly) skills-oriented exams, so they drive as well as anyone in the US, so cultural issues with bribery (or bullock-cart-driving) are irrelevant. Under the Indian system, drivers are selected without reference to skill => unsafe roads! Under the US system, drivers are selected with reference to skills => sort-of-safe roads! Why would we expect the latter result if licenses and skills-selection were done away with?
Posted by: Taeyoung at Jun 25, 2006 12:02:23 PM
"Libertarians should take note, however, the problem in this case is not so much that there is too much government but that government is too weak."
Could someone please explain this comment to me because, as I understand, it is economically incoherent. Government is able to influence (or currupt) because it is so powerful in India -- not because it is weak.
Inreasing the bureaucracy's size and authority will only add to the wait times and inefficiencies. For example, India closed its borders to the rest of the world because of its overzealous government. Do you think that a weak government could single-handedly stop trade for an entire country?
Love the blog but this comment has left a bitter taste in my mouth.
Posted by: Charles at Jun 25, 2006 12:04:02 PM
"unsafe roads!"
Or are Indian roads (indexed for congestion) roughly as safe as US roads?
Posted by: Taeyoung at Jun 25, 2006 12:04:26 PM
Excellent post. I'm from India. No, I did not have to pay any bribe but I went through a driving school and paid him money to teach me how to drive and presumably the bribe was included in the bill. I say this because I got my license driving a car that did not have a functioning reverse gear!!
Posted by: Jav at Jun 25, 2006 12:38:38 PM
But I think the licensing process here does filter for really bad drivers somewhat -- however imperfectly -- and that the roads would be somewhat more dangerous otherwise.
This is often argued, but is there any evidence for it? For example, did the states that adopted licensing programs later have higher automobile accident rates than those states which adopted them earlier? Do drivers "conserve risk" (1) and drive more recklessly to compensate for the perceived higher skill level of the general driving population (resulting in no net decrease in mortality)?
The proper libertarian solution is to auction off the roads and get the government out of the road-building business altogether. The owners of the roads could then set whatever driving requirements they deemed necesssary to maximize revenues. We would likely see stratification of the training requirements for different kinds of roads. Perhaps there would be no training required for most country farm roads, but "London cabbie" training required for Manhattan roads.
(1)
Posted by: Christopher Rasch at Jun 25, 2006 12:56:46 PM
Oops, forgot the reference:
(1) http://psyc.queensu.ca/target/index.html#contents
Posted by: Christopher Rasch at Jun 25, 2006 12:59:32 PM
> Most of the risk we (or at least I) worry about does not come from our own lack of skills, but the lack of skills of other people.
But is that worry a rational worry? You're not the only person wishing to preserve their own life.
When we use the internet, each one of us runs the risk of transmitting or acquiring a virus to other users of the internet. Fortunately, most (or at least enough) computer users want to protect themselves from viruses that they install anti-virus and anti-spam software.
Would anyone suggest requiring licenses to access the internet? Would this be a more effective system than what we currently have (i.e. "use at your own risk")?
Posted by: Chris Monnier at Jun 25, 2006 1:05:31 PM
"When we use the internet, each one of us runs the risk of transmitting or acquiring a virus to other users of the internet. Fortunately, most (or at least enough) computer users want to protect themselves from viruses that they install anti-virus and anti-spam software.
Would anyone suggest requiring licenses to access the internet? Would this be a more effective system than what we currently have (i.e. "use at your own risk")?"
My computer won't kill me though. And more importantly, other peoples' computers won't kill me through the internet either. So I don't feel licenses to be particularly needed in the computing context. I suppose my attitude might change if someone could accidentally kill me via the internet, or even just maim me accidentally, through negligence or sheer incompetence. But that's not the case.
Posted by: Taeyoung at Jun 25, 2006 1:14:00 PM
One writer (Jody) above observed "It's also a cultural thing and libertarians in favor of open immigration should take note". Indeed, there is evidence to support such a statement. Mexico ranks 66th in the world for corruption with a score of 3.5 (out of 10). The USA ranks 17th with a score of 7.6. With the exception of Chile (21st with a score of 7.3), no Latin American nation makes it into the top 50. The top 10 are Iceland, Finland, New Zealand, Denmark, Singapore, Sweden, Switzerland, Norway, Australia, and Austria. Chad comes in last. Victor Davis Hanson has written eloquently about the decent into corruption of the Latino controlled cities of California. Mexifornia: A State of Becoming should be required reading for anyone interested in immigration.
Posted by: Peter Schaeffer at Jun 25, 2006 1:19:44 PM
> My computer won't kill me though.
People die in crowds ("pedestrian traffic") from suffocation or being trampled on. Should we require licenses to attend concerts or political rallies?
Many people are injured or die while skiing and/or snowboarding, sometimes because of the negligent actions of other skiiers/snowboarders. Why not require licenses for these activities?
People get injured or die from the negligent actions of themselves and others while particpating in a variety of activities. Can you imagine if we required licenses for all such activities?
Posted by: Chris Monnier at Jun 25, 2006 2:01:20 PM
"People die in crowds ("pedestrian traffic") from suffocation or being trampled on. Should we require licenses to attend concerts or political rallies?"
That's why there are fire restrictions on occupancy levels for buildings, concert grounds, etc. It's not complete, but the existing regime covers most of the instances where trampling would be a hazard. Similarly, when there are large, large rallies, access is generally controlled by a police line (if not through licensing) -- not so much to restrict the number of people, but to prevent an outbreak of disorder which could lead to injury.
A further distinction, of course, is that a car makes it rather easy to kill someone accidentally, while killing someone accidentally with your own body is rather different. I'm not sure how you could even try to license attendance of concerts or political rallies either -- the issue is not at matter of individual negligence/incompetence in crowds, but the sheer number of people.
"Many people are injured or die while skiing and/or snowboarding, sometimes because of the negligent actions of other skiiers/snowboarders. Why not require licenses for these activities?"
The distinction between roads and snowboarding should be obvious -- we've decided to make road-access safe because on the whole, we have determined that we have an interest in maintaining low barriers to transportation. Economically as well as simply on liberty-grounds. We also have an interest in maintaining public safety in public spaces and quasi-public spaces -- e.g. with concerts, or with political rallies -- so we effect occupancy limits and "time, manner, place" restrictions to ensure that they proceed in a safe fashion.
None of these interests is implicated with snowboarding or skiing, so there is no reason to step in and mandate higher safety levels.
Posted by: Taeyoung at Jun 25, 2006 2:28:17 PM
Jim Bim: I don't think that doing away with driving licenses is a particularly "libertarian" solution. (Anarchist would be more like it.) Libertarianism has to do with reducing state regulation of private spaces, but roads, as currently consistitued, are manifestly public spaces.
Christopher Rasch transforms the problem into one libertarianism has something to say about by proposing to privatize roads. But another approach is just to accept that libertarianism has nothing to say on this issue, and try to find a ways to regulate the problem and/or change the bureaucrat's incentives.
Posted by: David Wright at Jun 25, 2006 3:18:57 PM
There must be some ideas for better aligning the bureaucrats' incentives with the stated rationale for their power. Anyone?
A second check of a random sample of drivers just after licensing, with bonuses/penalties for having made proper/improper decisions?
Competing DMV offices that get to set their own prices, but face strong penalties for their 'graduates' having a larger-than-average accident rate? (Assumes a record-keeping about accidents that may not exist or be practical.)
Others?
Posted by: Gordon Mohr at Jun 25, 2006 3:35:00 PM
> A further distinction, of course, is that a car makes it rather easy to kill someone accidentally...
Yes, but a car makes it just as easy to kill yourself accidentally. Hence the self-preservation argument. My whole point is that the risks one takes upon themself when driving are great enough to encourage drivers (or their parents) to become properly trained before driving on their own.
The fear of dying is a far better motivator than the fear of getting caught without a license.
Posted by: Chris Monnier at Jun 25, 2006 3:48:25 PM
Prof. AT,
So how can the govt. be stronger?
Should it make the punishment for engaging in bribery much more severe? (Saudi Arabia chops off hands for theft).
Should it pay the DMV folks more money so they are not tempted to bribe.
Should people with bad driving records/more accidents have their license revoked more often?
Should there be a reward (a la East Germany) to DMV employees who turn in their corrupt colleagues?
Is the problem cultural/religious?
Alternatively, is this condition common and normal for a country going through the puberty stage of development?
Posted by: Chairman Mao at Jun 25, 2006 3:52:18 PM
> If government worked well
Of course, as acknowledged later, the evidence points to failings of the Indian government, not of government in general.
> The fear of dying is a far better motivator than the fear of getting caught without a license.
If people were rational, and accurate judges of their own competence relative to others, then this would be the case. But we know teenagers tend to think they're immortal, we know people tend to overestimate their own competence, especially when they're incompetent; we know the elderly sometimes refuse to acknowledge decreases in their skills or eyesight. Licensing allows someone who is somewhat more objective to say "no, you in fact suck, go get more training" or "no, you've gone too blind" and make it stick. And then you've got all the ones who get drunk and drive -- so much for the fear of dying.
It is my understanding that Britain has rather stricter licensing than the US; since much of the US has been shaped to need a car to get around, our licensing tends more toward "not an obvious and immediate danger" vs. "really competent". I got licensed in San Francisco without being tested in freeway driving or parallel parking or parking-on-a-hill.
Posted by: Damien at Jun 25, 2006 4:05:17 PM
The fundamental purpose of instituting a drivers license in the US was to raise revenue, not to make the roads safe. Missouri had a license law in 1903 but had no driver examinations until 1952; most states initially had licenses you could obtain by mail just for paying the fee. That DMVs *eventually* started implementing tests was bureaucratic mission creep. I question the claim that having the DMV require written tests significantly increases safety. In the case of the Indian study, I'd like to see them do a followup and see whether the drivers who had to pass a test got in more accidents over the next few years than those who did not.
http://www.voluntaryist.com/articles/119a.php
Posted by: Glen Raphael at Jun 25, 2006 4:24:05 PM
> And then you've got all the ones who get drunk and drive...
Do these people have licenses?
> It is my understanding that Britain has rather stricter licensing than the US...
Are there not drunk drivers in Britain?
> ... we know the elderly sometimes refuse to acknowledge decreases in their skills or eyesight
Good point. But the drivers in the "elderly man drives through a crowd of people" stories have licenses.
The problem is a lack of personal responsibility (or more precisely, a lack of objectivity over their own skills). If anything, possessing a license allows a person to shrug off suspicisions of inadequate skill. "Hey, the state says I'm alright to drive...who I am to argue??"
The solution to making people better drivers (which is what the ultimate goal is) is to increase personal responsibility. Make people more aware of their own mortality and/or their own shortcomings.
Posted by: Chris Monnier at Jun 25, 2006 4:35:32 PM
The license mainly motivates people to drive well during the license test. The rest of the time, fear of (a) accidents and (b) being pulled over and fined and/or arrested motivates people to drive well. OK, there's also the fear of losing one's license. My intuition is that if the license factor were eliminated (a) and (b) would still motivate people quite well. No I can't prove it.
Moreover, in Massachusetts the license must be renewed every few years, and I imagine the same in any other state. But the renewal does not involve a driving test. What's the renewal for? Not, I think, to make sure only skilled drivers stay on the road, because (1) drivers are unlikely to lose their skill as they drive, and (2) the skill is not tested for renewal.
Posted by: Constant at Jun 25, 2006 5:40:58 PM
What's the renewal for?
They do test your eyesight. That's worth something.
Posted by: Bernard Yomtov at Jun 25, 2006 6:33:07 PM
