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The Case of the Unpaid Parking TicketWhy some people cheat, and others don't.

By Tim HarfordPosted Saturday, July 8, 2006, at 7:10 AM ET

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If you want to be rich, you can try to build a brilliantly successful company. Or you can steal. The corruption watchdog Transparency International has estimated that Gen. Suharto embezzled up to $35 billion while president of Indonesia, a figure that is in the same league as the entrepreneurial fortunes of Bill Gates and Warren Buffett.

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On a humbler scale, we all face the same choice. We can try to earn money by doing something useful, or we can try to steal or extort it from other people. A society where most people are doing something useful has a good chance of being rich; a society full of corruption will be poor.

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Draw your own conclusions about corruption after reading Michael Crowley's digest of the oil-for-food scandal. Brendan Koerner explained how Suharto stole his $35 billion. Seth Stevenson offered a free course in Cheating 101. William Saletan chronicled the victories and agonies of traffic court.

That is a glib enough explanation of wealth and poverty, but it is surely just the start of the story. What causes corruption? Many economists believe that corruption is a response to perverse incentives. For example, in Indonesia it takes 151 days to legally establish a small business, according to the World Bank's "Doing Business" database. This is a large incentive to pay bribes or keep a business unregistered. It is not surprising that there is a strong correlation between red tape and corruption. In general, the harder it is to make money legally, the more tempting it will be to do so illegally; and if people are not punished for stealing, then they will be more likely to steal.

The view that incentives are paramount suggests that if you take a person from a poor, corrupt economy and move him to a richer, less corrupt economy, he will live up to the new system that surrounds him. William Lewis of the McKinsey Global Institute has pointed out that illiterate Mexican workers on building sites in Houston are as productive as any construction worker in the world. The Mexicans are perfectly capable of living up to the potential of the American system.

That is a mainstream economist's view. An alternative view, popular among the common-sense crowd, is that corruption is a problem in Indonesia because Indonesians are crooks by nature. Poor countries are poor not because of their economic system, but because they are full of people who are lazy or stupid or dishonest.

I disagree out of faith, rather than because the evidence is compelling. But then, what evidence could there be? You would need to take people from every culture on earth, put them somewhere where they could ignore the law with impunity, and see who cheated and who was honest. That sounds like a tall order for any research strategy, but economists Ray Fisman and Edward Miguel have realized that diplomats in New York City were, in fact, the perfect guinea pigs. Diplomatic immunity meant that parking tickets issued to diplomats could not be enforced, and so parking legally was essentially a matter of personal ethics.

Fisman and Miguel discovered support for the common-sense view. Countries with corrupt systems, as measured by Transparency International, also sent diplomats who parked illegally. From 1997-2005, the famously incorruptible Scandinavians committed only 12 unpaid parking violations, and most of them were by a single criminal mastermind from Finland. But over the same period of time, Chad and Bangladesh, regularly at the top of the corruption tables, managed to produce more than 2,500 violations between them. Perhaps poor countries are poor because they are full of corrupt people, after all.

It's a very clever piece of work, but I will not be abandoning my faith in economic incentives just yet. In 2002 the Clinton-Schumer Amendment gave New York City much greater power to punish diplomatic parking violations: Cars were towed, permits suspended, and fines collected from the relevant foreign-aid budget. Unpaid violations immediately fell 90 percent. When it comes to parking violations, personal morality matters, but incentives matter more.

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Tim Harford is a Financial Times columnist. His latest book, The Logic of Life, will be published in paperback on Feb. 10.

Photograph of parking meter on the Slate home page by Keith Brofsky.

COMMENTS

Remarks from the Fray:

In a country with a corrupt system of government, the best way to get ahead and therefore become part of that country's diplomatic mission to the UN is to be a crook. On the other hand, in a system with an honest system of government, crooks are likely to find themselves in jail or at least unable to get any job with any sort of status.

Therefore, if you want to see what the average moral character of a person from a country, you should pick people at random from that country, not just people who are relatively successful, especially people who are relatively successful as government employees, positions that are notoriously given out as favors by corrupt governments.

--Crackmonkeyjr

(To reply, click here.)

What the study demonstrates is that habits of morality and being raised in an environment of ethics really creates a more ethical, moral person. High expectations, good standards/examples, and probably a memory of punishments past (or possibly an informal system of punishment still in existance) can be very effective.

So can simple enforcement of laws, impartial, swift and sure. You can break future criminals when they are young and surround them with people who have good expectations, and they won't commit crimes. Or you can establish a solid system of justice. Or both. Either way, you will end up with a good society.

--BenK

(To reply, click here.)

I think the Clinton-Schumer amendment proves that social controls are the key to moral behavior. Those pious Scandanavians are from a very socially structured culture. Chad and Bangladesh are both quite unstructured. Further, the NYC diplomatic culture was, until recently, quite unstrcutured. Social controls come along and, Blammo!, suddenly everyone is a good citizen.

--bakum

(To reply, click here.)

The conclusion of this study is ridiculous. It would be like looking at the genders of diplomats from various governments, noting the patriarchies, then concluding that they came from societies made up entirely of men.

--Mubic_P

(To reply, click here.)

Some of the most honest and pious people I know have no qualms about taking a few extra sugar packets home with them when they go out to eat, a man I worked with routinely yanked out an extra 50 or 60 feet of twine for home use each time he tied something to his truck at Home Depot, and another person I met got caught turning in rolls of quarters at the bank, each one containg $9.75. And nearly everybody who drives, including the police, exceeds the speed limit at least ten times a day.

Every one of these people, if pressed, would admit that their behaviour is dishonest. They may rationalize at first, but if pressed they would admit it, but they wouldn't change.

This is not a question of inherent dishonesty; each of these people has the same code of ethics deep down, with each drawing the line at a different point. The line is not drawn due to incentives, but due to fear. The fear of being caught, weighed against the certainty of being caught, far outweighs the moral imperative to do the right thing, no matter where we come from. This would explain why the so-called incorrigible criminals don't commit crimes in front of policemen.

I'll even bet that given time even those honest Scandanavians would start to cheat.

--Ozymandias1

(To reply, click here.)

I wonder if the study took into account any of the other key parameters of diplomatic parking. I can recall reading a State Department report on the issue, and it made several points:

#1. Lack of Parking. Why did diplomats park illegally? Most of the tickets, apparently, were for illegal parking at/near their own embassies/consulates. Those who parked illegally the most were also those with the worst parking situation. Rich/Western nations tended to have larger embassies with much better/more parking arrangements. Poor nations, often simply renting office space, did not have a plethora of parking. [...]

--fozzy

(To reply, click here.)

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