Corruption roots by EU Research

Getting to the root of corruption Many corrupt acts are built on cooperation between partners, who have a shared interest in bending or even breaking the rules. Researchers are using an approach built on behavioural ethics to probe the roots of corruption, which could help inform the development of policy that encourages ethical behaviour, as Dr Shaul Shalvi explains The ability of humans to work together and cooperate in shared endeavours is central to material and scientific progress, leading to important discoveries and new products that enrich our lives. However, there are also situations in which cooperation between different parties helps to embed corrupt relationships and abuses of power. “If we think about corruption in general, there are situations in which teams of people work together in order to succeed in unethical endeavours,” points out Dr Shaul Shalvi. Based at the University of Amsterdam, Dr Shalvi is the Principal Investigator of a project investigating the basis of corrupt collaborations. “Corruption is defined as the abuse of power for personal gain. So there may be situations in which a single public official uses their power for personal financial gain, without engaging others,” he says. “But, arguably more often than not, these actions are done by groups of individuals.”

Corrupt behaviour A company might bribe a public official to approve a development application for example, an act in which both sides have engaged in corrupt behaviour. Researchers now aim to probe deeper into the roots of these corrupt collaborations, building on recent investigations in a field called behavioural ethics. “This is the scientific approach to studying ethical questions. For years ethics has been taught in business schools from a normative perspective. So you would go to a class on behavioural ethics, learn which acts are wrong and which are acceptable, and follow a normative philosophy, based on work by leading philosophers throughout history,” explains Dr Shalvi. “Over the past 10-15 years, researchers in behavioural ethics have started to look at questions like, when do people violate rules? So, it’s less about defining what’s right and wrong, but rather acknowledging that there are rules and asking; ‘when do people decide to violate them?’” This research involves looking at different settings and investigating which are more or less likely to push people to violate the rules. It may be that an individual comes into a setting in which they perceive other people as violating the rules for example.

“There are organisations in which corrupt norms emerge. A new employee joining that organisation would be exposed to corrupt norms, and therefore would be likely to start adapting,” says Dr Shalvi. One of the projects Dr Shalvi and his colleagues are working on at the moment looks at the question of what happens when people move between different groups. “Think about job rotation – people work in one position, then every few years they move to another group, or unit, for a certain amount of time, and perhaps go back. So we were wondering – what happens when one person moves to another group and is exposed to corrupt norms?” outlines Margarita Leib, a PhD student on the project who contributed to this work.

rules of the game, the participants have a shared financial interest in reporting the same high outcome, even if that wasn’t what they actually observed. “If they want to maximise financial profit, they should both report 6. We call these individuals brazen liars – they are there to make money and don’t care about the rules of the game,” says Dr Nils Köbis, another postdoctoral fellow from the team. There is also a further, ethical dimension to the experiment. “Before the experiment, we tell the participants that we are going to make a donation of 2,000 Euros to an organisation that reduces carbon footprint. Every time a person in an experiment earns money – based on an incorrect report – we subtract the amount earned by the participants from the total overall donation to the charity,” continues Dr Köbis.

Over the past 10-15 years, researchers in behavioural ethics have started to look at questions like, when do people violate rules? The individual concerned may adapt to the situation in which they’re working and become corrupt themselves, or alternatively they might decide to reject those values. Researchers are running experiments in the laboratory to investigate how people respond in this type of situation. “The game that we often used in this project involves two players – the first and second mover. The first mover rolls a die on a computer screen and is asked to report the outcome of the roll into the computer. A second mover observes the report of the first, and also rolls a die on the computer screen and reports the outcome – if both report the same outcome, they win that amount,” explains Dr Ivan Soraperra, a post-doctoral fellow working on the project. The researchers know what the participants actually observed, but individuals themselves see the report of the other player. “After they’ve played the game once, the first and second mover learn about each others’ reports and their shared payoffs. Then they do the task again,” says Dr Soraperra. This gives researchers the opportunity to observe how the relationship between the participants develops and the extent to which they adapt to each others behaviour. Under the

This may deter some instinctively honest individuals from engaging in corrupt behaviour, while others may carry on regardless, motivated purely by self-interest. Researchers have adapted this experiment in different ways, with the wider goal of investigating what happens when participants in the experiment are given the opportunity to switch partners, to someone who maybe has a similar outlook to themselves. “After every three rounds we ask participants whether they want to stay with their current partner or switch and work with another,” outlines Dr Shalvi. Researchers expect the liars, the dishonest individuals who are there purely to make money, to respond in a fairly predictable way. “We expect that when a liar is linked with an honest person, they will be upset. Therefore they will switch until they find a partner in crime that will maximise profits with them, even at the expense of the charity,” says Ms. Leib. The response of the honest individuals is more difficult to predict. Some may feel uncomfortable about securing profit based on the corrupt acts of other people and so seek a different partner, others might decide they are responsible only for their own behaviour

EU Research

and not that of their partner, while a third possibility is what Ms. Leib describes as ‘ethical free-riding’. “There are honest individuals who always report the outcome that they observe on the computer screen. However, if they are paired with a dishonest partner, they stay rather than switch – so they secure profit based on the acts of the corrupt partner, while remaining honest themselves,” she explains. This behaviour in itself perpetuates corruption however. “Anti-corruption strategies are commonly about encouraging whistle-blowing, about not tolerating actions that violate rules, laws and organisational norms,” points out Dr Shalvi. “However, sometimes people stay silent and believe it isn’t their business.”

Volkswagen scandal A good example is the recent scandal around Volkswagen’s efforts to get around vehicle emissions tests. While not all the details are known, it seems probable that knowledge of these methods was not limited solely to a small group of engineers. “It’s likely that some people at least understood that things were too good to be true, but they didn’t stand up and say that,” says Dr Shalvi. Combatting corruption is a major concern for policy-makers

across the world, so the project’s research holds wider relevance in terms of incentivising ethical behaviour; Dr Shalvi points to the example of recent research in Colombia. “We ran an experiment in Bogota, where there are issues with corruption in education, where teachers are bribed to give higher grades,” he explains. “One of the main insights we gained was around the fair wage hypothesis – that if teachers were paid better, they would not have an incentive to ask for bribes.” This might seem logical, yet increasing a teacher’s salary is not enough in itself to eradicate corruption, as the financial incentive to accept a bribe remains. A greater degree of competition between schools can help to encourage ethical behaviour, believes Dr Shalvi. “In our experiment, teachers earn a fixed salary, but on top of that they may earn more money if more students choose to study in their school. Since a bribe-free school produces a better quality diploma, students have an incentive to attend such schools. Allowing for competition between schools by paying teachers based on the number of students they have might establish a market for honesty - a market for schools that provide a bribe-free environment,” he says.

Corruption Roots At the roots of corruption: a behavioral ethics approach

Project Objectives

Cooperation is essential for completing tasks that an individual cannot accomplish alone, and deciphering the roots of human cooperation has been one of the major interdisciplinary scientific challenges of recent decades. However, much is still to be done, especially with respect to understanding the building blocks of the potential darker side of human cooperation – specifically, the tendency to join forces by bending ethical rules to achieve personal success at society’s expense. Such joint self-serving acts of dishonesty are at the roots of corruption and are the core of the current investigation. The societal impact of corruption – defined as the abuse of power for personal gain – was recently assessed in a European Commission anti-corruption report (EU report, 2014), which suggests that corruption costs the European economy more than 120 billion Euros annually. Home Affairs Commissionar Cecillia Malmstroem, who presented the report, claimed that the extent of European corruption is ‘breathtaking’, as the annual cost of corruption within the EU equals the bloc’s annual budget (BBC News, 2014). Gaining a basic scientific understanding of the (psychological) roots of corrupt behavior and the settings likely to remedy it, is the goal of this proposal.

Project Funding

Funded under H2020-EU.1.1. - EXCELLENT SCIENCE - European Research Council (ERC) Starting Grant

Contact Details

Shaul Shalvi, PhD Faculty of Economics and Business Section Microeconomics Roetersstraat 11 1018 WB Amsterdam The Netherlands T: +31 205 254 293 E: S.Shalvi@uva.nl W: http://www.uva.nl/profiel/s/h/s.shalvi/s. shalvi.html W: https://sites.google.com/site/morallabshalvi/

Fig. 1. (A) Simulation of reported outcomes assuming honest reports. Each dot represents the reports of player A and player B in a single trial. The simulation assumes that each number (1 to 6) is reported with a probability of 1/6 in any given trial. The position of dots is jittered to allow visibility of identical outcomes. (B) The observed distribution of reported outcomes in aligned outcomes. Each dot represents the reports of player A and player B in a single trial. The position of dots is jittered to allow visibility of identical outcomes. High values on the diagonal—especially pairs of 6’s—which yield the highest payoffs, are overrepresented.

Weisel, O., & Shalvi, S. (2015). The collaborative roots of corruption. Proceedings of the National Academy of Sciences, 112(34), 10651-10656.

Professor Shaul Shalvi

Shaul Shalvi is an Associate Professor at CREED, the Centre for Research in Experimental Economics and political Decision-making at the University of Amsterdam. His main research interests are in experimental economics, moral psychology, cooperation and in particular behavioural ethics. Fig. 2. Four prototypical dyads. The horizontal axis represents the 20 trials; the vertical axis represents the die roll outcomes; an “O” represents player A’s report; and an “X” represents player B’s report. (A) A brazen dyad, reporting a “double 6” 20 times; (B) player A is brazen, player B appears honest; (C) player A appears honest, player B is brazen; (D) corrupt signaling. After mutual reports of 4 in the first five trials, A reported a 4 once more, but B replied with a 6, arguably to suggest to A that switching to higher numbers would be more profitable.