Abstract
Using the arguments of Ludwig von Mises and Friedrich August von Hayek, I argue that private ownership solves the economic problem of corruption. Since private ownership discourages entrepreneurs from rent-seeking, and privately owned media provide objective and unbiased information to citizens, any legal reform establishing and enforcement of private ownership also solves the corruption problem.
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Notes
This argument was developed by Otáhal (2007).
Tullock (1996) provides the explanation. He connects corruption with rent-seeking and uses the example of a congressman who favors an interest group in order to be reelected legally.
Becker (1983) explicitly argues that legal lobbying can result in efficient legal system. From this point of view legal lobbying cannot be considered as corruption of any kind. Nevertheless, this conclusion was questioned many times by scholars of Virginia public choice who consider even legal lobbying as a kind of corruption since it harms benefit of the third party, alternatively social welfare (i. e. Tullock 1996; Lambsdorf 2002).
Again, I use an example of bribery as a kind of corruption, which can take various forms. Bribery, in essence, is a particular exchange; therefore, the economic problem of corruption is rather problem of the system, where such corrupt exchange takes place, than of particular behavior or public policy.
Reinikka and Svensson (2004) provide micro evidence supporting this hypothesis.
De Soto concludes: “ILD research confirmed the role of law in determining the efficiency of economic activities it regulates. It is in this sense that we shall define ‘good laws’ and ‘bad laws’: a law is ‘good’ if it guarantees and promotes economic efficiency and ‘bad’ if it impedes or disrupts it” (De Soto 1989, p. 132).
The question of law enforcement and corruption is addressed by Hay and Shleifer (1998).
Clarke and Xu (2004), however, focus rather on petty corruption than grand corruption.
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Acknowledgments
This article is the result of research project supported by the Ministry of Education, Youth and Sports of the Czech Republic No. VZ 6214648904 “The Czech Economy in the Process of Integration and Globalization, and the Development of Agricultural Sector and the Sector of Services under the New Conditions of the Integrated European Market,” thematic area 01 “Macroeconomic and microeconomic performance of the Czech economy, and the Czech government’s econo-political measures in the context of the integrated European market.” The submission was highly inspired by Dr. Libor Dušek from CERGE-EI. I would like to thank the anonymous referees for their comments that help improve the manuscript, and also Katarína Lexová from NEWTON College for editing.
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Otáhal, T. Mises, Hayek and Corruption. J Bus Ethics 119, 399–404 (2014). https://doi.org/10.1007/s10551-013-1646-x
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DOI: https://doi.org/10.1007/s10551-013-1646-x