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Corruption and Market Reform in China

Abstract

Everyone knows that officials in China are corrupt. It would be difficult to find a China scholar who would disagree outright with this statement. However, because official corruption is illegal, immoral or both, it is painstakingly concealed from the public and from researchers alike. So, what do we do about it if we can’t even measure it? Many authors have answered this challenge by using descriptive methods that discuss political corruption as a broad phenomenon that has commonalties of both cause and effect across many different situations. These works often focus more on the effects and potential future effects of corruption than on explanations and possibly helpful responses to its existence. In this paper, I propose that a solution to the problem of studying political corruption in China can be found in the analytic approach of game theory. I model particularistic gift-giving from citizens to officials for necessary goods as a product (equilibrium outcome) of choices made by different players attempting to maximize their individual payoffs in the context of certain clearly understood and common priors (a specific institutional framework and incentive structure). Using this method, we can then proceed to a discussion of how part of a “stably corrupt system” such as China’s might be altered or broken by exploring how changes in the system and the incentive structure might shift players’ choices and thus the equilibrium outcome. In this way, I hope to replace interesting but vague and finally unhelpful descriptions of modernization, democracy and marketization as ‘natural’ and long-term cures for corruption with a more concrete discussion of specific policy options and institutional and political structural changes that can begin to address corruption and its related problems in the short to medium term (though may not promise to eliminate it). Thus, using game theory, not only can we hope to explain the macro phenomenon of corruption as an aggregation of individual choices , but we will also discover that it takes extreme environmental changes to crack corruption as the modus operandi of Chinese citizen/official interactions.

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