What Corruption Indices Really Measure

by singaporearmchaircritic

“Corruption is authority plus monopoly minus transparency.”

Contrary to what this pithy quote suggests, there is no simple formula for measuring corruption. Although most people have an intuitive understanding of what constitutes corruption, translating this abstract knowledge into concrete, measurable terms has been frustratingly hard for social scientists.

The reasons are obvious once you start thinking about the nature of corruption. Corruption is clandestine and hidden away from public view – those culpable of corrupt practice or privy to it have a stake to keep it secret. The dearth of first-hand observations and unbiased observers greatly compounds the difficulty of measurement. Nonetheless, there are still a number of indices that attempt to solve this problem.

But what exactly do these corruption indices measure?

The incidence of corruption, you may think. Well, no. Lacking hard indicators, many widely cited corruption indices actually measure the perception of corruption, using it as a proxy for the extent of corruption in a society.

The Corruption Perceptions Index of Transparency International (CPI) is one such example. A composite index or a “poll of polls”, the CPI aggregates a number of sources such as The Economist Intelligence Unit (EIU), The Political and Economic Risk Consultancy (PERC), and Freedom House (FH) and others to come up with a global ranking of countries based on their perceived levels of corruption.

Corruption Perception ≠ Corruption Experience

The assumption is that corruption perception reflects corruption experience. But this assumption is overturned upon careful scrutiny.

Experts suggest that corruption perception is precisely what corruption perception indices measure; they do not measure corruption experience. Donche and Ujhelyi argue that one’s experience of corruption does not necessarily correlate with how one perceives corruption. Instead, corruption perception is colored by a host of individual characteristics such as education and age.

More importantly, perception is affected by the openness of corruption instead of the actual incidence of corruption. This relates to the openness of the society in question as well as the nature of corrupt practices.

Imagine this: there are two societies A and B with almost the same incidence of corruption. However, A has a free press and freedom of information, an independent judiciary, and also an independent anti-corruption enforcement agency while B has none of these. Ceteris paribus, which society do you think will have a higher perceived level of corruption?

Corruption Comes in Many Guises

The form of corruption matters too. Forms of corruption differ in conspicuity, thus affecting perception. This brings us to another criticism of many corruption indices, i.e. a “bribery bias”.

To a large extent, corruption indices treat bribery as the predominant form of corruption. Many of CPI’s sources ask respondents about bribery, or payments made in their line of business to get something in return. A typical question asks how common bribes are in exchange for favors or advantages. That business people instead of ordinary folks are surveyed in some sources also contributes to this slant.

What about other forms of corruption such as nepotism, insider trading, and legislators or policy-makers tailoring laws and policy to profit themselves?

Not only do these forms of corruption deviate from the bribery paradigm, they are less conspicuous, detectable or recognizable and may be underestimated while they may be no less deleterious to society.

Whereas bribery is a quid pro quo (such as sex-for-contracts), there may be a time lapse between the quid and the quo in other corruption exchanges such that the two acts may not be associated with each other.

Furthermore, unlike small exchanges that take place more openly and frequently, larger transactions that occur at the top echelons of the political hierarchy are hidden from the public eye. In such political or grand corruption, the deals are only accessible to a privileged few at the pinnacle of the state structure. The interests at stake also stop business people in collusion from revealing their true perceptions.

What Now?

Having said all these, how useful are corruption indices?

Perception influences behavior, and for this corruption perception is important in policy-making and other decisions like business investment in a country.  But because perception may not square with experience, and appearance may not correlate with the underlying number of corrupt acts, there is a need to exercise caution when interpreting corruption indices.

The statement on CPI’s website clarifies what it is and is not:

the CPI is mostly an assessment of perception of administrative and political corruption. It is not a verdict on the levels of corruption of entire nations or societies or of their international policies and activities.

The reader, therefore, should not to jump to conclusions based on statistical indices alone. It does not mean that a country ranked tenth on an index is twice as corrupt as one that is ranked fifth. The difference in corruption levels between top one and two countries may not be equal to that between any other two consecutively ranked countries.

Other pitfalls include the circularity of information, in which index A is used to estimate index B and index B for index A, and “echo chamber,” in which repetition lends false authority to perceptions.

In short, perceptions of corruption must be complemented with more objective information.