Tuesday archive : If the price is right

From 8th July, 2006.

If you want to be rich, you can try to set up a brilliantly successful company. Or you can steal money. Trans-parency International, the corruption watchdog, has estimated that Mohamed Suharto embezzled up to $35bn when he was Indonesia’s president, a figure that is in the same league as the entrepreneurial fortunes of Bill Gates and Warren Buffett. 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.

That is a glib enough explanation of wealth and poverty, but what causes corruption? Many economists believe that corruption is a response to perverse incentives. For example, in Indonesia it takes an average of 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…

Continued at timharford.com.

The Undercover Economist: a guide

Publishing schedule: Excerpts from "The Undercover Economist" and "Dear Economist", Tim's weekly columns for the FT Magazine, are published on this blog on Saturday mornings.
More about Tim: Tim also writes editorials for the FT, presents Radio 4's More or Less and is the author of "The Undercover Economist" and "The Logic of Life".
Comment: To comment, please register with FT.com, which you can do for free here. Please also read our comments policy here.
Contact: Tim's contact address is: economist@ft.com
Time: UK time is shown on posts.
Follow: A link to the blog's RSS feeds is at the top of the page.
Follow on Twitter
FT blogs: See the full range of the FT's blogs here.