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Corruption, Rule of Law, and Economic Efficiency: Virginia vs. Chicago Public Choice Theories

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  • Ladislava Grochova

    ()
    (Department of Economics, Faculty of Business and Economics, Mendel University in Brno)

  • Tomas Otahal

    ()
    (Department of Economics, Faculty of Business and Economics, Mendel University in Brno)

Abstract

Can corruption improve economic efficiency? Classical political economists argue that corruption undermines the rule of law (Smith 2001, chap 5). The modern Public Choice proponents argue that corruption and lobbying might influence the efficiency of the rule of law. While Chicago Public Choice scholars model how legal lobbying, which is corruption in Virginia Public Choice perspective, improves efficiency of the rule of law and thus the overall economic efficiency, the Virginia Public Choice models explain how corruption reduces efficiency of the rule of law and thus the overall economic efficiency. In this short paper, we present a brief survey distinguishing between arguments of the Chicago Public Choice and Virginia Public Choice schools on how corruption influences economic efficiency. We argue that the Virginia Public Choice explanation is more realistic because it includes the influence of bureaucratic rent-seeking.

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Bibliographic Info

Paper provided by Mendel University in Brno, Faculty of Business and Economics in its series MENDELU Working Papers in Business and Economics with number 2012-24.

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Length: 23
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:men:wpaper:24_2012

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Keywords: Bureaucracy; corruption; economic efficiency; Chicago Public Choice; Virginia Public Choice; rent-seeking; rule of law;

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