The March 13, 2013 Lab seminar was presented by Oguzhan Dincer, Associate Professor of Economics at the Illinois State University, and Edmond J. Safra Center for Ethics Lab Fellow. Professor Dincer's research focuses on how cultural factors such as ethnic and religious diversity affect economic growth and inequality through channels such as corruption and trust and or social capital. His work has appeared in journals including Economics of Governance, Economics Letters, and Public Choice. During his fellowship, he will construct new measures of legal and illegal corruption across US states. For the Lab seminar, he gave a presentation focusing on how special interest groups (SIGs), lobbying, and corruption affect economic growth.
Professor Dincer opened the seminar by discussing the ways in which SIGs limit entry into markets and reduce the rate of growth when they use their power to block innovation. Among the examples he touched upon was President George W. Bush's decision to impose tariffs of up to 30% on a range of imported steel products, and the government's subsidization of ethanol in corn-growing states such as Iowa. Professor Dincer also argued that when SIGs become more powerful and distributional issues accordingly more significant, political life tends to become more polarized. As an example, he cited the recent political crisis in Wisconsin stemming from Republican Governor Scott Walker's efforts to eliminate the collective bargaining rights of most public employees supported by the US Chamber of Commerce as well as several local chambers. Following the labor unions' efforts to block the legislation, a political crisis ensued where Democratic legislators left the state to avoid a quorum on the controversial legislation. As a result, almost nothing passed in the Wisconsin legislature for a year and the state suffered huge job losses.
At this point in the seminar, Professor Dincer offered some potential positive economic effects of corruption. He argued that in some cases, corruption raises the growth rate by allowing individuals to pay bribes in order to avoid "bad rules" causing inefficiencies. In light of this information, he also contended that lobbying has positive economic effects. For example, lobbyists inform legislators and their staffs on complex issues. Further, lobbying also allows intense minorities; groups vitally affected by a policy, to prevail over majorities to whom policy matters little. Following Professor Dincer's comments on the potential positive effects of corruption and lobbying, a number of Lab participants were eager to voice their opinions. One participant of the Lab pointed to Joseph S. Berliner's study of managerial behavior in the U.S.S.R. during the1950s explaining the dubious ways in which corruption can in fact raise growth rates, but also have negative implications causing distortions in the quality of growth.
As the presentation continued, a number of Lab participants expressed the need for Professor Dincer to differentiate between illegal forms of corruption versus legal forms of corruption. One participant used short-termism as an example of a legal way in which corruption affects growth, while other participants pointed to research being conducted at the Center on the legal corruption of medical knowledge and its effects on medicine. These legal examples of corruption were then juxtaposed with illegal forms of corruption, such as bribery or corporate fraud. Finally, after participants of the Lab debated the differing implications of illegal versus legal forms of corruption, Professor Dincer discussed his intentions to survey 10,000 businesses in the US to gain a sense of how corruption (broadly defined) is affecting their business today. Professor Dincer explained that he is particularly interested in small businesses in local areas.