I agree with Posner‚Äôs basic approach to corruption, so I will elaborate on some ways to reduce corruption, refer to evidence where corruption actually helps performance, and offer a suggestion for why big-city corruption in America appears to have declined over time. I confine my comments to corruption in the public sector, although for every public official who is bribed, there is always a businessman, union official, or someone else in the private sector that is doing the bribing.
By corruption I simply mean that public officials accept payments that violate some laws in order to affect the implementation of other laws or regulations. Corruption so defined is bad if it lowers efficiency in the economy or society- that is, if the cost imposed on everyone else exceeds the gain to an official. Good corruption raises efficiency, so while the corrupt official may gain, so does the economy and society as a whole.
Clearly, in a country with bad laws, corruption by officials that enable businessmen and others to get around these laws may be helpful. The Soviet Union, for example, had terrible economic and other laws, and performed badly. Still, the widespread corruption that existed helped it to do much better than it would have if all officials followed the letter of the law. A preliminary study by a graduate student at the University of Chicago, Maxim Mironov, analyzes the effects of corruption on economic growth in 140 nations during the past decade. He finds that corruption in countries with weak institutions, defined by government effectiveness, the rule of law, and the quality of regulations, appears to help countries grow faster, whereas corruption in countries with good institutions slows down economic growth.
For the remainder of my comment I concentrate on corruption that on balance is bad. Posner points out that corruption flourishes with a weak legal system, and with larger government. Obviously, if governments strongly regulate many activities, then companies, unions, and other groups that are regulated can do better if they can "bribe" officials to overlook or relax these regulations. So the wider is the reach of governments, the greater is the corruption potential. There was relatively little corruption in the Federal government of the US in the early 19th century primarily because the government did so little then.
Other than narrowing the scope of government and strengthening legal institutions, what can be done to reduce (bad) corruption? One simple step is to improve the incentives of officials to act honestly. The incentive to be honest would be stronger when officials are better paid, and if they are fired from their well-paying jobs, and sometimes also punished rather severely if they are caught engaging in corrupt behavior. A few studies do support this conclusion that corruption thrives more in environments where officials are badly paid, such as policemen in Mexico.
Corruption is reduced by greater competition between separate political jurisdictions and stronger competition for political leadership. This implies that corruption is lower in decentralized political systems compared to centralized systems. Various studies do indicate that democracies generally appear to have less corruption than totalitarian systems, although some of the corruption in totalitarian systems like the Soviet Union may be of the good kind because the laws are so bad.
Corruption is reduced when information is more easily disseminated to the public. That is why a free press is such an important protector against greater corruption. The press is more effective in better educated societies, and various studies have shown that corruption is lower when education is greater. Education also helps cut corruption by improving political institutions, so part of the positive relation between the amount of corruption and the weakness of institution is the result of the positive connection between education and good institutions.
Work in progress by Professor Edward Glaeser and others at Harvard University suggests that corruption in the US declined over time in part because education increased. This helps answer Posner‚Äôs question about why corruption in big American cities appears to have been declining. The steep growth in regulations over time would suggest growing, not declining, corruption. I believe the increase in education, combined with more vigorous competition among print and other media to disclose information about corrupt officials, and greater geographical mobility of many types of business have all contributed to the apparent decline over time in the amount of corruption in big cities.