The property rights approach
The property rights approach to explaining corruption is underscored by the prediction of Professor S.N.S. Cheung that property rights analysis will someday replace demand and supply as the economist’s most versatile analytical tool. But what are property rights? The concept of property rights over scarce resources refers to the exclusive right to the use of and income from a resource as well as the right to transfer its ownership.
In relation to the public treasury, concern is with what a public officer can do and cannot do with resources entrusted to him in the ordinary course of his work. The idea is to examine the question: does a public officer own the public treasury? The question is relevant because of the rising cases of corruption in Nigeria as measured by her ranking on the Transparency International Corruption Index. According to the latest ranking (2012), Nigeria is the 35th most corrupt country in the world. The country scored 27 out of a maximum 100 marks to clinch the 139th position out of the 176 countries surveyed for the report. Countries like Togo, Mali, Niger and Benin Republic fared better than the giant of Africa. Another barometer of the rot in Nigeria is the 2013 Resource Governance Index published by the New York-based Revenue Watch Institute. The index is constructed with information on governance of oil, gas and mining sectors of 58 countries around the world. The index scored Nigeria low and pointed to the consistent failure of the country to institutionalise transparency and accountability in the management of oil and gas resources over time.
The property rights literature dates back to over 70 years but not much is heard about it among Nigerian economists. One notable exception is former National Planning Minister, Shamsuddeen Usman, who frequently draws on the property rights paradigm in discussing public policy. Although this line of research is not yet popular in Nigeria, work by property rights scholars has led to the incorporation into the standard theory of production and exchange, of the terms on which property rights are assigned, enforced, and transferred thus enabling the systematic analysis of a broad range of issues including corruption.
Read also: When is fighting corruption worth it?
An important aspect of the property rights literature is the shift to utility as the maxim and in the familiar optimization problem of economics. By rejecting profit or social benefit maximization as the fundamental behavioural postulate explaining the actions of decision makers in an economy, the property rights approach “opens up new possibilities for studying different patterns of managerial behaviour and permitting greater insight into the operation of business firms in the private or public sector in various socio-economic environments”.
In the foregoing sense, any goal established by an individual decision maker in either the private or public sector “can always be conceived as arguments in some type of utility function”. A significant feature of the property rights paradigm is the assumption that each decision maker is motivated by self interest; he moves efficiently toward the most preferred operating position open to him. In this sense, the property rights approach allows economists to explain a number of social realities. One example is the possibility of an inefficient public servant running his private business efficiently or performing better in private sector employment. Such officer attenuates (weakens) the property rights of the state (country) in resources; he keeps his job only because the public service lacks a sensitive reward structure.
In the foregoing sense, any goal established by an individual decision maker in either the private or public sector “can always be conceived as arguments in some type of utility function”. A significant feature of the property rights paradigm is the assumption that each decision maker is motivated by self interest; he moves efficiently toward the most preferred operating position open to him. In this sense, the property rights approach allows economists to explain a number of social realities. One example is the possibility of an inefficient public servant running his private business efficiently or performing better in private sector employment. Such officer attenuates (weakens) the property rights of the state (country) in resources; he keeps his job only because the public service lacks a sensitive reward structure.
Secondly, the property rights approach allows economists to incorporate a “corruption hypothesis” into the standard theory of production and exchange. The late Professor Abdullahi Smith, pioneer director of Arewa House, Kaduna, delivered the Ali Akilu memorial lecture in 1976. On that occasion, the erudite professor of history advanced the corruption hypothesis to explain Nigeria’s under-development. He argued convincingly that all the elaborate development plans that we draw up with so much fanfare add up to instruments for enriching public officers and their collaborators. Numerous examples abound as demonstrated by confirmed cases of misappropriation of public funds. Another major insight from the property rights literature is in research by Nobel laureate Professor Douglas North. He talks of an economic theory of the state with special reference to ideology. North seeks to explain how economies change over time and how their “structures” change in sympathy. He defines structures to include “the political and economic institutions, technology, demography and ideology of a society”.
