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ABSTRACT In policies for economic development, anti-corruption measures have received increased attention. The policy advice from the international "good governance regime", which is based on the principal-agent theory, is geared towards incremental change that will set in motion a "virtues circle". It is argued that this theory and the following incremental policy approach is dysfunctional for curbing corruption. It is unlikely that small institutional devices can set in motion a process towards establishing "good governance" in countries were corruption is systemic. Based on an understanding of corruption as an instance of the theory of collective action, it is argued that what is needed to establish a new equilibrium of social and economic exchange is a "big-bang" type of change. Incremental policies that are based on the principal-agent theory are likely to end in a "social trap" situation worsening the problem. The argument is illustrated by an historical case-study of how corruption was eradicated in 19th century Sweden. KEY WORDS: Corruptiongood governanceimpartialityefficient institutionsSweden Notes 1 www. transparency. org/policyᵣesearch/surveysᵢndices/cpi/2008–Corruption Perceptions Index 2008. 2 Thanks to Dr Maria Cavallin Ajmer for providing me with most of this information.
Bo Rothstein (Sun,) studied this question.