Just the Facts Ma’am

doi: 10.1057/ 9781137354396

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doi: 10.1057/ 9781137354396

 Just the Facts Ma’am:
A Case Study of the
Reversal of Corruption
in the Los Angeles
Police Department
R. Mark Isaac
John and Hallie Quinn Eminent Scholar and
Professor of Economics, Florida State University
and

Douglas A. Norton
PhD Candidate, Florida State University

doi: 10.1057/ 9781137354396

just the facts ma’am
Copyright © R. Mark Isaac and Douglas A. Norton, 2013.
Softcover reprint of the hardcover 1st edition 2013 978-1-137-35828-8
All rights reserved.
First published in 2013 by
PALGRAVE MACMILLAN®
in the United States—a division of St. Martin’s Press LLC,
175 Fifth Avenue, New York, NY 10010.
Where this book is distributed in the UK, Europe and the rest of the
world, this is by Palgrave Macmillan, a division of Macmillan Publishers
Limited, registered in England, company number 785998, of Houndmills,
Basingstoke, Hampshire RG21 6XS.
Palgrave Macmillan is the global academic imprint of the above companies
and has companies and representatives throughout the world.
Palgrave® and Macmillan® are registered trademarks in the United States,
the United Kingdom, Europe and other countries.

ISBN 
ISBN  (eBook)

DOI 10.107/
Library of Congress Cataloging-in-Publication Data is available from
the Library of Congress.
A catalogue record of the book is available from the British Library.
First edition: 2013
www.palgrave.com/pivot
 Contents
Acknowledgments vii

1 Introduction 1

2 A Brief History of Los Angeles: Conditions

for Institutional Change 5
2.1 The economic conditions: urban
rivalry 6
2.2 Social and political values in
Los Angeles 10
2.3 Corruption in the Los Angeles Police
Department prior to 1950 13

3 Corruption Reform, Equilibrium Selection,

and the Institutional Entrepreneur 20
3.1 Corruption reform as a coordination
problem 21
3.2 The institutional entrepreneur and
equilibrium selection 22
3.3 Parker’s reforms 24
3.4 Parker’s reforms and our model 31

4 Essential Components of the Success of

Parker’s Reforms 36
4.1 Internal contestability 37
4.2 External contestability 38
4.3 Values 39
4.4 Media 41

doi: 10.1057/ 9781137354396 v

vi Contents

5 Application to Economic Development 43

5.1 The incentives-values approach 44
5.2 Incentive reforms 45
5.3 The importance and coordination of values 48
5.4 Contestability 52
5.5 Charter Cities 56

Appendix 59

Bibliography 62

Index of Concepts and Events 74

Index of Historical Figures 76

doi: 10.1057/ 9781137354396

 Acknowledgments
We wish to thank the members of the Theory of Moral
Sentiments Readings Group at Florida State University
and participants at the 2011 APEE meetings for their
helpful comments, with a special thanks to Prof. Charles
Barrilleaux, Andrew Smyth, and to Prof. James Cobbe for
information on the Hong Kong ICAC. Much apprecia-
tion goes to Susan Isaac for assistance in copyediting the
manuscript. As usual, we are solely responsible for any
remaining errors.

doi: 10.1057/ 9781137354396 vii

 1
Introduction
Abstract: Chapter 1 presents a brief introduction to the
purpose of the monograph and lays out the road-map for
the rest of the book. The theme so developed is the following:
development economics research on corruption has surged in
recent years, in part because there is a growing consensus that
the efficacy of foreign aid hinges on the honest management
of funds. The overall theme of the literature has been to
demonstrate the corrosive effect corruption has on enterprise
and the political process. We present here a case study of
successful institutional change in the 1950s Los Angeles Police
Department in which Police Chief William H. Parker produced
a record of effective reforms. Finally, we introduce that we
intend to apply this history to modern day development
economics.

Isaac, R. Mark and Norton, Douglas A. Just the Facts

Ma’am: A Case Study of the Reversal of Corruption in the
Los Angeles Police Department. New York:
Palgrave Macmillan, 2013. doi: 10.1057/9781137354396.

doi: 10.1057/ 9781137354396 

 Just the Facts Ma’am

Los Angeles “appears, in the light of recent developments, [to be]

one of the most vice infested” cities in the nation.
—Los Angeles civic reformer Clifford Clinton,
quoted in the Los Angeles Times, 1938

* * *
Philip Marlowe: “They say there’s a gambling house up the line.”
[Los Angeles] Policeman: “They say.”
Philip Marlowe: “You don’t believe them?”
Policeman: “I don’t even try buddy,” he said, and spat past my
shoulder.
—Raymond Chandler, The Little Sister, 1949

* * *
Sgt. Joe Friday, LAPD Badge 714: “I live in this town. I work here,
and I like it. There are 4,000 other men in the city who feel the
same way…men who are trying to prove that the law is here to
protect people, not cut ‘em down.”
—Dragnet, 1954

* * *
The Los Angeles Police Department “has become a model for police
administrators throughout the world...”
—O.W. Wilson, Dean of the School of Criminology,
University of California Berkeley, 1957

Development economics research on corruption has surged in recent years,

in part, because there is a growing consensus that the efficacy of foreign aid
hinges on the honest management of funds.1 The overall theme of the litera-
ture has been to demonstrate the corrosive effect corruption has on enterprise
and the political process.2 We present here a case study of successful institu-
tional change in the 1950s Los Angeles Police Department in which Police
Chief William H. Parker produced a stunning record of effective reforms.
Then, we apply this history to modern day development economics.
The study of institutions has recently received pride-of-place in
mainstream development economics.3 Institutions are the social and
legal rules of the game and they shape the costs and benefits of human
action. But, while economists believe institutions matter, we have a thin
knowledge about the emergence of institutions and the potentially frag-
ile transitions toward better institutions. A seminal work on institutional
formation from Lance E. Davis and Douglass C. North, “Institutional

doi: 10.1057/ 9781137354396

 Introduction 

Change and American Economic Growth,” puts institutional change

squarely in the domain of economic analysis. They write,
An institutional innovation will be innovated if the expected net gains
exceed the expected net costs. Only when this condition is met would we
expect to find attempts being made to alter the existing structure of institu-
tions and property rights within a society. (Davis and North 1971, p. 10)
As will be seen below, the Davis and North paradigm—that insti-
tutions will be changed when there are perceived net gains from
transformation—will play an important role in our analysis.
Chapter 2 of this volume provides social, economic, and political
background for Los Angeles. The stories are rich with Midwestern immi-
grants, mobsters, corrupt city commissioners, crooked cops, concerned
citizens, and the prospect of big military and business dollars.
In Chapter 3 we provide a model of equilibrium selection in the con-
text of corruption. We flesh out that model with a review of Police Chief
William H. Parker’s actual reforms. We tell a story about the courage
and prudence Parker exhibited in the face of a corrupt status quo, but
also present a number of critical preexisting institutions that were at his
disposal. In addition to implementing a portfolio of incentive-related
reforms, Parker believed strongly that cops should be honest, paid well,
and that they should be viewed with esteem in the community. To this
end Parker publicly communicated a campaign of restored values. One
notable element of this campaign was the television show Dragnet.
In Chapter 4 we identify some key elements of the LAPD success
story that ought to be transcendent with respect to time and location
for reversing a culture of corruption: internal contestability of govern-
ment power, external contestability of one government with another, the
freedom of the media, and a memory of morality.
Finally, Chapter 5 concludes with a discussion about how the model
we present might be applied out of sample to issues in contemporary
economic development.
Before going further, we should say a few words about the research
method we employ in this study. Our research may broadly be called a case
study, a methodology that continues to have both supporters and detrac-
tors. Broadly speaking, there are two obvious approaches to the question
of why Parker was so successful in his reforms. On the one hand, the exist-
ing, yet thin, historical literature emphasizes Parker’s personal values. On
the other hand, a starting point for economists is likely to be an inquiry
as to how Parker might have changed incentives (perhaps by changing

doi: 10.1057/ 9781137354396

 Just the Facts Ma’am

institutions). Because we will be exploring the LAPD story through each

of these two lenses, with specific reference to Davis and North’s model of
institutional change, we believe that this research can be described as what
Bates et al. (1998) have called an “analytic narrative” in which the data from
a contextual history interact with one or more organizing models.
As we mentioned earlier there has been surprisingly little written about
the Parker era. To our knowledge, none of that literature approaches the
narrative from an economic analysis of values, institutions, and incentives.
Nevertheless four sources have stood out as indispensable to our inquiry:
John Buntin’s history of mid-century Los Angeles, L.A. Noir, which inter-
plays the careers of Parker and gangster Mickey Cohen (Buntin 2009,
hereafter “Buntin”); Alisa Sarah Kramer’s Ph.D. dissertation (Kramer 2007,
hereafter “Kramer”), the archives of the Los Angeles Times (hereafter “LAT”),
and Parker’s own words, Parker on Police, as collected by Wilson (1957).
Finally, it is important to emphasize at the outset that this is not a book
designed to recommend Parker’s reforms per se as a model for developing
countries. Instead, what we are examining are the conditions and methods
that serve to support a reform program of this magnitude and effectiveness.

Notes
 Evidence about the importance of corruption in developing economies can
be seen from the World Bank Anti-Corruption initiative in 1997. All aid
strategies are required to assess “corruption risks” (World Bank 2000). A
number of influential papers (see Chapter 5) and the popular book Economic
Gangsters motivate the importance of studying corruption by linking it to a
decline in foreign aid effectiveness (Fisman and Miguel 2008).
 There are a number of channels through which corruption might increase
the costs of doing business. By decreasing the productivity of investment
there will also be a decline in the rate of successful enterprise. Following
failure would be an increase in the cost of capital. Corruption also has been
shown to deteriorate checks and balances at various levels of accountability.
 Earlier work such as North and Thomas (1973) demonstrated the importance
of institutions in economic growth. However, the fact that the handbook
article presented in Acemoglu, Johnson, and Robinson (2005) argues that
institutions are the fundamental cause of economic development is evidence
of how the study of institutions is more mainline in development economics.
Moreover, Boettke, Coyne and Leeson (2008) construct an account of the
increased focus of development economists on institutions, which they call
the “New Development Economics.”

doi: 10.1057/ 9781137354396

 2
A Brief History of
Los Angeles: Conditions
for Institutional Change
Abstract: In order to understand what William Parker
accomplished and how he did it, it is necessary to lay some
historical groundwork about the history of the settlement of Los
Angeles, the parallel history of its neighbor to the South (San
Diego), and, of course, a detailed discussion of the pattern of
corruption in Los Angeles in general and in the Los Angeles
Police Department in particular. This is the task of Chapter 2. In
the first section, we look at the historical rivalries between Los
Angeles and San Diego. As later developments made Los Angeles
the more economically dominant of the two cities, it is important
to recognize that, early on, San Diego was perceived to be the
city best situated for growth in Southern California. In the
second section, we look more closely at the growth of Los Angeles
as a deliberately designed process of self-selection, appealing
to Midwestern immigrants with a strong religious and ethical
orientation. Finally, in the third section, we detail the specifics of
Los Angeles police corruption during the 1920–1950 period, with
particular emphasis on the years 1938–1949.

Isaac, R. Mark and Norton, Douglas A. Just the Facts

Ma’am: A Case Study of the Reversal of Corruption in the
Los Angeles Police Department. New York:
Palgrave Macmillan, 2013. doi: 10.1057/9781137354396.

doi: 10.1057/ 9781137354396 

 Just the Facts Ma’am

The importance of reviewing the economic history of Los Angeles rests

in its relationship to the Davis and North story of institutional change
driven by perceived benefits and costs. A primary piece to this story of
benefits and costs was the rivalry between Los Angeles and San Diego
(outlined in Section 2.1). We argue that the threat that post–World War II
economic development would flow away from corrupt Los Angeles to
other locales (likely including San Diego just 100 miles to the south) gave
William Parker support from the city leadership to execute a variety of
institutional changes in the LAPD that improved police professionalism.
After the outline of the urban economic rivalry in Section 2.1, we
will turn our attention in Section 2.2 to a history of values that typified
the population of Los Angeles in the period of the 1920s through the
1950s. We will argue that the moral sensibility of many of the citizens of
Los Angeles provided a “memory of morality” that supported Parker’s
reforms. In addition, California was a center for Progressive Era insti-
tutions such as the initiative process, the recall, an independent grand
jury, and strong civil service buffers for civic “experts and professionals”
against partisan political influence. We will demonstrate that several of
these Progressive institutions provided both the base upon which Parker
could come to power and the levers that enabled Parker to stage a mas-
sive turnaround.1
Finally, in Section 2.3, we present a detailed history of municipal and
police corruption in Los Angeles over this same period. By demonstrat-
ing the depth of corruption we hope to imbue the reader with an appre-
ciation for the magnitude of change in the LAPD.

2.1 The economic conditions: urban rivalry

Even within the first decades of California statehood, Los Angeles

and San Diego were rivals pitted in a tournament to become the next
California metropolis. Though there were divergent sentiments about
which city would triumph, early opinion seemed to favor San Diego.
With its superlative harbor, many considered San Diego’s march to
metropolis a foregone conclusion.2 On the other hand, Los Angeles pos-
sessed a larger population, which included powerful businessmen with
money staked in the city.3
When Los Angeles became the western terminus for the Southern
Pacific Railroad in 1872, doubt was cast upon the future of San Diego.

doi: 10.1057/ 9781137354396

 A Brief History of Los Angeles 

But, after recovering from a series of failed railroad negotiations San

Diego rallied in 1886 and secured the terminus for the Santa Fe Railroad.
With new transportation, San Diego capitalized on the inadequate and
shallow Los Angeles area harbor (Wilmington harbor) that could no
longer accommodate increased tonnage from ships. The loss of business
to San Diego threatened the aspirations of Los Angeles and prompted
the Los Angeles Herald to write, “If this is to go on, then indeed we might
as well not have a harbor, but become a back-country to San Diego.” Los
Angeles needed to create a harbor that allowed them to compete with
the natural harbor of San Diego (Fogelson 1967, pp. 109–110).
San Pedro Bay was selected by the Army Corps of Engineers and con-
struction commenced in 1899. Once the engineers converted the modest
bay into a functional harbor, the City of Los Angeles brokered a deal
to consolidate San Pedro and Wilmington into the city limits. The area
quickly became a hub for commercial activities, and further improve-
ments to the port (1911–1912) set the stage for Los Angeles to supply
petroleum, lumber, citrus, and other products to larger markets. As Starr
(1997) has noted, the new harbor was critical in propelling Los Angeles
past San Diego.
Nevertheless, as the Los Angeles harbor expanded, San Diego was
far from an afterthought. The watershed moment for San Diego arrived
with the California-Panama Exhibition in 1915. The event conferred
notoriety to a proud city still struggling with its economic identity.4
Richard F. Pourade writes about the boost in confidence from the exhibi-
tion, “Forgotten for the time were old rivalries that had found San Diego
bested at every turn by the commercial ambitions of its larger neighbor
[Los Angeles]” (1965, p. 199). How the new notoriety should translate to
the economic future sparked a political debate in the 1915 mayoral elec-
tion dubbed “Smokestacks vs. Geraniums.”5
The vision for commerce carried the election, but San Diego did not
immediately attract commercial interests. Instead, their California-
Panama Exhibition had showcased the scene to important military
personnel. With significant lobbying efforts from former Congressman
William Kettner and in spite of bitter competition from their California
rivals (San Francisco and Los Angeles) San Diego prevailed as the home
base of the Pacific Fleet in 1919. This military development, which repre-
sented $27.79 million over five years, vaulted San Diego into its modern
city model. Once again, San Diegans believed they could assemble a
competitive commercial harbor (Hennessey 1993).

doi: 10.1057/ 9781137354396

 Just the Facts Ma’am

In a short period of time San Diego’s population more than doubled:

74,361 in 1920 to 203,341 in 1940—a rate of growth in the 1930s that far
outstripped that of California as a whole (San Diego Historical Society
2010a; Starr 1997). San Diego engaged in a series of civic improvements
including a second international exhibition in the 1930s and growing
preeminence in the field of aviation. Starr has even highlighted the fact
that President Franklin Roosevelt was a major booster of San Diego in
the 1930s.
But, despite San Diego’s surge in growth, one might argue that
Angelinos did not view San Diego as a major concern in the depths of
the Great Depression in the 1930s. Los Angeles had already surpassed
San Francisco in terms of industry and population, and all it lacked was
the prestige San Francisco had accumulated as California’s financial
center.
By the time of the first post-war census (1950) Los Angeles arguably
held the position as the premier city in California, with a population of
almost 2 million (almost six times larger than San Diego)6 and also being
the western regional location of many companies. Yet, historian Roger
W. Lotchin argues that post–World War II California continued to be
characterized by competition over government assets (1992, p. 172). The
United States Congress had earmarked $12 billion for military spending
in 1947 and each rival city wanted to hoist those prized military con-
tracts. Lotchin writes,

From the First World War on, both [sic] Los Angeles, San Francisco, and
San Diego had become increasingly aware of the importance of military
spending. The preparations for World War II enhanced this perception
greatly and the war did too: The Los Angeles Chamber of Commerce, as
we observed, even opened a Washington office devoted to helping local
businessmen secure government war contracts. (p. 202)

The preexisting military infrastructure made San Diego a natural home

for further military expenditures. Following the establishment of the
headquarters of the Pacific Fleet, San Diego added a host of other mili-
tary installations, including the Marine Corps Recruiting Depot (1923),
the Naval Training Center (1923), and Miramar Naval Air Station (1939)
(San Diego Historical Society 2010b). Military operations during World
War II expanded the runway at San Diego’s municipal airport, Lindbergh
Field, to 8,750 feet, making it “jet ready” long before many of the other
municipalities.

doi: 10.1057/ 9781137354396

 A Brief History of Los Angeles 

But San Diego’s heavy footprint in military facilities did not deter
Los Angeles from its own pursuit of federal dollars. The City of Angels
Chamber of Commerce placed professional lobbyists in Washington, D.C.
Furthermore, California also experienced massive private capital
inflow after World War II. Economic historian Paul Rhode writes, “The
California State Chamber of Commerce, which tracked new factory
start-ups and plant expansions, estimated that in the four years from 1945
to 1948, $1,069,000,000 of private capital [approximately $8.50 billion
in today’s dollars]7 was invested in California manufacturing facilities.
This was divided fairly evenly between 3,270 new factories ($487 million
was invested) and 3,160 plant expansions ($582 million invested)” (1994,
p. 386, emphasis added).
If San Diego had fallen behind Los Angeles around the turn of the
20th century, what was there to indicate that San Diego would be viewed
as a rival to Los Angeles for economic development at the end of World
War II? There are at least three major factors at work. First, the federal
support of San Diego in military development kept San Diego as a rela-
tively prosperous area during the Great Depression. Second, San Diego
was not standing still in areas in which Los Angeles had gained previous
superiority. While Los Angeles had effectively won the railroad wars of
the late 19th century, San Diego was aggressively developing a presence
in the new field of aviation.8 Likewise, no history of municipal growth in
California would be complete without a discussion of water. The history
of the Los Angeles Department of Water and Power is legendary and
its leadership was prescient. Los Angeles leaders saw that in what was
essentially a semi-desert environment water was critical for economic
growth. The Santa Barbara area is only about 95 miles north of Los
Angeles and had potential as a rival home to business and industry. But
Santa Barbara had notable constraints on its growth prior to its connec-
tion with the California State Water Project in the 1990s (Kuznia 2010).
San Diego, on the other hand, (again motivated by considerations for
its military installations) completed its own connection to the Colorado
River in 1947 (Sholders 2002). As Starr (2002, p. 206) has noted the
new connection to Colorado River water “made possible the impend-
ing expansion of the city. A privileged and protected resort and naval
enclave now stood on the verge of metropolitanization.”
Finally, there is ample evidence that even though the city of Los
Angeles had openly revolted against the corruption of the 1930s, it
remained a dangerous and corrupt city. Starr (2002, p. 232) noted the

doi: 10.1057/ 9781137354396

 Just the Facts Ma’am

wave of murders and other violent crimes in Los Angeles, epitomized

by the infamous Black Dahlia murder in 1947, and quoted Los Angeles
attorney Bernard Potter as defining the L.A. of the 1940s as:
…the dumping ground for the riff-raff of the world, racketeers of every
type, bootleggers, bookmakers, black market operators, thugs, murderers,
petty thieves, procurers, rapists, fairies, perverts, reds, confidence men, real
estate sharks, political carpetbaggers and opportunists. Ask for any violator
of any law and we can promptly fill the order.

We have found no evidence of any single “smoking gun” document in

which Los Angeles leaders spell out their concerns about whether they
believed their culture of corruption would deter the private or military
investment. However, we have documented a historical tug-of-war
between urban rivals since their formative years. Furthermore, we believe
that the perceived gains and losses in the competition for post–World
War II economic development are what Davis and North would view as
drivers of institutional change. Specifically, we argue that the fact and
perception that its municipal institutions were significantly corrupt and
that there existed at least the potential competition from other western
locations, including but likely not limited to San Diego, provided a threat
to Los Angeles’ continued economic dominance. Finally, in the following
sections, we will document the role that business and civic leaders played
in the efforts to reform the Los Angeles government in general, including
the LAPD. We will describe the connections that reform mayor Bowron
made between reform and Los Angeles economic improvement. And,
we will also document William Parker’s direct, unvarnished appeals to
the business community for support of his reform efforts.

2.2 Social and political values in Los Angeles

Walter Neff: “They say that native Californians all come from Iowa.”
Double Indemnity (Paramount Pictures, 1944)

The overall social identity of Los Angeles was firmly planted with Christian
beliefs and teachings with the establishment of a Catholic Mission at San
Gabriel in 1771 and, much later, with the infusion of evangelical Midwestern
Protestants after construction of the transcontinental railroads through the
1920s. Indeed, Los Angeles sought this infusion of Midwestern immigrants.
Initially, they promoted their agricultural environment to Midwestern

doi: 10.1057/ 9781137354396

 A Brief History of Los Angeles 

farmers. Later, Los Angeles promoters modified their strategy when they
discovered that Midwesterners did not want to move to the Pacific Coast
for farming; rather they sought new, more metropolitan opportunities
(Fogelson pp. 67–75). Pasadena, the large Los Angeles suburb just to the
northeast, was founded as The Indiana Colony in 1874. The City of Pasadena
was incorporated in 1886 in response to the opening of a saloon (“Pasadena
History” 2010). Before the arrival of the first saloon, Farnsworth (1883)
wrote that “Pasadena has had a decidedly religious character from the
origin. Christian families connected by membership with churches were
among the first settlers.” Toward the southern harbor end of Los Angeles,
“there were so many Iowans (and other Midwesterners) in Long Beach
that the town was dubbed ‘Iowa by the Sea.’” (History, Los Angeles 2010).
Census data (Fogelson, p. 81) provide a partial snapshot of this phenom-
enon. Table 2.1 registers the percentage of the American born population of
Los Angeles from the Pacific Region as compared the American Midwest.9
It is striking that even in terms of immigrants, “North/West Europeans”
were the dominant ethnic group until 1930 (Table 2.2 contains U.S.
Census data appearing in Fogelson “Table 3,” p. 76).10
These data point toward a community with a strong network of people
with what can be identified as Midwestern, often Protestant and pious
religious values. Other sources corroborate the strength of Evangelical
and Pentecostal Protestantism in Los Angeles during this period, the
latter movement (the Azusa Street Revival and later Aimee Semple

Table 2.1 Native-Born Americans in Los Angeles by Region ()

    
Pacific . . . . .
Midwest . . . . .

Table 2.2 Foreign Born Residents of Los Angeles by Region

North/West South/East Other Other
Europe Europe Asia America Regions
     
     
     
     
     

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 Just the Facts Ma’am

McPherson) including African-Americans and Hispanics as well as

white Protestants (Walsh 2003).11
Furthermore, there is concurrent evidence from periodicals such as
The California Outlook and sociological histories such as The Better City by
Dana W. Bartlett (1907), a pastor and social worker in Los Angeles, that
Progressive and Social Gospel movements were strong in Los Angeles.
Bartlett expresses the vision for “The Better City,” writing, “Los Angeles
is a city of churches banded together in their work for humanity’s uplift.”
Bartlett profiled at least nine different civic-betterment and anticor-
ruption organizations active in Los Angeles in 1907, and devoted an
additional chapter to the separate category of civic “Women’s Clubs.” In
keeping with the strong association between Progressive politics and the
Social Gospel movement, Bartlett titled one of the chapters of his book
“Organized Religion Socialized.”
The existence of these particular moral values is fully displayed in
the following exchange recounted by Fogelson (pp. 190–191) between a
journalist from a sophisticated Eastern magazine and the residents of
Los Angeles in 1913:
William Huntington Wright described Los Angeles as a puritanical and
ill-governed city destitute of the delights of urbanity. “The spirit of genuine
gaiety is lacking,” he wrote. “Enjoyment is considered the first step to perdi-
tion. Noise is the rumbling of the gates of hell. Music is a sign of immorality,
and dancing is indecent.” For this attitude he blamed the militant moralists
of the Midwest. “These good people brought with them a complete stock of
rural beliefs pieties, superstitions, and habits” … Applying Sunday school
precepts to their political decisions, they have transformed a once fascinat-
ing and sensible place into a “city of little sociability or hospitality, a city
devoid of lenience and cosmopolitanism.” The article outraged the residents
of Los Angeles, but far from denying the author’s allegations, they defended
the community as he described it.

Replying to Wright’s article titled “Los Angeles—The Chemically Pure,”

one resident, among many others, retorted,
[Los Angeles] believes in the moralities; she believes in the decencies of life
… She deliberately chooses to be dubbed “Puritan,” “Middle-West Farmer,”
“Provincial,” etc., and glories in the fact that she has been able to sweep
away many flaunting indecencies that still disgrace older and more vice-
complacent communities. (p. 191)

In the midst of extolling the morality of Los Angeles citizens, a natural

question emerges, “How did Los Angeles become corrupt in the first

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 A Brief History of Los Angeles 

place?” Historians point to crimes related to Prohibition—illegal sale

of liquors and gambling that were prevalent in most major U.S. cities
(Douthit 1975; Kramer). Another dent in our case for a “moral” Los
Angeles was a slew of sex scandals in the entertainment industry dur-
ing the 1920s and 1930s. Local citizens attempted to control damaged
perceptions of Los Angeles. Pastors such as Dr. J. George Dorn wrote in
periodicals such as the Lutheran to stem the view that Hollywood embod-
ied immorality. Also, many famous actors and actresses spoke against
this perception to their denominations (Starr, pp. 274–275). In the case of
reducing graft stemming from Prohibition, citizens were willing but not
successful.12 Nevertheless, even with the booming entertainment industry,
increase in graft, and bad press Los Angeles was still known for its Middle
America feel. Frank Lloyd Wright, when asked about the character of Los
Angeles for a Los Angeles Times article in 1940 said, “[Los Angeles] was as if
you tipped the United States up so all the commonplace people slid down
here into Southern California.” Wright also added, “Mentally and morally
… Los Angeles is a glorified Middle-Western town” (ibid., p. 196).
From 1940 to 1950 the population of Los Angeles increased 31 to
nearly 2 million people. But, this sizable infusion of population following
World War II did not overturn the values orientations in Los Angeles. If
anything the vitality of the mainline protestant denominations such as
Baptists, Episcopalians, Lutherans, Methodists, and Presbyterians was
greater after World War II. Scholars of American religion point to the
1950s as the pinnacle in popularity of the mainline church (Noll 1992).13
Also, according to the Cornell Values Survey, the early 1950s were the
high point of conservative and religious values (Hoge 1974).14
All of these examples act as signposts toward the existence of stable,
pious values that helped generate and support change when reform-
minded William H. Parker took office. Also, it is worth noting here that
Parker himself was Catholic and a Midwestern transplant, moving from
South Dakota to Los Angeles in his teenage years. We will return to a
discussion of the beliefs of Parker and the citizens when we discuss the
reforms aimed at values.

2.3 Corruption in the Los Angeles Police

Department prior to 1950
Philip Marlowe: “I’ll testify under oath that the book came from Geiger’s
store. The blonde, Agnes, will admit what kind of business the store did

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 Just the Facts Ma’am

[pornography]. It’s obvious to anybody with eyes that the store is just a
front for something. But the Hollywood police allowed it to operate, for
their own reasons. I dare say that the Grand Jury would like to know what
those reasons are.”
Wilde [a Los Angeles policeman] grinned. “Grand Juries do ask those
embarrassing questions sometimes —in a rather vain effort to find out why
cities are run as they are run.”
Raymond Chandler, The Big Sleep, 1939

* * *
[Los Angeles County] District Attorney Sewell Endicott: “The citizen is the
law. In this country we haven’t gotten around to understanding that. We
think of the law as an enemy. We’re a nation of cop-haters.”
Philip Marlowe: “It’ll take a lot to change that,” I said. “On both sides.”
He [Sewell] leaned forward and pressed a buzzer. “Yes,” he said quietly, “It
will. But somebody has to make a beginning.”

Raymond Chandler, The Little Sister, 1949

From the 1920s through the 1940s, the City of Los Angeles in general
and the Los Angeles Police Department in particular were beset with
widespread corruption. Prohibition brought some of the same problems
that appeared elsewhere in the United States, but corruption in the
LAPD went deeper and outlasted the 18th Amendment. In the late 1920s,
a scandal revealed that the LAPD could and did exile innocent but
troublesome citizens to a local insane asylum (Howells 2008, McNulty
2008). At about the same time (1927), William Parker joined the LAPD.
According to Buntin, Parker “made a startling discovery. In Los Angeles
the police didn’t fight organized crime, they managed it.” Buntin’s term
for the largely home-grown Los Angeles amalgam of gangsters, racket-
eers, and corrupt city officials is “The Combination.”
In the 1930s, if anything, the Combination got worse after the repeal
of Prohibition. Novelist Raymond Chandler depicted Los Angeles as a
community in which gangsters ran prostitution, gambling, and shake-
down operations with abandon, using direct payoffs and political pres-
sure as protection from the police. Boyer (2001) says that the Chandler
depictions did not defame Los Angeles. Looking beyond pulp fiction to
historical accounts, one finds that a county grand jury in 1934 opened an
inquiry into “‘protected gambling’ and the manner under which some
clubs are allowed to operate in asserted violation of the law” (LAT 1934).

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 A Brief History of Los Angeles 

In that same period, the grand jury indicted Los Angeles County District
Attorney Buron Fitts in a bribery and sex crimes scandal, although a jury
would later acquit him. The Hollywood Citizen estimated graft payments
to police, politicians, and journalists at $400,000 per month, in 1930s
dollars (Buntin). TIME magazine (1938) quoted journalist Westbrook
Pegler as calling Los Angeles “the slobbering civic idiot in the family of
American communities.”
A breakpoint in the reaction of the citizens of Los Angeles can be seen
in the events of 1938. Local businessman Clifford Clinton began a reform
campaign, and managed to convince the circuit judges to appoint him to
the county grand jury. In California at the time, a new county grand jury
was empanelled each year, and the powers of the county grand jury went
beyond the traditional handing out of indictments upon bills of evidence
from prosecutors. In California, grand juries were expected to serve as
independent watchdogs of local governments, even to the point of being
able to employ independent experts (Conrey 1914). Clinton’s minority
grand jury report charged that the LAPD and other law enforcement
agencies “work in complete harmony and never interfere with the activi-
ties of important figures in the underworld” (Buntin). From the other
side of the reform fence, this was almost the identical picture as viewed
by Los Angeles mobster Mickey Cohen who said that “[e]verything they
did in Jersey, Chicago, and New York was completely run by the cops
and stoolpigeons” in Los Angeles (Buntin). Clinton and others initially
requested a state special prosecutor (LAT 1938a). The grand jury eventu-
ally uncovered a massive corruption system in which police exam ques-
tions and promotions were sold out of the office of Mayor Frank Shaw,
through the mayor’s special assistant, his brother John Shaw (Buntin;
LAT 1938e, 1938f, 1938g, 1939a; TIME 1938).15 During the investigation,
witnesses were beaten and bombs were planted, with direct ties for these
activities established to the District Attorney’s office and the LAPD
(Buntin; TIME 1938). As Starr (1997, p. 169) asserts about the beating of a
grand jury witness: “Even Raymond Chandler, soon to make his debut as
a crime writer, could not have had the nerve to fabricate such an event.”
Businessman Clinton’s reform organization, with significant support
from the local religious (especially Methodist) community, turned to
the goal of recalling Mayor Shaw. The effort was successful, and Shaw
is known as the first major big city mayor in the United States to be
removed from office through a recall procedure. One notable fact is
that the Los Angeles Times, often marked as the voice of the Los Angeles

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 Just the Facts Ma’am

business community, opposed Shaw’s recall (LAT 1938d). This is despite

the fact that Clinton was a prominent businessman and in a “letter to
U.S. Senator Hiram Johnson, Chamber of Commerce director Frank
Doherty” described the DA’s investigation of the Shaw scandal as fol-
lows: “A near-psychotic district attorney is investigating a crooked police
department that is trying to dispense of or frighten a former crooked
member of their crooked force who was spying on their crooked activi-
ties…” (Buntin, location 1504–1522).
The recall election installed reform-minded judge Fletcher Bowron,
who would serve until 1953. The first police chief appointed under his
administration16 ran an aggressive antimob campaign and anticorruption
campaign. Many professional mobsters decamped to greener pastures,
particularly the up-and-coming desert gambling city known as Las
Vegas. According to Buntin, local racketeer Tony Cornero personally
provided Bowron with the names of 26 police officers on the take.
By 1949, TIME magazine, no longer referring to Los Angeles as a “slob-
bering civic idiot,” ran an extensive article on the changes, growth, and
reforms in Los Angeles wrought by Bowron and World War II. (Bowron
had just been reelected for a third term, this time with the support of
the Los Angeles Times, now being run by a younger generation owner,
Norman Chandler (Buntin, LAT 1949b)). Unfortunately, the city had
lost its reform police chief and under new chief C. B. Horrall the LAPD
returned to some of its wild and wicked ways. The very week that the
TIME profile article appeared, Los Angeles was rocked by the revelation
of a prostitution ring, catering to some of the city’s most prominent men
and operating with the direct involvement of LAPD officers. Additional
revelations pelted the LAPD. The county grand jury investigated
“lavish parties…clothing, and other gifts by persons close to Mickey
Cohen, gambling kingpin, in an effort to ‘worm their way into the
Police Department’” (LAT 1949c). A key figure in preparing the bribery
case for the grand jury was none other than Inspector William Parker
who “discovered a scheme to place police officers under obligations to
these civilians [associates of Mickey Cohen] for favors and personal
benefits.” In addition, a bribery scandal involving LAPD officers and
a long distance “gambling wire” operation were sent to the Governor’s
Crime Commission (LAT 1949e). Buntin describes the gambling wire
operations as generating some of the most lucrative money at the very
core of organized crime in Los Angeles. Police Chief Horrall resigned
and was eventually indicted for perjury, along with an Assistant Chief of

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 A Brief History of Los Angeles 

Police and three other officers. While all five individuals were eventually
acquitted, this was not the kind of news desired by a city and its “reform”
mayor, especially when recently honored in America’s most notable and
establishment news magazine.
With the resignation of Chief Horrall, an interim outside chief, former
Marine General Arthur Worton, was appointed. Worton laid some of
the groundwork for reform that would be followed by Parker, but the
permanent chief had to be appointed through civil service procedures
that Parker himself had help put into place as a leader of the police
and fire protective league (the forerunner of the current police union).
The decision went down to the wire. Of the five members of the police
commission, two favored Parker, and two favored Chief of Detectives
Thaddeus Brown. (Buntin claims that even though both men were
viewed as reformers, Mickey Cohen would have preferred that the LAPD
be led by the more get-along-and-go-along Thaddeus Brown.) The fifth
vote, a Parker supporter, was a last minute replacement for a Brown sup-
porter who died of cancer (Buntin and Kramer). So, on August 9, 1950,
William H. Parker became the Chief of Police of the Los Angeles Police
Department.

Notes
 The openly and Progressively partisan California Outlook published in
1914 a speech by Theodore Roosevelt in which he argued, to a group in
New England, that there was no state in which the practical application of
Progressive ideals “has been as great as in California.” Bartlett (1907) argued
that “while not the first city to declare itself for complete nonpartisanship in
city politics [a prominent Progressive goal], the state of the partial victory
of the city of Los Angeles may well encourage other cities to enter upon this
latest movement in social service and civic betterment…” (p. 172).
 For example, some Los Angeles residents are quoted as saying, “We must be
content to be the political and social capital of south California; we must be
satisfied with our genial climate, fruitful soil, our generous wines, our golden
fruit, our productive mines, our cattle upon a thousand hills… The great
commercial city of south California must be San Diego.” (Los Angeles Star,
August 14, 1869 as quoted in Fogelson).
 Charles Crocker once said, “We would blot San Diego out of existence if we
could, but as we can’t do that we shall keep it back as long as we can” (1880
letter as cited in Fogelson 1967).

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 Just the Facts Ma’am

 Pourade (1965), Hennessy (1993) and in the Journal of San Diego History
all write about the importance of the California-Panama Exhibition.
Specifically, Hennessy argues that, “Growth so dominated politics during this
period [1900–1920] that voters in a frantic search for prosperity and metro
recognition, returned only two mayors to office for a 2nd term.”
 Despite the success of Los Angeles the “Smokestacks” still envisioned San
Diego as a major port with large industries and booming commerce. On the
other hand, “Geraniums” preferred a resort town to industrialization. In the
end, voters voiced their preference for the smokestack strategy to growth
(Ports 1975).
 www.census.gov.
 This is using the 2009 GDP deflator compared to the 1947 deflator at www.
gpoaccess.gov/usbudget/fy05/hist.html. The original California Chamber of
Commerce data are not online, so it is difficult to calibrate them to federal
data series. However, from Rhode (2003) we find that, using 1948 again as the
benchmark, California had 8.157 of all business formations in the United
States and the Pacific Coast had 20.27 of all urban building construction.
California had just over 7 of the U.S. population in the 1950 census,
following about 5.6 in the 1940 census. Rhode also makes the point that the
Great Depression was still fresh in people’s minds, so a billion dollars in new
plant was undoubtedly important to people in California regardless of how
that squared with what actually occurred in New York or Pennsylvania.
 San Diego was the home of modern passenger aviation (see Starr), the
manufacturing location of Charles Lindbergh’s Spirit of St. Louis (Ryan
Aviation), the home of Consolidated Aircraft, and a constant booster of its
civilian aviation facility (later known as Lindbergh Field).
 These data are from the U.S. Census and are excerpted from “Table 8: Region
of Birth of the Native American Population of Los Angeles” in Fogelson
(1976). “Midwest” is the combination of “East North-central” and “West
North-central” in Fogelson.
 “Table 3” in Fogelson (1976) is fully titled “Negro Population and Nativity of
Foreign Born in Los Angeles 1890–1930.”
 The official Foursquare biography is at http://www.foursquare.org/about/
aimee_semple_mcpherson/p2.
 Los Angeles citizens were not complacent to accept the increasing graft in “a
boss-controlled city administration” and formed The Citizen’s Anti-Crime
Commission in 1923 (Peterson 1953). Immediately the commission sought
Berkeley police reformer August Vollmer to, “help in the reorganization of a
police department ridden by corruption and ineffectual crime control” (Douthit
1975). Vollmer’s appointment as police chief lasted only one-and-a-half years.
Moreover, many of his reforms did not survive his tenure. Douthit writes, “It

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 A Brief History of Los Angeles 

was not until the 1950s that the Los Angeles Police Department developed into a
professionalized police system under William H. Parker” (ibid.).
 In terms of church attendance, Los Angeles shared this trend with other
parts of the United States during the 1950s. Clifton L. Holland, a scholar of
church trends in the Los Angeles area, writes, “The 1950s in the Los Angeles
area were a time of religious revival when most protestant churches were
growing and their worship services, Sunday School and youth activities were
well attended.” (Holland 2008) One famous example of religious activity
in Los Angeles was the ultra successful Billy Graham-led revival campaign
in downtown Los Angeles under “the largest revival tent in history” (TIME
1949).
 It is worthy of note that popular sociology in the early 1950s (such as David
Riesman’s The Lonely Crowd and William H. Whyte’s The Organization Man)
attempted to paint sweeping change in American values orientation during
the period of our study, roughly the 1920s to the 1950s. Nevertheless, there
was a sense that these analyses were overextended. Seymour Martin Lipset
provided a wealth of historical evidence from early American travelers and
from his contemporary historians that built a firm case that values were
consistent even though technological and societal changes existed (Lipset
1961).
 It should be noted that Shaw came to the mayor’s office by defeating
a previous incumbent who was born in Iowa and was a notable pro-
Prohibition evangelical Protestant (Starr 1997).
 Recall that the Los Angeles mayor could not appoint a new chief directly.
Bowron’s influence came from his appointments to the police commission.

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 3
Corruption Reform,
Equilibrium Selection, and the
Institutional Entrepreneur
Abstract: This work is intended to be what has been called
an “analytical narrative;” that is, it is a presentation of a
specific, naturally occurring circumstance but with the analysis
examined through the lens of a strategic economic model.
The core of our model, corruption reform modeled as an
equilibrium selection problem, is presented in the first two
sections. We then describe in greater detail many of the policies
William Parker implemented in his reform drive in the
Los Angeles Police Department. We close the chapter by
relating his policies back to our model.

Isaac, R. Mark and Norton, Douglas A. Just the Facts

Ma’am: A Case Study of the Reversal of Corruption in the
Los Angeles Police Department. New York:
Palgrave Macmillan, 2013. doi: 10.1057/9781137354396.

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 Corruption Reform, Equilibrium Selection, Institutional Entrepreneur 

3.1 Corruption reform as a coordination problem

Davis and North (1971) argued that individuals or groups can make
rational decisions to change economic and political institutions, and not
simply optimize over choices or policies within those institutions. Davis
and North highlight such components of institutional choice as the
menu of possible new institutional forms, the gains from each of them,
and the costs of obtaining them, including the costs of organizing for
action, the costs of change itself, and what they called the “stuck” costs of
the potential of future disutility of a new institution.
The Davis and North approach is at the heart of our analysis, and can
be explained simply. The change from a system that we have seen some-
times fostered, and at the least tolerated, police corruption to William
Parker’s combination of “police professionalism” insulated from partisan
political control and his personal stark values against corruption was a
major institutional change for the City of Los Angeles. We will argue that
in the post–World War II era the costs to Los Angeles of reverting to (at
that time) their recent reputation as a corrupt, crime-ridden municipal-
ity were large, and so the incentives for the Los Angeles civic leadership
to support this change were substantial. However, a move away from a
system of corruption is qualitatively different from some of the institu-
tional change stories described by Davis and North.
In particular, the Davis and North model is largely decision-theoretic
with no strategic or game-theoretic aspects. We argue that a move away
from an institutional equilibrium of corruption must consider strategic
components, for two reasons. First, if the move to a system without
corruption is to be both successful and stable, then the new noncorrupt
outcome must itself be an equilibrium. Thus, we argue that anticorrup-
tion campaigns have the feature of a coordination problem in which a
central question is which of multiple equilibria will be achieved.
Second, if we are looking at a coordination problem, then there are
two separate parts of the problem itself. Obviously, the nature of the mul-
tiple equilibria can be spelled out. Indeed, it is not difficult to construct
conditions with standard assumptions such that equlibria include (1) an
outcome in which the police are corrupt and the citizens are complicit
with that corruption, but also (2) a Pareto-dominating outcome in which
the citizens and the police are honest. With enough retribution costs, no
single police officer nor any single citizen can deviate toward honesty in
a corrupt equilibrium. Likewise, in an honest equilibrium the penalties

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 Just the Facts Ma’am

(official and/or psychic) for the rogue policeman (or citizen) are severe
enough to rule out deviation toward corruption.
(By using the term “coordination problem” we are leaving it open as
to whether this is a traditional coordination game with multiple equi-
libria in the same normal form, or whether there are multiple, mutually
exclusive games that could be played.) A formal model of a corruption
coordination problem is presented in the Appendix.
This argument means that just because we observe corruption does
not mean that corruption is the inherent state of the world. There can
exist a coordination problem with multiple (corrupt vs. honest) equi-
libria. While it may be surprising that an organization such as the LAPD
could rapidly move from being one of the most corrupt to one of the
least corrupt police forces in the country, it is not out of the bounds of
possibility when looked at as moving from one equilibrium to another
in a coordination problem. In addition, when the honest equilibrium is
Pareto-dominating and payoffs are higher than the payoffs at the corrupt
equilibrium, there is exactly the opportunity for gains from institutional
innovation that are at the heart of Davis and North, even though we have
made their model more complicated by adding the strategic component.
Finally, in a coordination game, the real action is associated with the
problem of equilibrium selection, which is to say, “Why is one equilib-
rium observed rather than another?” Another way of saying this is that
the game form itself is a static concept, but the processes that influence
equilibrium selection are not static but emphasize change and transi-
tion. The real bite of the model comes in describing the incentives of the
individual or group institutional entrepreneur who work outside of the
normal form game (or games) to achieve the preferred noncorruption
equilibrium. We will argue that the structure we have just described will
provide a useful framework for analyzing the transition of institutions in
the LAPD from a corrupt to an honest equilibrium by the institutional
entrepreneur, William Parker, with at least the tacit support of enough of
the Los Angeles citizenry to make the transition successful.1

3.2 The institutional entrepreneur and

equilibrium selection
There are two reasons that an individual (either a policeman or a citizen)
might not wish to play in the Corrupt/Corrupt corner of the game

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 Corruption Reform, Equilibrium Selection, Institutional Entrepreneur 

matrix. First, the moral costs of personal participation could be great

enough that they outweigh the retaliation for being a “lone ranger”
in a corrupt world. Such an individual would make a decision not to
participate in the corrupt process and would accept the retaliation for
this nonconformity because it is outweighed by the gain in utility from
not being personally corrupt. That would change the Nash noncoopera-
tive equilibrium of the game. Alternatively, as an individual with great
personal disutility for participating in corruption, he may be motivated
not to act like a Nash player but rather a Stackelberg player who wishes
to move the society to the Pareto-superior honest equilibrium. Buntin
describes reformer Clifford Clinton both as a son of Salvation Army
Officers and as a businessman with an extensive record of philanthropy
for the poor.2
There is a large literature on possible processes by which such equi-
librium selection can occur (Schelling 1980). We wish to posit that this
“reforming” individual incurs some personal costs in creating insti-
tutional innovations that will lead to the new equilibrium, and hence
we call this person an “institutional entrepreneur.” The institutional
entrepreneur’s decisions in the context of this equilibrium selection
problem are analogous in this model to the decision-theoretic cost/ben-
efit analysis modeled by Davis and North. The institutional entrepreneur
(without loss of generality, a policeman) can be seen as choosing from
a set of possibility institutional changes where the expected gains from
institutional entrepreneurship can be modeled as:
ρj *(ΠP + γj Ω) + (1 – ρj ) *(ΠP – Ap ) – Cj

where
ρj = the probability that institutional innovation succeeds
ΠP = the private benefits to the entrepreneur of an honest world
γj = the proportion of the aggregate benefits which accrue to a successful
entrepreneur
Ω = the aggregate benefits of moving to the Pareto-superior equilibrium
Ap = the aggregate costs to the entrepreneur is he tries, and fails, to achieve
the Pareto-superior (honest) equilibrium
Cj = the direct cost to the institutional entrepreneur of attempting the
change

The institutional entrepreneur has a variety of tools available including

(a) creating a critical mass of players who are going to play at the new
equilibrium, (b) changing the incentives in the game, and (c) signaling

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 Just the Facts Ma’am

the Stackleberg-like intent to play at the new equilibrium. With these

types of actions, it is conceivable that the larger set of players (other
policemen and citizens) would follow to the new equilibrium as a best
response.
In terms of part (a) above (creating a critical mass of players), the
entrepreneur may have some direct, personal control over the selection
of individuals who will play the game. In terms of part (b) (the insti-
tutional entrepreneur changing the incentives), we suggest that prime
targets would be the retaliations for individual deviations from the cor-
rupt equilibrium and the sanctions for individual deviations from the
noncorrupt equilibrium. In terms of part (c) (signaling a commitment to
play the honest equilibrium), the entrepreneur could invest in signaling
his own values and intent to play the honest equilibrium. The channels
for such signaling would need to be far reaching. Logical candidates
would include social networks and the mass media.

3.3 Parker’s reforms

It is now received wisdom that good economic and political institutions
are associated with superior economic track records (Gwartney 2009).
But the crucial question, of particular import to developing countries,
is how economic institutions can be improved. Two of the most popu-
lar, and sometimes viewed as antithetical approaches, are (1) a change
in economic incentives to produce good institutional outcomes, or
(2) a change in the values of the polity. We argue here that not only did
William Parker’s reforms rely on both incentives and values, but in fact
it was imperative for their success that they reinforced one another, and
that both incentives and values play a role in the equilibrium selection
model we outlined in the previous section. However, for expositional
purposes, we will initially address Parker’s changes in incentives and val-
ues separately. We will conclude this section with some explicit examples
of how they worked together.3

3.3.1 Incentive reforms

Parker wanted a well-trained, well-paid professional police force. The
economic model that fits nicely is that of the efficient wage hypoth-
esis, with the concept of “shirking” in the standard models (Akerlof

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 Corruption Reform, Equilibrium Selection, Institutional Entrepreneur 

1982 and Shapiro and Stiglitz 1984) modified here to represent cor-
rupt behavior.4 The efficiency wage hypothesis adapted for the LAPD
problem was that Chief Parker wanted honest cops who would be fired
for corrupt activity, and in doing so would lose both future earnings
potential and social prestige. However, that simple restatement packs
together numerous pieces of a reform agenda that need to be examined
separately.
The Efficiency Wage Model as applied to Parker’s reforms: Corrupt behav-
ior would be identified. Corrupt officers would be disciplined, even fired.
Corrupt officers, thus fired, would face an outside option of lower utility,
both in monetary terms and in terms of social respectability.

First, consider the proposition that corrupt behavior would be identified.

William Parker came to the Chief ’s job as the head of the new Internal
Affairs division under his interim predecessor Arthur W. Worton
(Kramer, Buntin). Strengthening the role of Internal Affairs in exposing
corruption became a hallmark of Parker’s reforms. In Parker on Police5 he
wrote (p. 207):
Little known is the fact that an entire administrative division of the police
department devotes its time exclusively to investigating complaints against
policemen.

Parker also believed that junior supervisors should be rotated through

internal affairs as a part of their training.6 Boyer (p. 4) said that “Parker’s
first imperative was to create a police force that was impeccably clean.
He was compulsive about police honesty; the everyday transgressions
winked at in some East Cost police departments were often grounds
for instant dismissal in the LAPD. In Los Angeles, police officers even
bought their own coffee.” It was on his second day in office that Parker
reorganized the LAPD creating a visible new bureau combining, in one
office, Intelligence, Internal Affairs, Administrative Vice, and Parker’s
one of Parker’s personal priorities, a new division of Planning and
Research (LAT 1950b).
Parker instituted and defended from public criticism a rule that
required officers to submit to the LAPD an accounting of all of their
sources of personal income (LAT 1952e, 1952f). This may seem like a
small administrative point, but if an investigation showed that an officer
lied about any source of income, then that officer faced the possibility

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of administrative discipline or dismissal even if no underlying criminal

corruption case could be successfully prosecuted.
Probably no issue attracted Parker’s attention more than his insistence
on a “police professionalism” model in which he could discipline his
police officers without interference from the elected political hierar-
chy. In his first public statement as Chief, he promised, “It is my firm
intention that selections for promotion positions will be made in strict
conformity with the order of promotional lists” (LAT 1950a). Earlier
in his career, as an officer active in the police benevolent association,
Parker spearheaded an initiative petition that had (at least on paper)
enshrined police independence from partisan control. Parker never left
this issue. “The most important factor in police progress is the fact that
the department has remained consistently free from partisan political
control” (Parker quoted in LAT 1953a). Parker had years of experience
in the LAPD in which there was outside protection for corrupt cops (the
Philip Marlowe scenario about the LAPD overlooking vice activity is not
fiction). For example, the following recollection is from Buntin:7
One night [Parker] decided to protest the policy of nonenforcement by
parking directly across the street from a Hollywood house of ill repute in an
effort to scare the johns away.
“Listen, you stupid fuck,” the madam yelled at Parker, “you’re ruining my
business by hanging around here.”
“That’s the general idea,” he replied.
“What’s the next move?” she asked.
“The next move is to put you in jail.”

In a 1951 ceremony, the Los Angeles Chamber of Commerce honored

Parker for his first year of “outstanding service as head of the department.”
In accepting an award, Parker reiterated, “In Los Angeles, any police
officer can do his duty without reprisal” (LAT 1951d). The two quotes here
are only samples of Parker’s repeated statements on the importance of the
independence of the LAPD from partisan political control. Parker was
so convinced of the importance of the police professionalism model that
he was willing to make official public comments on future city elections:
“Organized underworld gangs are now among us, lining up for the next
municipal election to take over and run the city” (LAT 1952f).
The next link in the chain is that corrupt officers would be disciplined,
even fired. Kramer concludes that Parker “would not tolerate graft,
acceptance of gratuities, or fixing tickets which could result in severe

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punishment or termination” (emphasis added). In case this was unclear to

his recruits, Parker spoke to a graduating class and said the following:
I caution you against temptations to which you have never before been
exposed. You must be men of strong moral fiber in order to resist
them. If you do not resist them, not only will you be unhappy and
mentally disturbed but you will also risk loss of position and possible
imprisonment. 8

Parker was apparently not afraid to go to the popular press with news
of the discipline or dismissal of officers. In the 1952 Los Angeles Times is
the headline “5 Officers Suspended by Parker” (for doing unauthorized
detective work with a conflict of interest). In 1959 there was, “LAPD
Officer Suspended for Misconduct” (for having sex with a prostitute and
turning over his gun to her). In 1955, Parker arranged a sting operation
for someone attempting to implement a municipal bribe, and he person-
ally testified at the trial (LAT 1955).
The final part of the efficiency wage model is that there should be
evidence that dismissal from the LAPD would be costly in terms of util-
ity, both in terms of loss relative to the individual’s opportunity wage but
also in terms of the shame or dishonor from firing. Consistent with this
conjecture, the historical record is replete with references that Parker
preferred a small, well-paid and highly trained force. Parker did not
exhaust his budget to expand the number of officers but rather he kept
the quantity below the authorized level (and well below the per-capita
representation in other major cities) while pushing for higher wages.9
Parker spoke passionately about wanting the job of an LAPD officer to be
both financially remunerative and socially respectable. On his first day in
office, Parker made the following statement to the officers (LAT 1950a):
I shall do all in my power to accomplish those things necessary to make the
policeman’s life a little brighter and the load a little lighter. In return, I ask
only that we remain steadfast in our loyalty to the people of the community
whom we serve; that we ever remember that our oath of office binds us to a
life of service to the community.

In Parker on Police he wrote:

Should policemen have social status? Just how important is it that they be
respected, perhaps occasionally honored, as vital to community peace and
security?…Take recruiting. We are having a difficult time enlisting quali-
fied candidates into our ranks. Thousands of acceptable young men with
no better prospects in sight steadfastly refuse to consider a career of police
work. They are not afraid of hard work. What’s the problem? Simply they
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consider that a police oath would automatically deprive them of the respect
and status they want in life.

This was not an isolated quote. Reading through Parker on Police, he

visited this theme at least six times (pp. 8, 27, 37, 42, 152, and 153).
Indeed, Parker’s concerns were reinforced by others in Los Angeles. In
1952, Los Angeles City Council member Harold Harby was concerned
about the opportunity wages for the police: “They can get more money
as a hod carrier or construction helper and have only a five day week
with no night work” (LAT 1952c). By the sunset of Parker’s tenure, TIME
magazine could write, “Though it has the highest pay rates of any police
force in the U.S., the department is seriously undermanned; it has only
5,018 men to cover 458.2 sq. mi.—ten cops per sq. mi. v. 39 in the aver-
age U.S. community. Nonetheless, Parker has an admirable record of
arrests…and has chased the Mafia all the way to Las Vegas.” TIME may
have seen this outcome as paradoxical, even undesirable, but the small,
well-trained, highly paid LAPD was arguably the vision of Parker’s “Thin
Blue Line.”10
If Parker succeeded in raising the LAPD wages, what, other than
speaking about the issue, did Parker do to improve the perceived social
status of an LAPD job? The answer is that Parker’s vision of the role of
LAPD officer in society was broadcast to the world on a weekly basis in
the famous TV (earlier, radio) show Dragnet. Parker was formally rec-
ognized as a special advisor to the show and provided many benefits to
the production. Consider, from our introduction, the Joe Friday speech
about a corrupt cop. Instead of dismissal from the LAPD being an event
of no significance, the dirty cop is colorfully depicted as a person of
dishonor, a social pariah. (It should be noted that in the episode, the
dirty cop was not depicted as an actual LAPD officer, but rather as an
impostor.)

3.3.2 Ethical reforms or values

Buntin’s book is as close as we have to a full biography of William Parker.
Coming approximately 60 years after Parker’s appointment as chief,
there has certainly been time for the usual reevaluations and revision-
isms. Even as Buntin’s book unsurprisingly demonstrates that “no man is
a saint” in discussing the stresses in Parker’s personal life,11 it is striking
how much in Buntin’s book supports what has been asserted for years
about Parker’s values as a policeman. William Parker was a deeply
religious, honest cop who demanded honesty from his colleagues and

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subordinates. James Ellroy, the novelist whose L. A. Confidential provided

thinly disguised versions of some of the LAPD corruption described
in this book, wrote that “Since William Parker took over in 1950 the
LAPD’s march forward has been almost entirely progressive” (Dunphy
2005). Boyer wrote that “Parker’s first imperative was to create a police
force that was impeccably clean.” Kramer (p. 12) says, “At an early age,
Parker developed a rigorous adherence and respect for the law which
guided him throughout his career in the LAPD and set him apart from
his peers.” And she also reports (p. 25) that Parker “enforced the law
rigorously and indiscriminately.” But undoubtedly the most striking nar-
rative of Parker’s personal standards has been reported by both Buntin
and Kramer. A young LAPD officer who had a talent for writing found
himself him assigned to writing speeches for Chief Parker. Years later,
that former officer, Gene Roddenberry, created the iconic television pro-
gram and entertainment franchise Star Trek. According to Buntin and
Kramer, Roddenberry modeled the character of Mr. Spock after William
Parker.12
It is one thing for a chief of police to be a personally honest man.
Going beyond this, an honest chief of police may prefer to surround
himself with honest colleagues.13 We think that the record demonstrates
that Parker actively used his position as Chief of Police to shape the
value of his officers and of the community with which they interacted.
Whether the result was a change in values or whether it was a priming of
existing but latent values is something that we will discuss further below.
The fact remains that a chief of police has a limited amount of time,
attention, and political capital in order to promote whatever reforms he
might see as promoting his agenda. The documentary evidence is that
Parker used that time, attention, and political capital to promote values
of honesty and reforms from corruption. This emphasis on values may
seem a diversion from the incentive-based reforms discussed previ-
ously, but Chang and Lai (2002) argue that both wage incentives and
internal norms can play useful, mutually reinforcing roles in solving
the organizational “shirking” problem, which we have reconstituted as
an anticorruption problem. Similarly, Becker and Murphy (2000) argue
for a “functionalist” model of norm formation in which incentives and
norms are intertwined.
In January 1951, Parker spoke to the Downtown Los Angeles American
Legion (LAT 1951a). The TIMES headline was “War Against Evils Pledged
by Parker.” Part of his address emphasized his personal commitment to

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reform. “With all the fiber of my being I will see to it that crooked rats
who would change the City of the Angeles to the City of Diablos will
not do so.” But some of his address spoke to the ethical imperative not
simply for the LAPD but also for the entire community.
We must drive the money changers from the temple of government…and
eliminate those parasites with their ill-gotten wealth, and we might as well
start this trend in Los Angeles, the City of the Angels….America must
necessarily undergo a moral and spiritual revival and the place to start is
government….We have in our midst avarice, corruption and greed—the
seeds of our own American destruction. We must correct these faults.

The venue of the American Legion is interesting because the TIMES

article reports that 3500 of the 4100 LAPD officers at the time were
veterans.
Just a few weeks later, Parker spoke at the Downtown Exchange Club
(LAT 1951b). Again, he explicitly used the forum to communicate not
simply the values of the LAPD but also his views about the appropri-
ate values of the community. “This country can no longer afford to
countenance vice and corruption as typical of the American scene.”
When O.W. Wilson compiled Parker on Police in 1957, following his own
introduction the first collection of Parker’s essays were grouped under
the title “Parker’s Philosophy.” The first article was entitled “Crime and
Belief,” and was an address before the 59th Annual Conference of the
International Association of Chiefs of Police in 1952. The following are
some excerpts from that chapter:
Crime has its birth in this clash between individual and group ethics….
Therefore if we are to approach crime at its most vulnerable angle, we must
recognize that man is a creature of belief. If anyone doubts the power of
belief, let him go to his history book and watch man rise and fall, love and
kill, exalt and fear—all on this basis….Hunger, poverty, maladjustment,
and other physical problems do not incite crime—they incite beliefs that
may produce crime…. A question immediately arises: Can individual
ethical standards be altered? The answer is unreservedly “Yes!”…Ideals,
morals, ethics, or by whatever name you call man’s convictions—they are
the indispensable tools of life.”

The second essay in this section is entitled “Religion and Morality,” which
was a speech delivered to the Holy Name Society in Los Angeles in 1953.
It is a fact that we have become a confused nation, and the path back is as
difficult as the course ahead….This confusion that has engulfed us must be

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eliminated, and there must be a return to fundamental honesty, morality,

and ethics in every facet of our lives. Who will lead the way? Perhaps a clue
to the answer to this question is to be found in our theme of today. It is a
valid premise that Religion and Morality are indispensable to human wel-
fare, it must be concluded that Religion and Morality are indispensable to
each other. Therefore, the leadership we require in this compelling return
to fundamental virtues must lie among those men who have been privileged
to understand the true relationship between God and man.

One of the most fascinating vehicles that Parker employed to solidify

the perception of the LAPD as an honest and trustworthy police force
was the popular radio and televisions program Dragnet. Parker was not
only an advisor to the show but his affiliation as “technical advisor” was
listed prominently in the closing credits. There is little doubt that Parker
used the affiliation with Dragnet to promote a value system regarding the
archetypal honest, hard-working LAPD police officer (Sgt. Joe Friday)
and that officer’s relationship with the community.14 Buntin’s take was
that Parker viewed that in Dragnet, “Total commitment to the highest
ideals of police professionalism would be the program’s goal.”15 As early
in his tenure as October 1950 Parker honored the radio version of Dragnet
for “an honest, faithful, and official portrayal of police officers in action”
(LAT 1950c). We discussed in 3.3.1 a specific example of a narrative in
which a (hypothetically) dishonest cop would be treated with scorn.
In Parker on Police16 Parker personally discusses his goal to increase the
number of qualified recruits with the comment that “recruiting films
starring Jack Webb were prepared for television and motion pictures.”
Sgt. Joe Friday was the “antifocal point” to Raymond Chandler’s lazy,
corrupt, spitting oaf of a cop from just a few years before. Within just a
few years, there would be no contest: Sgt. Joe Friday would become the
face of an LAPD policeman.17

3.4 Parker’s reforms and our model

Parker’s reforms map in a straightforward way into the two parts of

our model of corruption as an equilibrium selection problem. First, the
incentive-based reforms are going to change the payoffs for deviation
from either of the two equilibria: both the incentives to go “clean” in a
corrupt environment and the incentives against rogue corruption in
an honest equilibrium. For example, it is easy to see how in a world in

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which LAPD police officers and Los Angeles citizens believed that cor-
ruption was the norm, Parker’s reforms had the potential for altering the
retaliation costs associated with defecting toward honesty. By decisions
directly under his control that were part of the daily life of running an
honest police force, Parker lowered the possibility and/or severity of
retaliation against honest cops or against citizens who refused to enable
civic corruption. Through his obsession with police professionalism
independent of partisan interference, Parker additionally reduced the
scope of retaliation against honest cops from outside the force.
For those officers and citizens who viewed the natural equilibrium as
one of honesty, Parker’s reforms had a similar effect on the incentives
for defecting toward corruption. Reforms such as the rotation of officers
through different neighborhoods lowered the gains to corrupt activity.
And many of Parker’s reforms can be expected to increase the expected
sanctions for corruption, either by increasing the probability of detec-
tion, or by increasing the expected penalty conditional upon detection.
As an example of the former, consider the simple change in requiring
officers to reveal all sources of their annual income. A corrupt cop may
or may not be able to beat a criminal indictment and conviction, but
with internal discipline, the very act of hiding income, legal or not,
would become grounds for punishment. Likewise, in the essays in Parker
on Police, Parker discusses the role of the “internal affairs” system that he
strengthened. And, although nominally aimed at crime broadly defined,
Parker makes clear that he expects the LAPD to use modern technologi-
cal and statistical tools in crime detection and fighting; there is no reason
to believe that those same tools would not, in a parallel fashion, uncover
crime associated with a corrupt officer.18
Turning to the dimension of increased penalties conditional upon
detection, consider the implications of the efficiency wage model. If a
fired LAPD officer could easily find another job with similar pay, then
the dismissal from the force carried little bite (a point made repeatedly
by Buntin). On the other hand, as Parker worked to raise the pay of the
LAPD, dismissal could carry a real cost. Parker’s parallel campaign to
raise the social status of LAPD officers and to portray dirty cops as social
pariahs would intensify this effect.19 William Parker was not an econo-
mist and never used the term efficiency wage, but one cannot read his
repeated references to the role of increasing police wages as a barrier to
corruption and not expect that something very much akin to this model
is what he had in mind.

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Parker’s reforms had a second component other than changing the

individual, noncooperative incentives for defection. Equally as important
are reforms that address the equilibrium selection problem and make the
“everyone honest” equilibrium more focal.
One way in which Parker had control over the equilibrium selection
process was through the selection function of recruitment. The historical
record is unambiguous that Parker insisted on high physical and moral
standards in his recruits. Parker was undoubtedly aided by the fact that
he took over the LAPD soon after a large wave of returning GIs provided
a deep pool of new recruits. The selection of more officers with appropri-
ate personal values aided the equilibrium selection process by changing
the mix of officers likely to stay as honest cops.20
Parker’s vocal and repeated discussion of police and community
values of honesty and integrity created a focal point for LAPD and com-
munity integrity and thus served a crucial coordination function (and
we specifically include his expansive use of newly emerging media such
as Dragnet in this category).
We believe that the speed with which Parker reformed the LAPD
and the equally impressive change in public perception of the LAPD
are a testimony to the reforms as performing an equilibrium selection
function.
Notice that we are distinguishing between a potentially rapid change
in culture inside of the LAPD due to Parker’s incentive and self-selection
processes and the longer-term survival of the reformist cultural tenden-
cies in the Los Angeles population as a whole. But this is almost exactly
Roland’s (2004, p. 116) dichotomy between social norms as “slow-mov-
ing” institutions versus political institutions that “may change little for
prolonged periods of time, then change very abruptly.”

Notes
 After drafting this section of the paper, we became aware that Acemoglu
(2009) also used a multiple equilibria coordination game based on
“investment” activity in a developing economy. And, in a later section of the
book (p. 122) he argues that “culture may be one of the factors determining
whether individuals coordinate on the high- or the low-investment
equilibrium.”
 Kindle Location 1439.

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 Just the Facts Ma’am

 We will not address in detail some of the innovations that Parker introduced
in what might be viewed as the technology of policing. Reading through
Parker on Police one can find extensive descriptions of these types of
reforms such as reorganizing districts along census tracts and data-driven
deployment of police resources (see, for example p. 83). However, we will
provide a brief outline of some of the these in footnote 34 in a discussion of
the technology of detection of corruption.
 Our use of the employees’ “return gift” as adherence to a norm of
noncorruption is certainly consistent with Akerlof ’s original formulation.
From the beginning of his article, Akerlof develops the gift-exchange in
terms of norm-referenced behavior inside the organization.
 “Progress Report,” Parker on Police, pp. 207–208.
 “Police Challenge in Our Great Cities,” Parker on Police, p. 196.
 Kindle Location 1010–1021.
 “Crime and Belief,” Parker on Police, p. 22.
 For supporting evidence of this proposition, see Kramer, LAT (1950d, 1951c).
 See especially Buntin.
 Buntin paints a picture of a man who was usually a model of control but
who would have isolated outbursts of severe temper; a man who drank
sporadically but tended to overindulge on those occasions. The most
remarkable story in this regard in Buntin is when Parker realizes that a
member of the mob had witnessed a private occasion of his over-drinking,
Parker simply decides to quit. He apparently remained a teetotaler for the
remainder of his life.
 Buntin, Kindle Location 72–80. Kramer p. 78.
 Barnard (1938) noted that successful executives often were mindful of
choosing subordinates with an eye toward what he called “compatibility” or
“fit.” While his discussion covered many dimensions, personal values such as
honesty would be included. Additional evidence of Parker reorganizing the
LAPD with officers of his liking is provided in footnote 37 ff.
 An obvious question is what it was that Jack Webb got in return for
cooperation with Parker. Buntin discusses this in extensive detail. Webb
promoted the quasi-documentary style of Dragnet, and NBC reportedly
required that he keep his promise that the episodes would indeed be based
on actual LAPD cases. A great deal of attention was paid to the use of LAPD
badges, to the details of police procedures, and even to filming in official
locations. All of the above was made possible through LAPD cooperation.
(See Buntin, Kindle Locations 3880 and 3948–3953).
 Kindle Locations 3948–3953.
 “Practical Aspects of Police Planning,” Parker on Police, p. 85.
 By 1968, how many Americans would visualize the corrupt LAPD cops of
Raymond Chandler’s Los Angeles instead of Sgt. Joe Friday when Jack Webb

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 Corruption Reform, Equilibrium Selection, Institutional Entrepreneur 

and Johnny Carson created the infamous “Copper Clapper Caper”? Thirty-
three years after that parody online video records appear to have had at least
300,000 viewings so far.
 Parker reorganized crime reporting statistics (p. 83), required LAPD recruits
to be instructed in statistical methods (p. 155); introduced new budgeting
techniques (p. 94); formed a new planning and resources division (p. 79);
introduced new techniques in mapping (p. 79) and what he called “machine
analysis” of crime patterns—what we would commonly call MOs (p. 87). Of
course, Parker’s most visible crusade for advanced technological techniques
was his famous public feud with the courts which restricted police
wiretapping and electronic surveillance. Three chapters of Parker on Police, all
of Section VI, are devoted to Parker’s unhappiness with these restrictions.
 Kramer points out that Parker’s reforms protected officers who faced
discipline that was corrective in nature. She says (p. 27) “Parker built a
structure for professional review that would protect the officer’s position
and strengthen the department against accusations of lax discipline and
loose management.” Of course, our argument is that this system of internal
discipline also protected honest cops who might face unfounded, retaliatory
charges for not playing ball with corruption.
 While our text emphasizes the role of new recruits, which is particularly
important in the post-war period, there is also the issue of Parker’s
assignments among veteran officers. This brings our narrative immediately to
the infamous “Bloody Christmas” episode of 1951. We have intentionally set
aside an in-depth exploration of “Bloody Christmas” (Buntin, Kramer, and
Escobar 2003). The broader issue of race relations and the LAPD obviously
preceded Parker’s tenure (any officer with little more than 2 years service
involved in the episode would have been hired before Parker became Chief),
overlapped Parker’s tenure (consider the scrutiny the department received
after the Watts riots in 1965 (Buntin, TIME 1965)), and succeeded Parker for
many years. The most relevant aspect for our story is that Parker used the
aftermath to shake-up the LAPD personnel structure, what Buntin (p. 150)
refers to as a “massive purge” involving 90 officers including “two deputy
chiefs, two inspectors, four captains, five lieutenants, and six sergeants.”

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 4
Essential Components of the
Success of Parker’s Reforms
Abstract: Because our core model is one of corruption reform
as an equilibrium selection problem, it is important to analyze
in detail the conditions that we believe helped William Parker,
acting as what we call an “institutional entrepreneur,” to move
from a high-corruption to a low-corruption equilibrium. In
this chapter, we identify, and then explore in detail, four such
conditions: internal contestability, external contestability,
values, and media. These conditions are not discussed in
abstract terms. Instead, for example, with regards to the first
condition, we examine in detail the particulars of governance
in California in the 1930s, ’40s, and ’50s that promoted internal
governmental contestability. We attempt to provide the same
level of specificity with regards to all of our four conditions.

Isaac, R. Mark and Norton, Douglas A. Just the Facts

Ma’am: A Case Study of the Reversal of Corruption in the
Los Angeles Police Department. New York:
Palgrave Macmillan, 2013. doi: 10.1057/9781137354396.

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 Essential Components of the Success of Parker’s Reforms 

Parker needed various levers, authorities, and values in addition to his

courage to reverse the culture of corruption pervading his police force.
This chapter will detail the features that form the basis for his successful
reform: contestability, values, and free media. There were other institu-
tions that aided the success of his reforms, but these represent features
that were indispensable to the turnaround.

4.1 Internal contestability

It is difficult to imagine how William Parker would even have been in

a position to institute his reforms without two important features of
internal contestability (what the Founders might have called “balance
of powers”) within the rules of California government at the time. The
first of these is the initiative/recall system. While a junior police officer
and police union representative, Parker and his allies amended the City
Charter through the initiative system to put in place the building blocks
of police professionalism that Parker would use so successfully. And, the
recall of Mayor Shaw and election of Mayor Bowron was an enormously
important step for putting reformers in a position to appoint Parker as
Chief of Police.
Likewise, the unusually independent anticorruption powers of the
Los Angeles grand jury system provided information to the media
and the community of both the pervasive municipal corruption under
Mayor Shaw and later, under Mayor Bowron, of the 1949 “Brenda
Allen” prostitution scandal that exposed continuing problems inside
the LAPD.
It is critical to emphasize that we are not arguing that an early-20th
century Progressive model of politics is a prerequisite for 21st-century
anticorruption activities (indeed the Progressive model generates in own
shortcomings in municipal accountability). What we are arguing is that
internal contestability against a corrupt government would appear to be
extremely useful in order to lay the groundwork for reform. The nature
of this contestability may vary from country to country and from one
time to another, but we argue that a centralized, unified governmental
structure in which an entrenched and corrupt administration controls
all of the levers of potential change is not going to be hospitable to struc-
tural reform.

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4.2 External contestability

We previously observed that new military contracts and expanding

Western markets at the close of World War II generated large financial
incentives for Los Angeles to repair its image as a haven for municipal
corruption. Moreover, the presence of rival locations for civilian and
military business created a competitive environment for economic devel-
opment. The availability of alternative locations for business relocation
and expansion drives the institutional change. Without the constraint of
competition from cities such as San Diego, perhaps there would not have
been enough leverage to motivate the Los Angeles power structure to
install and sustain the reform-minded Parker.
After his appointment, Parker continued to drive home Bowron’s
point that corruption was bad for Los Angeles. The language employed
by Parker in various speeches indicates that he views corruption as a
financially and morally costly activity. We have previously quoted some
of Parker’s speeches regarding the elimination of corruption as almost
a moral crusade. But he was equally capable of reminding Los Angeles
business leaders that the presence of corruption was, in a practical sense,
bad for their business:
It is always a pleasure to discuss police problems with a group such as this
because businessmen are, first and foremost realists….[The business com-
munity of Los Angeles] has recognized their proprietary interests in the
community police organization and have devoted constructive attention to
its continued improvement.1

We have already mentioned the public appreciation that the Los Angeles
Chamber of Commerce paid to Parker after his first year in office. Thus,
although we do not have direct smoking-gun evidence that the Los
Angeles City leaders voiced publicly a specific fear such as the loss of
business to places such as San Diego if corruption continued, there is
clear evidence that Parker believed that corruption would be costly to
the Los Angeles business community, that he made them well aware of
this fact, and they responded in kind.
In addition to the Davis and North story that institutional change occurs
when benefits outweigh costs, this argument tracks well with market con-
testability and Tiebout competition arguments. From the demand side, if
consumers (business leaders, skilled workers, and so forth) have a set of
choices, they will choose the option that most satisfies their preferences.

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 Essential Components of the Success of Parker’s Reforms 

In addition to a macro view of how contestability shaped the reform

process in the LAPD we may also take a micro view of how institutions
were able to be changed through the contestability inherent in the effi-
ciency wage model. Even with the high level of recruitment standards
to become a police officer (high test scores, certain physical traits, etc.),
there were still a number of good candidates. If an LAPD officer failed to
act in accordance with Parker’s view of a good cop, he would not last on
the squad, and someone else would take his place.

4.3 Values

The contestability arguments are powerful and frequently employed by

economists; however, appropriate incentives and costs of change are a
necessary but insufficient condition for reform. Because there are many
situations characterized by benefits from defection, a critical mass of val-
ues will be necessary to overcome the financial incentives to deviation.
Elinor Ostrom and David Schwab describe the Game of Snatch (Plott
and Meyer 1975, which is similar but precedes the Trust Game of Berg,
Dickhaut, and McCabe 1995) which places people in such a situation
where deviation is profitable. They envision institutions such as reputa-
tion, the law merchant, and other knowledge disseminating devices that
guard against defection; yet, they conclude with the following statement,
Finally, it is worth noting that institutions—even well-designed ones—will
not lead to beneficial outcomes by themselves. Institutions are inseparable
from the people who make use of them, and, as noted above, all rules are
subject to manipulation by political actors. Thus, at some point, we must
cease to rely upon institutional corrections and place our faith in a citizenry
well educated in virtue. Ultimately, we must guard the guardians. It is our
hope that, by keeping our rules for institutional design in mind, we can
guard them well. (Ostrom and Schwab 2008, p. 223)

In such situations incentives will only lead to an infinite regress problem.

Ultimately, although it may seem to be a deus ex-machina, it is necessary
to install an economic actor who does not act based on his incentives,
but, from his values orientation.
We believe that in the 1930s Los Angeles was characterized by incen-
tives for the citizens to allow rampant corruption in part because the
retaliatory costs of rallying against corruption were high. Thus, there

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 Just the Facts Ma’am

were very few people guarding the guardians. One of the “guardians”
against public corruption would naturally be thought to be the local
district attorney, but from 1928 to 1940 that office was held by Buron
Fitts, who, as we mentioned previously, was indicted (then acquitted) for
bribery and was called “near psychotic” by one of the reformers. Mayor
Bowron was allied with the reformers, but it was a Chief of Police on
his watch who resigned amid the chaos surrounding the Brenda Allen
LAPD prostitution scandal. Once Parker was installed in office he called
on the police and citizens to hold themselves to a higher standard. But
Parker clearly saw the values of the LAPD and the community as mutu-
ally reinforcing. Again, from Parker on Police,2 he makes it clear that his
reform was not an exogenous imposition of new values from one of the
two sides onto the other:

Its members [the officers of the LAPD] are not an alien force, brought from
without to do a job. It is made up of citizens who carry the same strengths and
weaknesses as other citizens [emphasis added]. Law enforcement succeeds in
its task only so far as community interest lets it succeed, and it fails when
community neglect sows the seeds of failure.

Thus, this call to a higher standard was not for some foreign value
system, but, instead a reorientation to an existing value system—a
“memory of morality.” We argued in previous chapters that these val-
ues existed in a Los Angeles of transplanted Midwestern identities and
strong religious backgrounds. If we think of values as “conceptions of the
desirable” (Kluckhohn 1961) the relatively homogenous religious outlook
would make their conceptions approximately equal.3 Likewise, Parker’s
comments may have signaled that the cost of holding police to a higher
standard were lower than they were under previous regimes.
Overall, the expression of these values was encouraged under the new
regime Parker created in the LAPD. The expression of these values may
be viewed as fundamentally changing the cost-benefit calculus of the
police; but, it may also be seen that when the citizens expressed their
values they remind the police of their own values. It is indeed likely that
the institutional changes made by Parker were vital in making deviations
toward corruption more costly; yet, in a corrupt world deviation may oth-
erwise go unannounced without a citizenry whose values solve Ostrom
and Schwab’s infinite regress problem of guarding the guardians.
We thus return to the idea of equilibrium selection. We have argued
that the speed with which the reform of the LAPD was not only effected

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 Essential Components of the Success of Parker’s Reforms 

but also recognized externally (as in the case of O.W. Wilson) suggests
that there was more going on than simply changes in incentives at the
margin ameliorating a dominant strategy for corrupt behavior. Instead,
it suggests that reform may be rapid only when there is an underlying,
operative equilibrium selection problem; in other words, this type of
success requires that there be the potential for an honest equilibrium.
While such an equilibrium might, in principle, be supported merely by
an incentive structure, it will more likely exist when there is an underly-
ing reinforcing value system for honesty. In fact, it is possible that the
value structure itself feeds into the parts of our model that nominally
look like incentives. For example the sanctions for dishonest behavior
in an honest equilibrium is an expected value term; that is, it comprises
both the probability of and the penalties for being discovered to be dis-
honest. It ought not to be surprising that the probability that a corrupt
officer is uncovered and reported to internal affairs is a function of the
values for honesty and integrity of other officers who are in a position to
do the reporting.

4.4 Media

Parker utilized the free media extensively in efforts to turn around the
LAPD. We have already seen that he not only used the media effectively,
but openly discussed how the media were useful in his reform efforts
(the Jack Webb example). What seems apparent is that using the public
media was a low cost way of transmitting information about values,
expectations, and incentives to all the relevant populations: citizens,
police, and criminals.
Parker increased awareness that corrupt actions were morally imper-
missible through his language in speeches and interviews. Also, when
police corruption was uncovered Parker brought the information to the
newspaper to air in the public forum. This served at least two purposes.
First, his interviews and executive decisions served to highlight a focal
point for coordination for citizens and police. Second, because this cre-
ated common expectations it lowered the cost of coordination.
Another crucial point is the contestability of the press in Los Angeles.
Even though the Los Angeles Times was periodically sympathetic to “The
Combination,” the Los Angeles Examiner, owned by William Randolph
Hearst, provided an alternative. In addition, the pulp fiction novels of

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 Just the Facts Ma’am

Raymond Chandler also provided an honest glimpse into the dark side
of Los Angeles corruption.
The power of media to transmit information that shapes values, instills
public confidence, and improves coordination cannot be underestimated
in this case study. Citizens are less capable of acting as agents of account-
ability (“guarding the guardians”) when they do not have the information
available to monitor the actions in question. Ultimately, when citizens
have the values, information, and know that they have the support of the
reformers (such as Parker, in this case) they can significantly increase
the cost of criminal action.

Notes
 “The Businessman and the Police,” Parker on Police, p. 38.
 “The Businessman and the Police,” Parker on Police, p. 36.
 Additionally, it is worthy to note that in moral psychology harm and care are
frequently identified as the most salient moral foundation (Haidt and Joseph
2007). Moreover, the language utilized by Parker in many of his speeches
about how corruption harms other people can be seen as “priming” this
salient moral foundation.

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 5
Application to Economic
Development
Abstract: In Chapter 5, we return to the important motivation
for the entire monograph. Much of the debate over corruption
reform in developing countries has been about failure stories.
Our analytical narrative focuses instead upon an enormous
success in corruption reform, and lessons to be drawn from
it. But this example occurred years ago and far away, in both
distance and potentially in economic and cultural conditions,
from contemporary developing economies. We do not intend
to suggest that Parker’s specific reforms as such should be the
guide for current corruption reform efforts. Parker’s specific
policies were applicable to and successful for Los Angeles in
the 1950s. What we do believe is that the conditions that we
identified in Chapter 4 that supported Parker’s efforts can be
generalized across time and circumstances. Thus, we examine
the importance of political contestability, a free media, and a
focal system of values in the context of the current debate over
corruption reform in developing countries. We close with an
application to the novel “Charter Cities” movement.

Isaac, R. Mark and Norton, Douglas A. Just the Facts

Ma’am: A Case Study of the Reversal of Corruption in the
Los Angeles Police Department. New York:
Palgrave Macmillan, 2013. doi: 10.1057/ 9781137354396.

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 Just the Facts Ma’am

The case study approach is not frequently employed in economic schol-

arship because regressions cannot be conducted with a sample size of
one. Our thick description of the transitional period from corruption to
police professionalism in the Los Angeles Police Department will not be
applicable to all developing countries struggling to root out corruption.
Nevertheless, there are important environmental and specific anticor-
ruption initiatives in the LAPD case that will be salient to modern
administrations and bureaucracies.
In this chapter we provide an abbreviated description of current
empirical research on corruption. The tremendous overlap with prac-
titioner recommendations and reforms implemented in the LAPD case
is noteworthy; yet, perhaps it should not be surprising given the suc-
cess of the LAPD reforms. Humans have not changed so much since
the 1950s that Parker’s reforms would be rendered imprudent. But, we
do want to exercise caution because there are important differences in
countries that might make the exact cocktail of reforms in the LAPD
case misguided.
These important differences might be classified as important environ-
mental features that are preconditions for reform. In the LAPD case we
identified three essential elements: contestability, values, and free media.
Without these features we do not believe other initiatives could have
flourished. Since these were important features of the LAPD narrative,
we relate these observations to current development literature in addi-
tion to the more specific anticorruption initiatives.
We close with a discussion of the new concept of “Charter Cities” that
could capture all of these essential features. Moreover, these Charter
Cities provide an interesting variant on the “Big Push” approach to
development that remains popular in some practitioner circles.

5.1 The incentives-values approach

We argued that William Parker implemented reforms targeted toward
incentives and values. This two-pronged approach does not appear to
be an outdated recipe. Alongside incentives, development practition-
ers recognize a lack of values as an important contributing factor to
corruption. For example, in Corruption and Government, Susan Rose-
Ackerman concludes her section on competitive bribery with the fol-
lowing remark,

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 Application to Economic Development 

… [If] moral scruples fall as the incidence of corruption rises, such

phenomenon would contribute to both upward and downward spirals. A
similar result occurs if the probability of detection falls when the incidence
of corruption rises … (1999, p. 124)

While Rose-Ackerman notes that a lack of values and poor incentives

are both capable of producing a corrupt equilibrium, she presses forward
throughout the text with discussions of incentives. Other development
practitioners also discuss incentives but emphasize the importance of
values. In the edited volume, Fighting Corruption in Developing Countries
Mary Noel Pepys writes about reforming the justice system and makes
the following conclusion,
Clearly, one’s behavior is shaped by the threat of apprehension, conviction,
and punishment, but one’s personal ethics and moral values are the funda-
mental incentives for sound decision-making. Reforms must focus on one’s
personal ethics and societal attitude toward ethical behavior. (2005, p. 26)

Both incentives and values are discussed as causes and solutions to cor-
ruption problems. There are numerous case studies that would point to
the importance of both values and incentives. For example, in the tran-
sition to a computerized reservation system the Indian Railways were
concerned because clerks collected bribes to place customers in emer-
gency seats reserved for VIPs, or, purchased peak-time fares in advance
and resold them at higher prices. Heeks (2000) reports that there was a
reduction in this kind of corrupt behavior due to higher compensation
and increased professionalism clerks felt from wearing a white ‘lab coat’
uniform.

5.2 Incentive reforms

We have established that the general approach of altering both values

and incentives is thought to be important to development practition-
ers. But, now there are two important questions. First, are the reforms
Parker implemented in the 1950s popular among modern development
practitioners? Second, is there good evidence that such reforms work?
We begin with incentive reforms. Parker’s incentive reforms included
bolstering internal affairs, increasing wages, expanding “two cops per
car” rotating cops through different neighborhoods, and monitoring the
assets of police employees.

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 Just the Facts Ma’am

The cornerstone model for development practitioners is the rational

choice model of crime (Becker 1968; Becker and Stigler 1974; Rose-
Ackerman 1975). The model presents a clean description that criminal
acts are influenced through opportunity cost, probability of detection,
and severity of punishment. The clear description of the channels
through which criminal acts occur give rise to clear implications about
the kinds of interventions practitioners should pursue.
From the LAPD case a number of reforms Parker implemented seem
to aim at increasing the likelihood of detecting corruption. In particular,
having a strong internal affairs division, moving more cops to cars and
monitoring assets would all loom large for officers considering illicit
activities.
The additional cop per car policy represents a frequent refrain in
development economics. Scholars have traced this multiple observer
notion back to Poerting and Vahlenkamp (1998) and their term the
four eyes principle. The central idea is that multiple observers increase
the likelihood of detection (although it also might produce feelings of
shame). Among development practitioners this principle is set forth in
learning modules for public officials (Reiger 2005) and in guidelines for
procurement (Hussein 2005; Weihen 2005). To our knowledge there are
no field studies that provide evidence that the four eyes principle reduces
corruption; however, Schickora (2012) designs a laboratory experiment
to gain insight into this potential reform. The treatment manipulations
are one versus two people and, in the case of two people, whether the
bribe must be split. Schickora finds that corruption increases in pairs
because material gain is a more aggressive argument than moral objec-
tions; therefore, moral objections acquiesce. There are some important
limitations to the Schickora experiment but it is a good first step and
represents part of a larger movement to make development advice more
evidence-based.1
The monitoring of police income and accounts was an important
reform in the LAPD case. This served as both a deterrent and provided
Parker with data he could use to dismiss officers engaged in corruption.
In developing countries disclosure is a common prescription to help
combat corruption. It has become more popular since the Transparency
International Global Corruption Report 2006 where Mukherjee and
Gokcekus (2006) provide evidence that these disclosure agreements help
to reduce corruption. However, the details of the disclosure agreement
are important. When assets are declared, those declarations must be

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 Application to Economic Development 

verified, and, inconsistencies need to be prosecuted. This suggests that

small initiatives like this need the support of broader institutions.
The verification and monitoring of assets is one of the central func-
tions of anticorruption agencies or autonomous audit agencies. Since
these agencies are independent and wield special reporting status their
function seems to mirror Internal Affairs in our LAPD case. But, some
of the anticorruption agencies have additional responsibilities includ-
ing prosecution, education, and public opinion research. There have
been great successes among anticorruption agencies, for example, in
Hong Kong, Singapore, and Botswana; however, the UN Development
Programme (UNDP p. 5) warns that agencies are “not a panacea … [and
the successes] are not easily replicable because of the contexts in which
they operate” (2005). One specific example of an important “context” is
that these independent agencies should also be accountable. In Hong
Kong, their commission is accountable to four advisory boards. Other
agencies have similar measures. This is in contrast to the Argentinian
experience with its autonomous auditing agency falling victim to regula-
tory capture (Santiso 2008).
The rotation of cops into new neighborhoods mirrors the call for rotat-
ing government bureaucrats of different kind. The best-known recom-
mendation to “[rotate] officers periodically” came from Dr. Muhammed
Ali who was the Assistant Director of the Corrupt Practices Investigation
Bureau in Singapore (Ali 2000). Because corruption is still illegal the
corrupt want to negotiate with familiar faces. Beyond case studies there
is little evidence from field data to support the benefits of staff rota-
tion; however, there is some experimental data. Abbink (2004) reports
a significant reduction in corrupt decisions in a partners and strangers
setting (declining almost two thirds). Ryvkin and Serra (2012) report
a significant uncertainty effect where there is lower corruption because
agents lack knowledge about the corruptibility of their counterparts.
By far the most frequent recommendation seems to be increasing
the wages of those engaging in corruption. This is suggested because it
increases the opportunity cost of committing crime (Becker) or discour-
ages malfeasance (Becker and Stigler; Rose-Ackerman 1975). There is one
well-known research investigation with field data that tests the merit of
these claims. Van Rijckeghem and Weder (2001) demonstrate a negative
correlation between the ratio of government wages to manufacturing
wages and the level of corruption. However, establishing a causal link
is difficult given the limitations of their data (number of observations

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 Just the Facts Ma’am

is their greatest challenge). There has been more significant research on

this subject in the laboratory. Abbink and Serra (2012, p.95) summarize
a host of laboratory experiments on the topic of increased wages and
conclude, “Though the evidence is not unambiguous, public officials’
wages seem to have an influence on their corruptibility.”

5.3 The importance and coordination of values

The literature on values and development economics has indirectly

grown in recent years due to an interest in “culture” that can be thought
of as shared values (which fits well with our earlier definition of values
as “conceptions of the desirable”). Proxies for values such as language
(which contains information about feelings toward authority) have been
found to be significant explanations for governance quality (Tabellini
2008). Also, at least one natural experiment that holds incentives con-
stant but varies values sheds light on how important values are with
respect to corruption (Fisman and Miguel 2007).
In our case study of Los Angeles we focused on three sources of values
that helped reverse a culture of corruption. First, we noted that a sig-
nificant number of Los Angeles residents hailed from pious Midwestern
backgrounds. These widespread values ensured the receptiveness of
residents to the reforms and acted as a check against corruption through
the probability of detection. Second, there was emphasis on integrity.
William Parker maintained high professional standards as police chief
and in his personal life. He also demanded higher standards from men
who worked in the police department. There were strict mental and
physical requirements to joining the LAPD. His personal commitment
and the tough selection mechanism were crucial to changing the culture
inside the LAPD. Third, media generated focal points for citizen expec-
tations about appropriate police behavior. Also, they could be used to
tarnish the social image of would-be corrupt officers.
There has been a significant amount of research in other contexts on the
important role of religion in pro-social behavior. Religious organizations
are credited with enhancing social capital within communities (Putnam
2000), increasing civic participation (Gerber, Gruber, and Hungerman
2010), and reducing criminal activities (Lipford, McCormick, and
Tollison 1993; Hull and Bold 1995). There is also evidence that these ben-
efits extend to developing countries. Danila Serra (2006, pp. 245–246)

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 Application to Economic Development 

summarizes numerous empirical studies on corruption. Many of those

studies cite the percentage of the population Protestant as a significant
explanatory variable in reducing corruption. In performing her sensitiv-
ity analysis she concludes that,

Protestant religion is indeed a robust determinant of corruption; all the

299 regressions run result significant [sic] at the 0.05 confidence level. The
always negative sign suggests a negative impact on corruption … This is
one of the most interesting results of this paper … different religions may
have substantially diverse effects on corruption.

On the margin, we would expect this kind of effect from religions that
emphasize holiness and goodwill toward others. One explanation pro-
vided for the noneffect of Catholicism, Eastern Orthodox, and Islam is
their hierarchical structure. Because the religious organizations are hier-
archical there might be transference to their governmental organization.
With large systems of government there can be stickiness in the status
quo from a lack of competitive pressure. The reason we use the word can
here is that change can also occur at a rapid pace in hierarchical organi-
zations. Consider the Progressive Era institutions that relied on expert
implementation of plans. For a number of years the LAPD languished in
corruption; but Parker was able to make rapid changes to the culture and
institutions. There are a couple of interesting points in this comparison
that need attention. First, perhaps the most well-known champion for
those hierarchical Progressive Era institutions was Protestant Woodrow
Wilson. Second, the reformer of the corrupt LAPD, Parker, was Catholic.
This is worth noting because it demonstrates that these kinds of stories
about zeal for hierarchical organization and reformer attitude are “on
average” and not absolutes.
Finally, it is reasonable to ask whether this transference of authority
from one institution to another represents a “value” at all. Remember,
we had defined values as “conceptions of the desirable” and hierarchical
organizations do seem more or less desirable to some people. In fact,
moral psychologist Jonathan Haidt lists “authority/hierarchy” as one of
the five moral foundations (Haidt and Bjorklund 2008). An important
question that is unanswered in economics (due to the serious empirical
problems) is whether values cause institutions or institutions cause val-
ues. This is an important question for development practitioners since a
large part of their task is to implement new institutions that might not be
underpinned by values that appreciate those institutions.

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 Just the Facts Ma’am

There are a number of other channels through which values can effect
social change. For example, scholars have noted that one important
function the church serves is to coordinate heterogeneous beliefs about
moral behavior. In his essay “We Should All Pay the Preacher” Nobel
Laureate James Buchanan notes the (often unnoticed) importance of
values in economics,
Let it be acknowledged that we have a rational interest in the preferences
of others with whom we interact if their choices affect our economic well-
being, and let it also be acknowledged that, within limits, preferences can
be changed by investments in the institutions of socialization. The logic of
the economic argument for paying the preacher seems unassailable. (1994,
pp. 77–78)

In that article he promotes the notion that “Puritan virtues” are produc-
tive and facilitate economic exchange that increases wealth. Buchanan
sees the logic in paying the preacher to generate focal points among
people who might otherwise have heterogeneous beliefs. In develop-
ing countries another mechanism to transmit these focal points is the
media.2 Whether a local church or local television station, the power to
coordinate heterogeneous beliefs (and expectations) enhances possi-
bilities for voluntary collective action. Media also serve as an important
check and balance against government by providing information. This
is not a political institution per se; however, civil action is an important
facet of anticorruption prescriptions.
Also, through advertisements the media can attempt to change
the framing of how corruption is perceived. Corruption has been
labeled a “disease [that] robs children of their future.” Moreover, other
advertisements point out that corruption promotes “poverty, underde-
velopment, [and] human suffering” (Transparency International 2008;
United Nations Office on Drugs and Crime 2006). These commercials
are similar to the manner in which psychologists “prime” participants
in experiments to focus their attention upon a particular aspect of the
decision. According to moral psychologists, “not harming others” is a
universal moral foundation and a robust rationale for decision-making
(Haidt and Bjorklund). Thus, it makes sense that these anticorruption
commercials are attempting to “prime” these sentiments in the public.
There is also some mixed evidence on “framing effects” in lab experi-
ments. But, there are not a significant number of such studies, which
leads Serra and Abbink to call for more research in this area.

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 Application to Economic Development 

Finally, the presence of good leadership and a strong selection mecha-

nism are well known in development practice. The rhetoric of a recent
speech by former Malaysian Prime Minister Mahatir Bin Mohamad
(reported in Emh 2009) is instructive on the importance of integrity.
Mahatir emphasizes that to overcome corruption that people must have
good leaders that are beyond reproach,
When people have no sense of shame and their greed overcomes their bet-
ter judgment, corruption just cannot be stopped. No amount of explanation
about the destructive effect of corruption would be of any use … a leader
will show he means business with fighting corruption by disciplining him-
self into rejecting his greed for wanting what does not legitimately belong
to him. He must set this example. He more than anyone else must not be
corrupt.

Put another way, the anticorruption advertisements will not work if

the leadership does not live by the same values dispensed in the commer-
cials. Moreover, if you have leadership with high values you do not have
the Ostrom and Schwab (2008) problem of “who guards the guardians?.”3
Thus, leadership is important because leaders can communicate the
values and help people to coordinate on a common equilibrium. One
crucial component of leadership is assembling a good team. Therefore,
having improved selection mechanisms enhances the credibility that the
government is engaging in “best practices.”
In the LAPD case, Parker established numerous criteria for applicants
to become police officers. First, we reported that Parker had strict size
requirements and sought police officers that were physically imposing.
Second, applicants were required to pass a rigorous exam. Third, these
officers needed to demonstrate moral character. These standards acted as
a fine net through which few officers could pass. Applicants were awarded
positions as a result of their merit—not some favors from the political
process. In developing countries, this disbursement of positions based
on favors is a common problem. The reason this is problematic is that
you want the best people in those jobs. But, as Pepys notes, “Competitive
examinations [and other strict requirements], however, can only be
effective if demand [for positions] exceeds supply.” The LAPD opted for
a smaller, well-paid, and highly skilled force because their requirements
were so stringent.
The sentiment in the selection process is simple. If a person is
attempting to alter a culture of corruption then it is important to screen

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 Just the Facts Ma’am

for characteristics that improve the likelihood of achieving that goal.

This selection mechanism is discussed in the values section because the
reform is less about an institution that keeps people walking the line.
Instead, the selection mechanism alters the targeted personnel based on
desirable characteristics, of which upholding the values of the office is
supreme.
There is good news and bad news in our comparison between modern
development practitioners and the LAPD experience. The good news is
that the incentive reforms implemented under Parker are still popular
among practitioners. Also, the importance of values—while not receiv-
ing as much attention from economists—is still considered important.
As mentioned earlier, this incentives-values approach does not seem
outdated. However, the bad news is that there is not significant generaliz-
able evidence about the efficacy of our modern interventions.
The evidence we presented is true within the context of 1950s Los
Angeles. We believe that there exist elements that generalize across con-
texts; but that evidence is less clear. Also, there are other field studies that
have similar findings but suffer from the N equals 1 problem. And, there
are some empirical studies, but, with cross-country analyses it is difficult
to make clean inferences due to the large sample requirements of dif-
ferent estimators. Experimental evidence makes cleaner inferences but
suffers from problems of “external validity.” In the end assembling exact
information about development interventions is quite difficult—which
is, in part, the impetus for the surge in “randomized controlled trials”
(Banerjee and Duflo 2008). However, these randomized controlled trials
also have significant problems and detractors (Deaton 2009).
We turn our attention away from specific interventions to broader
context. While there are inference problems with specific interven-
tions, it seems that there is a solid case for some of the preconditions
for reform. In particular we focus on the preconditions of external and
internal contestability.

5.4 Contestability
Contestability measures how something is subject to competitive pres-
sure or scrutiny. In markets there is discipline through the competitive
process: (1) good products are rewarded with purchase, and (2) bad prod-
ucts are punished through the selection of other options. This feedback

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 Application to Economic Development 

mechanism helps guide firms and entrepreneurs toward production

decisions that are desirable. While the political process is not identical
(see Buchanan 1954 for elaboration), there is similar feedback common
to governments in higher income countries. On the other hand, those
mechanisms that help push poor decisions toward more desirable poli-
cies are often perverse in developing countries.
In most systems of government, politicians seeking reelection will
take actions that are desirable to a large segment of the population. In
contrast, the research of Bruce Buena de Mesquita and other political
scientists demonstrates that corrupt politicians are beholden to military
leaders and political backers called a “selectorate” rather than an elec-
torate (Buena de Mesquita et al. 2003). This undercuts the competitive
pressure toward improvement—though it does not eliminate the notion
that a given politician might be a “benevolent autocrat.”
Another form of contestability stems from companies making a deci-
sion about where to site operations. These should spur governments
to adopt rules that are conducive to attract businesses. However, since
some businesses are interested in extraction of natural resources that are
scarce and high-valued there are not outside options. This results in less
incentive for governments to reform (Collier 2007).
These natural competitive pressures are subverted through poor
feedback mechanisms. In contrast, when Los Angeles and San Diego
competed to secure private investment and government contracts, the
businesses and politicians provided feedback about how desirable those
destinations were for their enterprise or government. And, when there
were problems with Mayor Shaw, Los Angeles citizens were able to initi-
ate a recall election.
If we peel back another level there is an additional consideration that
is important for contestability. In our narrative San Diego sought smoke-
stacks (not geraniums) and endeavored to compete with Los Angeles. Los
Angeles did not desire to lose capital inflows or government contracts to
San Diego. This is akin to behavioral economic models where actors are
thought to make decisions based on some comparison set. Los Angeles
and San Diego were in each other’s comparison set. The question for a
specific developing country might be, “Who is in your comparison set?”
For example, in Paul Collier’s book The Bottom Billion he recounts,
When I settled into discussions with the government [of the Central
African Republic], I asked them a question that I always ask when advising
a government . . . which country did they wish to be like in twenty years

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 Just the Facts Ma’am

time? The group of government ministers discussed it among themselves

for a while, then turned back to me with an answer: Burkina Faso. Burkina
Faso! (p. 53)

What is important here is that expectations for achievement might be

influenced by the achievements of a neighbor. For example, Botswana
is a successful African country but the Central African Republic did
not mention Botswana. This is important for contestability because the
comparison set might determine who applies competitive pressure.
In addition to external contestability between regions there is also
contestability within the body politic. We call these checks and balances
on political decision-making “internal contestability.” Some internal
competitive pressure seems well accepted. For example, some develop-
ment practitioners favor bottom-up approaches to monitoring corrup-
tion and advocate for the role of citizens. This has been the impetus for
a number of randomized controlled trials on “bottom-up” monitoring.
As Bjorkman and Svensson (2009) note, the evidence on community
monitoring has been mixed; however, their project combines an RCT
with novel data sources and attempts to highlight correlates of successful
community monitoring. The results suggest that ethnic fractionaliza-
tion is an important determinant of success; this fits with the work of
Ostrom (1998) who notes that collective action is more difficult with
heterogeneous agents. Another stream of research on legal liability rules
complements these bottom-up monitoring investigations. As noted in
Rose-Ackerman (1999) (and in the antitrust literature) informants might
fear whistleblowing due to negative reciprocity. Some scholars such as
Lambsdorff and Nell (2007) have explored asymmetric leniency as a
possible institution to promote informants (see Serra and Abbink for a
survey of experiments on whistleblowing).
What seem important for internal contestability are both rules and
shared values. The shared values in Los Angeles were evident. Consider
Wright’s comment that “Los Angeles is a glorified Midwestern town.”4
These homogenous backgrounds might have made it easier for the
citizens to engage in collective action with monitoring. Also, there were
rules in place that enabled citizens to voice concern. For example, the
recall of Mayor Frank Shaw was initiated through citizen effort. Another
example of citizens making use of rules is the grand jury institution.
The grand jury could initiate investigations, spend a budget, and pursue
indictments against crimes in Los Angeles County. And, even though
there was negative reciprocity from these whistleblowing investigations

doi: 10.1057/ 9781137354396

 Application to Economic Development 

(the very real physical threats to Clifford Clinton, for example) citizens
were provided that opportunity.
Other checks and balances from the Los Angeles narrative would
likely not generate support. For example, one hallmark of the Progressive
Era is strong separation of bureaucracies from partisan political control.
The rationale was that experts who were designing interventions should
have ultimate power in their jurisdiction. By preventing interference
these experts would more perfectly enact their professional plans. For
anticorruption commissions this would seem to be a benefit; however,
there might also be concern that the anticorruption commission could
itself become corrupt without a check or balance against it.
The media seem to be a critical form of internal contestability. In a
recent Transparency International report, data suggest that, “The public
believe that media and the government are crucial to stopping corrup-
tion” (Transparency International 2010, p. 24). There is good support
for this view. As economists we are trained to look at actions not words.
People are said to “reveal” their preferences through their actions.
Because there are numerous case studies which detail government
capture of the free media for sycophantic purposes (Coyne and Leeson
2009) the importance of media seems more plausible.
Empirical studies on media freedom also suggest that media do not
become government run due to financing advantages; rather, media
become government run because it is beneficial for the government
to control the flow of information (Djankov et al. 2003; Lederman,
Loayza, and Soares 2005). Research from McMillan and Zoido provides
researchers with the rare opportunity to peer into the thoughts of a cor-
rupt politician. There was specific information on bribes paid to various
agent of internal contestability; but, the broadcast and print media were
the highest paid agents (McMillan and Zoido 2004). This collection of
research suggests media play a crucial role in internal contestability.5
There is also a vibrant literature that outlines causal, and, where endo-
geneity is a concern, at least correlational evidence that media freedom
curtails corruption (Norris and Zinnbauer 2002; Besley and Burgess
2002; Brunetti and Weder 2003; Reinikka and Svensson 2004). There
is no literature known to the authors that suggests that media freedom
increases corruption.
Media were extremely important in terms of uncovering scandal in
Los Angeles. When the Los Angeles Times was editorially supporting the
corrupt Shaw regime, the Los Angeles Examiner was actively engaged in

doi: 10.1057/ 9781137354396

 Just the Facts Ma’am

sleuthing stories.6 Moreover, media was an essential tool used by William

Parker to transmit information about his intolerance for corruption in
the police department. Parker believed the capability to send this signal
was of the highest value. He signaled the type of behavior tolerated by
the LAPD through the newspapers, but also utilized Dragnet to portray a
new image of Los Angeles police.
The increased recognition of corruption and straightforwardness of
media freedom as a facilitator of accountability craves answers for why
media freedom has not been featured more prominently in aid condi-
tionality. Media can influence both external and internal contestability.
There are numerous case studies that report media as the scourge of cor-
rupt governments. By raising public awareness of corrupt activity, media
alter the cost-benefit calculus of crooked regimes.
Finally, we highlight that the discussion cannot end simply with the
concept of a “free” media. It’s obviously possible that a “free” newspaper
or television station may have reasons to miss or ignore corruption. The
case of Los Angeles with the competition among newspapers highlights
the need for the media to be free but also contestable.

5.5 Charter Cities

Charter Cities propose a radically different approach to development

economics. The intellectual child of Paul Romer (2010), this approach
claims to need only three ingredients: land, charter, and enforcement. If a
country possesses a large and uninhabited parcel of land it can volunteer
that land to be established as a “special zone.” Then a charter, which is
“a foundation for a legal system”, and not a “detailed spatial plan,” would
specify the “process whereby the detailed rules and regulations will be
established and enforced in the city” (Charter Cities 2013). People would
be free to reside and conduct business in this Charter City and free to
move in-and-out of the city. Finally, a “guarantor” would ensure that the
charter is respected.
A motivating example for the Charter City movement is that of Hong
Kong. Although the origins of the special status of Hong Kong are quite
different from that anticipated in the Charter Cities program, its special
status has been accommodated by the Chinese government since the
return from British rule. And, pertinent to our present research, Hong
Kong has a track record of dealing with corruption over a time period

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 Application to Economic Development 

that spanned the return to Chinese sovereignty. The vehicle for combating
corruption, initiated in 1974 and continued through today, is the ICAC
(Independent Commission Against Corruption). In documents describ-
ing the work at ICAC, it is notable that they incorporate contestability,
values, and the media.7 For example, officers of ICAC have independent
power to make arrests. They have several programs to promote anticor-
ruption values among young people. They state that “media reports are
important….They provide useful information so that members of the
committee can ensure that the work of ICAC meets its mission and is sup-
ported by the Hong Kong Community at large.” And, in a case of media
history repeating itself, they collaborated with a television drama ICAC
Investigator 2009 based on true case stories. (The ICAC narrative does not
indicate whether the names were changed to protect the innocent.)
There are numerous questions that have been raised about Charter
Cities; however the heart beat of this approach to development is the
notion that institutions are important. The institutional approach to
development economics has become increasingly popular (see Acemoglu
2009). Our LAPD narrative discussed crucial institutions such as con-
testability and the media. In the case of Charter Cities, values can be
provided by the people selecting into the system (not unlike the deliber-
ate migration of like-minded Midwestern Americans into Los Angeles).
Each of these so-called essential features is unlikely to be independently
definitive, but we can conjecture that they will have joint significance.
For example, media freedom can influence values and act as an internal
check and balance on corruption; however, without integrity we once
again have the question of “Who guards the guardians?” Likewise, val-
ues are important; but, will values generate widespread support without
external motivation in good institutions?
This case study, from a city that knows a few things about story-telling,
provides some hope that corruption can be curtailed. While we are not
suggesting the exact recipe for reform, it is clear that both good institu-
tions and values are necessary for reform, and getting there is the hard
part. That’s a wrap.

Notes
 The reason practitioners promote the four eyes principle is that it increases
the likelihood of detection. This experimental design does not capture an

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 Just the Facts Ma’am

increase in the likelihood of detection that comes from having a second

person. Another reason to promote the four eyes principle is that it can
invoke shame from participants in the group. The experiment is context-free
rather than context-rich; this difference could matter.
 The ability for media to transmit values has gained recent attention in
economics with soap operas being linked to the reduction of fertility rates
in Brazil (Chong et al. 2008) and the belief that television shows altered the
perception of women in India (Jensen and Oster 2009).
 The selection process for “good leadership” can be precarious. Some elected
leaders are believed to be men and women of integrity; however, their tenure
tells a different story. For example, Jean-Bertrand Aristide was elected in
1990 with overwhelming support. Haitians believed the former Catholic
Priest, Aristide represented a higher-calling and would usher in a different
kind of government—they were wrong (Dupuy 2007). In other countries
democratic elections frequently trade one unscrupulous leader for another.
The identification of good leadership is a difficult exercise but that does not
diminish its importance.
 While heterogeneity represents an additional challenge to combating
corruption in some locales there are mechanisms to overcome those
problems. While people might have different ethnic identities groups can
form along other salient dimensions. Also, the power of the media and other
educational outlets should not be underestimated. Buchanan pointed out the
power of the preacher to make heterogeneous beliefs more homogeneous.
 The struggle to preserve media freedom persists in many countries. Citizens
in both Cote d’Ivoire and South Africa have worried that their government
will attempt to snare control of the media (Southall 2010).
 The Los Angeles Examiner was part of the Hearst chain.
 “Hong Kong: The Facts” and “Is the Independent Commission Against
Corruption (ICAC) Really Doing Its Job?” accessed at www.icac.org.hk on
April 5, 2011.

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 Appendix
In this Appendix we will add detail on the idea we intro-
duced in the main body of this volume, namely, modeling
corruption as a coordination game with two equilibria:
corruption and honesty. We present a highly simplified
example of a single stage game with two players: a citizen
and a policeman. First, some notation:
ΠP and ΠC are the baseline returns to a policeman and
a citizen, respectively, in a noncorrupt state of the
world.
WP and WC are the waste to a policeman and a citizen,
respectively, in a world with corruption. For example,
in Los Angeles during the 1930s there was corruption
in the hiring and promotion policies in the police
and fire departments. Some qualified job applicants
were rationed out of the pool, causing waste on the
labor side. And, a citizen had to address the fact that
during an emergency there was the possibility that
an unqualified policeman or fireman would respond.
In a contemporary example, one could consider the
Illinois scandal in which bribes for truck licenses
led to highway deaths caused by unqualified truck
drivers.1 In this example, WP and WC are active only
when there is a corrupt agreement (that is, only
when both the policeman and the citizen choose
corruption).
RP and RC are the expected retribution costs to the
policeman or citizen, respectively, of deviating from
a world in which everyone else accepts corruption.

doi: 10.1057/ 9781137354396 

 Appendix

In corrupt civic environments, reformers face the possibility of

economic harassment, violent attacks, and even death. In Los
Angeles such retaliation was neither hyperbole nor hypothetical
for reformer Clifford Clinton who faced official and unofficial
harassment of his business and even a bombing attempt (Buntin,
Los Angeles Almanac 2010, and LAT 1938d). The same is and was
true for police officers. Indeed, William Parker’s reputation as a
clean cop seems to have contributed to his career detour into the
Traffic division.
SP and Sc represent the expected value of sanctions to a policeman
and a citizen, respectively, of attempting corruption in a world in
which everyone else is honest. In the usual manner, SP and Sc can
be thought of as a result of both a probability of being caught and a
penalty condition upon detection.
–Vi represents the disutility to anyone of engaging in conduct that
they consider to be corrupt. These are reflections of the underlying
values of the population. If either a policeman or a citizen has no
moral qualms about corrupt activity, then these terms would be
zero. The terms are assumed to vary from one person to another,
but we maintain the assumption that Vi ≥ 0 i.e. that no one enjoys
being corrupt for its own sake.
ΘP and ΘC represent the possible gains to a policeman and a citizen,
respectively, of engaging in corrupt activity.
This structure creates a simple normal form game diagram with one
citizen and one policeman (Table A.1).
To reiterate, because this is a two-person model, waste from corrup-
tion exists only when successful corruption is ongoing, that is when both
the policeman and the citizen are corrupt. An obvious extension would
be to a world of N > 1 citizens and K > 1 policemen. In such a world,

Table A.1 A Model of Equilibrium Selection with the Possibility of Corruption

(Different Typefaces Indicate Deviations from Opposite Equilibria)
Citizen is corrupt Citizen is honest
Policeman is corrupt ΠC – WC + ΘC – VC ΠC – RC
ΠP – WP + ΘP – VP ΠP – VP – SP
Policeman is honest ΠC – VC – SC ΠC
ΠP – RP ΠP

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 Appendix 

the “waste” terms could be made to depend on the extent of corruption.

Such an extended model could also create a “tipping point” at which
deviations from an endogenous norm are either retributions flowing
from a world that is corrupt or sanctions from a world that is honest.
But, sticking with the assumption of a two-person world, let us add
some assumptions upon the parameters of this model.
(1) RP > WP – ΘP + VP
(2) RC > WC – ΘC + VC
(3) Vi ≥ 0 for both the policeman and the citizen
(4) ΘC + ΘP < WC +WP
If Assumptions (1), (2) and (3) hold, then this is a coordination game
with two pure strategy equilibria: (a) both the citizen and the policeman
are corrupt, and (b) both the citizen and the policemen are honest. What
are the interpretations of these assumptions? Assumption (1) implies that
the retribution toward an honest policeman who attempts to opt-out
of the corrupt world exceeds the net costs of living in a corrupt world.
(We use the phrase “net cost” under the assumption that WP + Vj > ΘP .
If the equality were reversed, this policeman would actually benefit from
being a dirty cop in a dirty world, and the issue of retribution for trying
to be honest would never be an issue). Assumption (2) makes a similar
statement about the retribution costs for a citizen trying to escape the
world of corruption. Assumption (3) implies that neither the policeman
nor the citizen enjoy being corrupt for its own sake, absent any reward
from corrupt activity.
Furthermore, if Assumption (4) also holds, then the honest equilib-
rium Pareto-dominates the corrupt equilibrium. Assumption (4) states
that the total gains from corruption are less than the total waste; that is,
corruption is a socially wasteful activity.

Note
 http://www.npr.org/templates/story/story.php?storyId=16051850.

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 Index of Concepts and Events
Black Dahlia murder, 10
California-Panama Exhibition,
7, 18
charter cities, 43, 44, 56, 57, 64
Colorado River, 9
“The Combination”, 14, 41
coordination problem, 21, 22,
33, 41, 42, 48, 59, 61
Davis and North model, 2, 3, 4,
6, 10, 21–3, 38, 64
Dragnet, 2, 3, 28, 31, 34, 56,
64, 68
efficiency wage model, 25
equilibrium selection, 3, 20,
22–4, 31, 33, 36, 40, 41, 60
external contestability, 3, 36,
38, 54
focal point, 31, 33, 41, 48, 50
four eyes principle, 46, 58, 72
Great Depression, 8, 9, 18
Hong Kong, 47, 56–8
Indiana Colony, 11
institutional entrepreneur, 20,
22–4, 36–7
Internal Affairs, 25, 32, 41, 45–7
internal contestability 3, 36, 37,
52, 54-56

Los Angeles and organized
crime, 3, 15, 16, 28, 34
Los Angeles County Grand
Jury, 14–16, 37, 54
Los Angeles Examiner, 41,
55, 58
Los Angeles prostitution
scandal, 16, 37, 40
media, 3, 24, 33, 36, 37, 41–4,
48, 50, 55, 56, 58, 64
Midwestern influences on Los
Angeles, 3, 5, 10–13, 18, 40,
48, 54, 57
monitoring, 45–7, 54, 63
police professionalism, 6, 21,
26, 31, 32, 37, 44, 64
Progressive Era (U.S.) and
related policies, 6, 12, 17,
29, 37, 49, 55
Prohibition (U.S.), 13, 14, 19
religion, 5, 10, 12, 13, 30, 31, 48,
49, 65, 66, 73
San Diego
aviation, 8
early years, 5–8, 10, 17, 18,
71, 72
post-World War II, 6, 9, 10,
18, 38, 53
“Smokestacks vs.
Geraniums,” 7, 18, 53, 71
doi: 10.1057/9781137323187
 Index of Concepts and Events 

U.S. Military, 8, 9, 65 social norms, 29, 33, 65, 71

water, 9, 72 Southern Pacific Railroad, 6
Santa Fe Railroad, 7
Social Gospel Movement, 12 World War II, 8, 9, 13, 16, 38

doi: 10.1057/9781137323187
 Index of Historical Figures
Bowron, Fletcher, 10, 16, 19, 37,
38, 40, 67, 68
Brown, Thaddeus, 17
Chandler, Norman, 16
Chandler, Raymond, 2, 14, 15,
31, 34, 42, 63, 64, 70
Clinton, Clifford, 2, 15, 16, 23,
55, 60
Cohen, Mickey, 4, 15–17, 68
Doherty, Frank, 16
Fitts, Buron, 15, 40, 67
Hearst, William Randolph,
41, 58
Horrall, C.B., 16, 17
Bin Mohamad, Mahathir, 51

Parker, William H.
early life and career, 13, 14,
16, 17, 25, 26, 37, 49
Parker on Police, 4, 25, 27, 28,
30–5, 40, 42, 73
the Thin Blue Line, 28, 66
Pegler, Westbrook, 15
Roddenberry, Gene, 29
Roosevelt, Franklin, 8
Roosevelt, Theodore, 17, 72
Shaw, Frank, 15, 16, 19, 37, 53–5,
67, 73
Shaw, John, 15, 55
Webb, Jack, 31, 34, 41, 64
Wilson, O.W., 2, 4, 30, 41, 73
Wilson, Woodrow, 49
Worton, Arthur, 17, 25
doi: 10.1057/9781137323187