Becker argues that heavily regulated industries may display more "corrupt" behavior than do less regulated industries. This assertion calls to mind the recent article in the JEL Economic incentives and social preferences: substitutes or complements?
I read this work as an important contribution to understanding the interaction between incentives, individual and social behavior.
So Becker and Posner would seem to be agreeing with Bowles et al in the assessment that economic incentives may well shape the informal institutional framework in a manner that is both wealth threatening and highly disruptive to wealth enhancing social capital. These types of perverse outcomes could lead to a spiral as further efforts to correct the perverse outcomes actually accelerate the disruption.
Is Banking Unusually Corrupt? Becker
"Financial intermediation was formerly dominated by commercial banks that borrowed short term and lent long term to local and sometimes national businesses. In those days, banking leaders denoted solid, respectable, if not very imaginative, individuals who were the pillars of society. Commercial banks are still important, but modern financial intermediation is dominated by investment banks, mutual funds, and hedge funds that often invest large sums of money in equities, derivatives, and other mainly risky assets, including junk bonds.
Has this change in the nature of modern banking changed also the type of individuals who enter banking toward those who are more likely to be more corrupt and of lower character than the traditional banker? An April 2010 study in The Daily Beast, in partnership with the think tank Transparency International, listed the 17 most corrupt industries. Wall Street/ Securities was in fact number 2, but number 1 was Utilities, and numbers 3-5 were Telecommunications, Construction, and the Media. Traditional banking was among the remaining industries that were mainly other heavily regulated industries, such as mining, insurance, oil and gas, and pharmaceuticals. It is not clear how much weight to give to this and similar studies, but I believe two factors do encourage somewhat more corrupt individuals to enter modern banking."
Is Banking Unusually Corrupt, and If So, Why? Posner
"One has the impression—no more than that, but it is difficult even to imagine what “evidence” is obtainable that could confirm or refute the impression—that imprudent, unethical, unlawful, and downright criminal behavior is more common in large financial institutions (“banks,” as defined in the next paragraph) than in other, and otherwise comparable, business firms. Much of this behavior occurred during the housing and related credit bubbles of the 2000s and was discovered in the wake of the financial collapse of September 2008, yet much seems to have taken place afterward as well, continuing up to the present with the Libor scandal."