It is hard to overstate the contribution of Alfonso Quiroz's Corrupt Circles to Peruvian historiography, as well as to the literature on corruption. The depth and breadth of Corrupt Circles is unparalleled not only as Peruvian history goes, but also because it constitutes the most comprehensive long-term monograph on the history of corruption of any Latin American republic—and, to my knowledge, of any developing economy to date. The book covers over two hundred years of Peruvian history starting with vivid accounts of widespread corruption in the late colonial period and ending with a detailed description of Alberto Fujimori's authoritarian regime and the corruption scandals surrounding him and his intelligence chief, Vladimiro Montesinos, in the last decade of the twentieth century. Quiroz’ thorough narrative of government malfunctioning is based on an astonishing volume of historical sources, including colonial treatises and accounts, diplomatic reports, legislative and judicial documents, and media reports.

Methodologically, the author builds on the insights of the New Institutional Economics. The country's historical evolution is presented as successive cycles of corruption followed by brief anticorruption reform periods that were swept away by powerful vested interests. These cycles present both a “systemic” component, and variable modes of graft that are highly responsive to changing economic incentives. The overarching theme across all seven chapters of the book—each of which focuses on a particular cycle of corruption—is the dominance of the executive branch and the virtual absence of checks and balances on the presidential power. But Quiroz goes well beyond this narrative dedicating the sole appendix of the book to measuring and evaluating the effects of corruption. The author finds that systemic corruption was consistently high throughout the period despite the cyclical variations. The peak periods include the early caudillo period (1820s–1830s), the height of the guano boom (1850s), the years that predated and followed the War of the Pacific (early 1870s and 1880s), the years of massive foreign borrowing under Augusto B. Legufa in the 1920s, the military revolution of 1968–1980, and Alberto Fujimori's regime. In the concluding section of the appendix, Quiroz ventures an estimate of the annual average costs of corruption (from 1820 to the year 2000) that range between 3 to 4 percent of GDP. These are clearly heroic estimates that should be taken only as reference points.

On the whole, Quiroz suggests that corruption imposed heavy costs on the Peruvian economy. He is most likely correct on this account. But the author treats corruption as a wrong that should be eliminated at all costs, not acknowledging that a certain degree of corruption at one point or another might very well be economically efficient. To be sure, relatively recent research on the economics of corruption, suggests that because government action to correct market failures requires the use of a bureaucracy, it will certainly create opportunities for graft. Given that such opportunities are extremely costly to eliminate, some degree of corruption could be seen as the unavoidable cost of dealing with market failures. In other words, there is an optimal mixture of market failures and corruption (see Daron Acemoglu and Thierry Verdier, “The Choice Between Market Failures and Corruption.” American Economic Review 90, no. 1 [2000]: 194–211). The implication of this basic insight is that the study of the economic effects of corruption should not be done in isolation, but should take such a trade-off into account. Granted, government intervention in Peru has rarely emulated the textbook version of the “benevolent dictator,” nonetheless, the provision of basic public goods, i.e., certain degree of order and the protection of property rights (however partial), undoubtedly helped reduce transaction costs. When government intervention helps the market mechanism, some degree of corruption can be seen as the lesser of two evils. Indeed, economic historians of the region have shown that, under certain circumstances, the partial protection of property rights (their protection for a subset of the population), despite its associated corruption costs, can be a second-best alternative that spur economic growth (see Stephen Haber, Armando Razo, and Noel Maurer, The Politics of Property Rights: Political Instability, Credible Commitments, and Economic Growth in Mexico, 1876–1929. New York: Cambridge University Press, 2003). Such was the case of Porfirio Dfaz's regime in Mexico which was preferable, despite its high levels of corruption, to the alternative of extreme political instability and chaos that took hold of Mexico in the early republican period. There are other methodological issues worth noting. The author's measurement and comparative analysis of corruption raise some problems that might be to some degree unavoidable, but that are important to recognize. First, the author relies heavily on accounts of corruption by the media and individual observers, which he takes at face value. Considering the incentives (ideological, political, and otherwise) that these individuals might have faced, it seems a bit of a stretch to give them such weight. Also, because the data sources are not consistent over time, the comparative assessment of levels of corruption should be taken with great caution. Finally, and for all the merits of Quiroz's narrative, I wish he had pushed his analysis a bit further. In particular, I was left wondering about the country's institutional evolution. Why was Peru seemingly unable to break away from such a suboptimal equilibrium? Quiroz points to path dependence, the continuity of colonial-style patrimony and the power of vested interests as underlying factors. But because Corrupt Circles does not develop a theory of institutional change, its account of this evolution is only tentative.

All that said, this book is a monumental research achievement and it is absolutely essential for Peruvianists as well as for economic historians of the region, and for all of those interested in the study of corruption.