Kumar, Vimal; Skaperdas, Stergios --- "Organized Crime" [2009] ELECD 463; in Garoupa, Nuno (ed), "Criminal Law and Economics" (Edward Elgar Publishing, 2009)

Book Title: Criminal Law and Economics

Editor(s): Garoupa, Nuno

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781847202758

Section: Chapter 10

Section Title: Organized Crime

Author(s): Kumar, Vimal; Skaperdas, Stergios

Number of pages: 14

Extract:

10 Organized crime*
Vimal Kumar and Stergios Skaperdas


Introduction
The core function of organized crime is the selling of protection. Protection
can be real, against third-party crime, or manufactured by the organized
crime groups themselves. Mafias and gangs emerge in areas of weak state
control, because of prohibition and geographic, ethnic, or social isolation.
Although competition is considered good in economics, in the case of
organized crime the predatory competition that is more likely to take place
is harmful. The costs of organized crime include the resources expended
on the activity, more ordinary productive and investment distortions, as
well as other dynamic effects on occupational choice.
From highly sophisticated mafias to youth street gangs, organized crime
is present in almost every country in the world. In addition to the better
publicized Italian and American mafias,1 examples include the Yakuza
in Japan, the Triads in Hong Kong, Shanghai's Green Gang, Colombian
and Mexican drug cartels, numerous groupings in post-Soviet states,
youth gangs in Los Angeles, New York, Soweto, or Sao Paulo, as well as
many other less well-known ­ even some, given the nature of the business,
unknowable ­ groups.
Organized crime engages in much regular economic activity, the produc-
tion and distribution of a wide variety of goods and services that are typi-
cally both legal and illegal ­ from construction and restaurant services to
drugs, gambling, and prostitution. For that reason we might be tempted to
think that mafias and gangs are just like any typical business ...