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Economics of the Sicilian mafia

There are a few academic papers on this topic (see here) but my interest is in the sheer inefficiency of gangster-like rule of a country.  I have not read any of the scholarly accounts but have gleaned most of my insight from Peter Robb’s meandering Midnight in Sicily – it is one of the most entertaining and well-written treatments of the modern history of this region I have seen.

Interspersed with mouth-watering descriptions of Italian tucker is a rollicking good modern history of the region with an emphasis on the role of the Mafia.

This is a cruel organization that has penetrated the highest levels of Italian politics. But as an economist what struck me was the enormous social inefficiency of meeting a ‘property rights failure’ in western Sicily with rule by a mob of hoods which instituted killing as the punishment for rule-breaking. This sort of social history  is the ultimate anti-libertarian tract since the overwhelming implication is that strong central government, based on western-style democratic values, vastly outperforms rule by a mob of hoods. Self-interest decidedly does not drive the social advantage.

Delayed and inefficient economic development, low productivity and a social culture based on fear are some of the worst implications of mob rule.  It is both unfair to citizens subject to its rule but also grossly economically inefficient – even ignoring the transfers the society is impoverished by having a bunch of illiterate thugs running things. Social Darwinism fails.

16 comments to Economics of the Sicilian mafia

  • Tom Davies

    It’s hardly fair to call it “the ultimate anti-libertarian tract” most libertarians believe in strong but *narrow* government. Extortion and murder would be recognised as crimes by most libertarians, and many (most?) would agree that stopping them is a legitimate aim for government.

    Libertarian laws would hurt the Mafia more than our current “western-style democratic values”, because they would remove the victimless crimes of drug selling and prostitution from the areas in which criminals can make easy money.

    In fact, tongue in cheek, I’ll call it “the ultimate anti-conservative tract”, claiming that conservatives value existing institutions and are reluctant to change them, even if there are many things about them that don’t work!

  • wjr

    I agree with you Harry about Peter Robb’s book. It’s excellent and a great read. His later book on Brazil up to the accession of Lula is equally penetrating. Unfortunately the phenomenon of the mafia state is not confined to Sicily. Many would claim that post-soviet Russia falls into that category, as well as many thug-ruled states throughout the world especially central Asia and Africa. Also the rise of the neo-con right and crony capitalism in the more democratic western countries is a cause for serious alarm. Berlusconi’s bribery and corruption along with rule-bending and installation of ideologues in judicial positions (SCOTUS) shows contempt for democratic institutions and is a step along the road towards rule by intimidation.

  • […] Harry Clarke blogs about the very interesting Peter Robb book on Sicily which discusses the development of the Mafia, originally as a ‘protection agency’ because of the lack of proper rule of law. However, Harry comes up with some non-sequiturs in his post: This is a cruel organization that has penetrated the highest levels of Italian politics. But as an economist what struck me was the enormous social inefficiency of meeting a ‘property rights failure’ in western Sicily with rule by a mob of hoods which instituted killing as the punishment for rule-breaking. This sort of social history is the ultimate anti-libertarian tract since the overwhelming implication is that strong central government, based on western-style democratic values, vastly outperforms rule by a mob of hoods. Self-interest decidedly does not drive the social advantage. […]

  • Pariah

    The only thing separating the mafia from government is that the former still has a ways to go:

    “A gang is a group of men under the command of a leader, bound by a compact of association, in which plunder is divided according to an agreed convention.

    If this villany wins so many recruits from the ranks of the demoralised that it acquires territory, establishes a base, captures cities and subdues peoples, it then openly arrogates to itself the title of ‘kingdom’, which is conferred on it in the eyes of teh world, not only by the renunciation of aggression but by the attainment of impunity.”

    – St Augustine.

  • Sam

    Hi Professor,

    Try John Dickie’s Cosa Nostra for an historic account of the mafia in Sicily.

  • Jim Rose

    see The Economics of Organised Crime Edited by: Gianluca Fiorentini and Sam Peltzman

    I imagine the economics of the red mafia is huge, but that was against a background of a stronger government.

  • hc

    Thanks Sam and Jim, I’ve just started Alexander Stills, Excellent Cadavers but I will get around to your suggestions eventually.

  • Jim Rose

    thanks HC, there are also studies of drug gangs too

    Years ago, I remember reading a short news note in the AFR about a Rand study of occupational hazards facing drug gangs in Washington, DC in the 1970s.

    In a typical career of a few years:

    1. The chances of being caught by the police was 4%; and

    2. The chances of being murdered by a business associate or rival was 7%.

    Gave up on the war on drugs right there and then.

    The Wire is being repeating on cable at the moment. Is so good that Harvard sociologists set courses exclusively about the programme.

  • Jim Rose

    See Money from Crime A Study of the Economics of Drug Dealing in Washington, D.C. at http://www.rand.org/pubs/reports/R3894.html
    table 6.1 at page 104, got the death and serious injury and arrest numbers mixed up but not the compensated differentials

  • rog

    Jim, those figures are per year, not “a few years”. Over a decade a “dealer” would have a 1 in 7 chance of being killed

  • Jim Rose

    rog, thanks for scanning the paper. first time that I found the paper. I then went to bed.

    I did find the number that murder was the leading cause of death of young black americans.

    there are papers by richard freeman and roland fryer somewhere pointing out that the explosion of crack-cocaine in the 1980s caused a large enough relative shift in the legal and illegal job opportunities to be worthy of serious study

    http://www.economics.harvard.edu/faculty/fryer/files/fhlm_crack_cocaine.pdf

  • rog

    Jim,

    Perhaps you should read the articles that you link to before passing judgement. It would be helpful should you ever need to establish any degree of credibility.

  • Jim Rose

    rog, so you disagree with my argument that violent death and serious injury is the leading occupational hazard of drug dealing?

    another paper pointed out that one reason the death penalty did no work so well was because people spent so long on death row that taking them out of the drug trade increased their life expectancy.

    the execution rate on death row is about twice the death rate from accidents and violence for all American men, and only slightly greater than the rate of accidental and violent death for all black males aged 15 to 34.

    bad prison conditions—well known, pervasive and immediate—are likely to play a significant deterrent role. death row is a rather safe place to be?

  • Crazy Libertarian

    The mafia provides goods and services that are prohibited; in essence the black market. Gambling, Prohibition were its starting mainstays here in America. As it accummulated
    money, it also accummulated power. It’s very existence is an argument for very limited government.

    Having dealt with both the government and organized crime people, I prefer the latter. At least with the gangsters, you’ll usually know where you stand.

  • Jim Rose

    the mafia also ran protection rackets theatening legal small businesess.

  • If you are interested in a scholarly treatment of the Mafia, I recommend Gambetta’s book, _The Sicilian Mafia_.