The Economics of Organised Crime

The first book to apply economic theory to the analysis of all aspects of organised crime.

This is the first book to use economic theory in the analysis of all the different aspects of organised crime: the origins, the internal organisation, market behaviour and deterrence policies. The theory of rent-seeking is adopted to help understand the origin of criminal organisations from a state of anarchy, while modern industrial organisation theory is used to explain the design of internal rules in the organised crime sector. The market behaviour of organised crime is analysed taking into account its double nature of competitive firm and of monopolist on rule-making. Finally, the 'crime and economics' approach is applied to the analysis of corruption that occurs when the organised crime sector and the government collude to exploit their monopoly on rule-making. This book provides a careful balance between theoretical and institutional or empirical contributions. Each chapter outlines the normative results of the analysis in order to design more sophisticated deterrence policies.

Foreword; 1. Introduction Gianluca Fiorentini and Sam Peltzman; Part I. Theories of the State and the Origin of Criminal Organisations: 2. Organised crime, Mafia and governments Annelise Anderson; Discussion Maurizio Franzini; 3. Gangs as primitive states Stergios Skaperdas, and Constantinos Syropoulos; Discussion William J. Baumol; Part II. The Criminal Organisation as a Firm: 4. Internal cohesion and competition among criminal organisations Michele Polo; Discussion Pier Luigi Sacco; 5. Conspiracy among the many: the Mafia in legitimate industries Diego Gambetta and Peter Reuter; Discussion Luigi Campiglio; Part III. Organised Crime and State Intervention in the Economy: 6. Rival kleptocrats: the Mafia versus the state Herschel I. Grossman; Discussion Marco Celentani; 7. Corruption: arm's-length relationships and markets Vito Tanzi; Discussion Flavio Delbono; Part IV. Deterrence Policies Against Legal Firms Involved in Illegal Activities: 8. Auditing with 'ghosts' Frank A. Cowell and James P. F. Gordon; Discussion Domenico Siniscalco; 9. The reputational penalty firms bear from committing criminal fraud Jonathan M. Karpoff and John R. Lott Jr.; Discussion Michele Polo; Part V. Deterrence Policies Against Organised Crime: 10. Regulating the organised crime sector Marco Celentani, Massimo Morelli and Riccardo Martina; Discussion Carlo Scarpa; 11. Oligopolistic competition in illegal markets Gianluca Fiorentini; Discussion Sam Peltzman; Index.

This book provides an economic analysis of the most relevant activities of the organised crime sector: its origins, its internal organisation, its market behaviour and the policies which can be employed against it. It also offers a formal analysis of the circumstances under which organised crime is more likely to become a threat to civil society.