Ancient law & economics: Sabbath-breaking edition

Ancient law often seems especially cruel to us moderns. Not only do ancient laws often condone and systematize things we find repellent—a topic for another day—but the punishments seem especially harsh. One famous example from the Torah*:

Exodus 31:12-17 Revised Standard Version (RSV)

The Sabbath Law

12 And the Lord said to Moses, 13 “Say to the people of Israel, ‘You shall keep my sabbaths, for this is a sign between me and you throughout your generations, that you may know that I, the Lord, sanctify you. 14 You shall keep the sabbath, because it is holy for you; every one who profanes it shall be put to death; whoever does any work on it, that soul shall be cut off from among his people. 15 Six days shall work be done, but the seventh day is a sabbath of solemn rest, holy to the Lord; whoever does any work on the sabbath day shall be put to death. 16 Therefore the people of Israel shall keep the sabbath, observing the sabbath throughout their generations, as a perpetual covenant. 17 It is a sign for ever between me and the people of Israel that in six days the Lord made heaven and earth, and on the seventh day he rested, and was refreshed.’” [emphasis mine]

One way to deal with this passage is to say that God said it, and God’s wisdom is greater than ours, so we don’t have to understand it, we just have to do it however harsh it seems. (As long as we’re in the population to whom the law applies, Jews in this case.) There are various other apologetic ways to look at it. I’m not inclined or qualified to discuss all of them, but they’re similar.

If one interprets this example as coming from a human document the analysis is very different. There must be some other justification intelligible to humans. A little law & economics can help here. The Torah law is incredibly thorough in its proscriptions. Some of them govern the minutest details of daily household life. The probability of detection for many of these infractions is very low. If a person is seen to commit an easily detectable infraction, it’s likely he is also committing and getting away with smaller infractions.

The logic of punishing things that are easier to detect because of an assumed correlation to things that are harder to detect (or prove) is apparent even today. Al Capone went to prison for income tax violations even though it was known by everybody that he was involved in many more serious matters. Structuring laws punish how people deposit and withdraw cash because this is much easier to detect than the illegal things they might do with the cash.

There was no science of forensics in the ancient world, no dedicated police force, and rarely any paper trails. In order to deter people from breaking the law when the chances of getting caught were slim, the magnitude of the punishments had to be ramped up. While we have no way of knowing it’s fair to assume violations occurred all the time without anybody else ever finding out about them.

The worthiness of the goals of these ancient laws, and indeed of parallel modern laws, is a separate topic. The goals of the Torah law may have been order and social cohesion among the people of Israel, or they may have been fabrications to shore up the power of the powerful at that time, or a combination. Readers of this blog know that I think the War on Drugs is a fantastically awful institution, for example, and it is one of the major justifications for structuring laws. But you can see how, given the ends, there is a logic to the legal means.

As a final note, though I don’t intend this as an apologia for any particular religious law, I suppose one could explain the passage by saying that God had the law & econ reasoning in mind when declaring the penalty for breaking the sabbath.


* I use the RSV here since the relevant passage in the Orthodox Jewish Bible is harder to follow for those not versed in it.

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The other kind of organized criminal activity

It’s one of the biggest crime scandals you never heard of. In 2013 chemist Annie Dookhan pleaded guilty to falsifying crime lab tests involving up to 40,000 people from 2002 to 2011. For this crime she was sentenced to 3–5 years in prison. You read that right. In response to her intentionally fraudulent work that may have resulted in tens of thousands of years of jail time for people who did not deserve it, in addition to the economic disadvantage of having drug crimes (or more serious drugs crimes than actually committed) on the records of people sacrificed to the correctional system Moloch, the judge gave her 3–5. Prosecutors were well aware of her activities. One email published during the trial showed the prosecutor suggesting what he wanted the result to be, which, surprise, Dookhan found.

A system of criminal activity of this magnitude should have had a mighty hammer brought down on it. My gut reaction is that this case is obviously offensive to any useful theory of justice and merits punishment on those grounds alone, but gut reactions are not good foundations for rule making. A stronger argument, the law and economics argument, is that punishments should be an efficient deterrent for crimes that are serious and/or difficult to detect. This pattern of crime was obviously hard to detect, as Dookhan got away with daily violations for nine years, enabled by other employees at the lab and prosecutors. And it is serious: 40,000 cases involving thousands or tens of thousands of years of prison time. It should be known by all crime lab employees that this is a behavior to avoid at all costs.

The Massachusetts Supreme Court could not completely reverse the damage, but it did rule in the right direction last year:

Massachusetts’ top court ruled on Wednesday that the state shares blame for thousands of drug convictions tainted by crime lab chemist Annie Dookhan, who admitted to faking test results over nearly a decade.

The ruling by the Massachusetts Supreme Judicial Court will make it easier for people convicted in drug cases linked to Dookhan to win new trials, by removing one of the standards for reversing a guilty plea.

“We must account for the due process rights of defendants,” said the ruling, written by Justice Francis Spina. “In the wake of government misconduct that has cast a shadow over the entire criminal justice system, it is most appropriate that the benefit of our remedy inure to defendants.”

The ruling said that in all cases in which Dookhan was the lead or secondary chemist, defendants were entitled to a presumption that there was egregious misconduct by the state – one of the standards for overturning a guilty plea.

This is very important. It is not only the individual lab workers who should feel the wrath of fraud. We apparently need to ensure that prosecutors, too, have greater incentives to favor honest lab work. To see their efforts undone en masse must have elicited a great wailing and gnashing of teeth except for what I imagine to be the tiny minority who were relieved that this miscarriage of justice had been reversed.

I bring this up now after seeing Radley Balko tweet about a crime lab scandal-in-the-making in Omaha. My concern over fraudulent lab results is not paranoid libertarian venting. Because crime labs are another arm of the same system that oversees police and prosecutors, they have incentives to falsify results. Taking it a step further, while there are no solid numbers on the victims in these situations it’s hard not to believe that they are disproportionately poor and/or racial minorities. This is an issue that should have people marching in the streets. Maybe when the next one comes to light.

“Doing” vs. “taking” drugs, with policy implications

One of the benefits of having smart friends is that you can do each other’s thinking from time to time. Last week I heard a speaker* at a seminar say “I don’t take drugs” instead of saying “I don’t do drugs”, and when I tweeted about it two of my friends had an exchange that I missed until an hour or so had passed. What they determined, and I agree completely, is that people who view drugs as something one takes view them as a corrective to a somehow “off” condition, and that people who view drugs as something one does don’t think of the doer as “off” but rather as interested in recreation. Consuming LSD causes a “trip” for just this reason, unless my folk etymology is grossly wrong. Of course, a person who views himself as normally in balance and does drugs for recreation may still take drugs for medical conditions.

This may be a trivial semantic distinction, but I believe it does reveal something about the attitudes of the speaker, or at least the attitudes of the speaker’s relatively narrow speech community. If one views drugs as something you take (for correction), a generation of college kids and hippies in the 1960s who don’t have anything obviously wrong with them in the first place** consuming vast amounts of drugs must be shocking and appear socially destructive on its face. If one views drugs as something you do (for recreation), the same phenomenon might appear fun and socially liberating, if also perhaps irresponsible. Yes, abuse is clearly possible, but in the first formulation all recreational use is abuse. This is a theme I’ve treated here before, and I think the empirical evidence is undeniable that this view is completely wrong. Certainly there are many people who abuse drugs, but equally certainly to say that all use is abuse is wrong.

As the reader will no doubt have noticed, the average man on the street all too commonly makes the leap from “X is wrong” to “there oughta be a law about X” without much consideration. If recreational drug use is ipso facto wrong, then there should be laws enforced against it. I don’t share this view, as the reader will also have noticed. For certain problems, the cure might be worse than the disease. I’ve written on this theme before as well.

As far as I have been able to observe, “do” is now the most common spoken verb in this context. The more neutral verb “use” sounds normal in writing but just slightly odd in speech. This brings us to another point. Attitudes about drugs, or at least about drug laws, have been growing more accepting for many years, and my guess is that the increasing preference for “do” over “take” reflects a broader shift in attitude, in part due to demographic changes and in part to increasing experience with drugs.

In my opinion the main explanation for the current prohibition is public choice issues; the various interest groups that benefit from prohibition are vastly better funded, organized, and influential than everybody else. However, it isn’t as though public opinion has no effect. In the states that have made marijuana legal in varying degrees, it is much harder for a politician to proclaim that marijuana is a serious issue to be attacked with the full force of the law and not be run out of town. In other states this still flies with voters, but if my thoughts on this linguistic division and the increasing dominance of one side approximate the truth in at least some meaningful way, it is now only a matter of time. This should be good news for most people once they realize the social and economic devastation the drug war has wrought on the world, which to me seems very obviously to outweigh the downsides of drug use.

I mean, come on, is this the America you hoped for?


* The speaker was Camille Paglia, although getting more into that would rightly be its own post so I won’t do it here.
** Feel free to insert hippie joke here since I know you’re going to do it anyway.

Wise words from Richard E. Wagner

From To Promote the General Welfare: Market Processes vs. Political Transfers, p. 56:

Whereas instances of policy failure are commonly attributed to ignorance or unforeseeable events, those failures may often be an understandable and predictable outcome of prevailing institutions—either as the intention of policy or as the by-product of a separate intention. Policy failure has often been attributed to mistakes and ignorance, but it might rather be the result of the rational pursuit of interest and not really a failure from the perspective of those whose interests are controlling the choice at hand. [emphasis mine]

I think something along these lines every time I hear somebody proclaim that the War on Drugs, some instance of foreign intervention, or a government department or policy is a failure.

The best news from the 2012 elections

The most exciting result from the recent elections was the legalization of the licensed sale and use of small amounts of marijuana for persons 21 and over in Colorado and Washington. Colorado’s measure seems to be a little better than Washington’s, but I will not nitpick details here. The overall theme is that liberty and civilization got a big boost.

I’ve written on this theme before, so I’ll be brief here. This is a list of harms caused by Prohibition:

1. It is detrimental, philosophically, to civilization. Your right to control your private sphere of action is a sine qua non of civilization. If the government’s scope of control is commonly believed to include your private activity, very few things will be considered outside its scope.
2. Prohibition has expanded police and prosecutorial powers in uniquely harmful capacity. There is almost nothing that law enforcement officers and prosecutors of all varieties haven’t tried to justify doing based on fighting the Drug War.
3. These expanded police powers are more likely to be used on the more vulnerable elements in society, and this is precisely what we see. The lifelong handicap to one’s job potential by being arrested even for simple possession at age 18 is big, and is bigger the fewer options one already has.
4. It creates and perpetuates massive opportunities for organized crime and violence. When people still demand the product in large numbers a market will function, but since contracts in this market are unofficial and legally unenforceable the consequences will be predictably bad.
5. It diverts billions of dollars annually from productive uses into destructive uses (see #3 and #4).
6. It prevents billions more from being capitalized in productive ways. Lots of people want to drink wine, so a multi-billion dollar legal industry exists to cater to their demands. If marijuana were legal, the market would be organized in a very different and more productive way.
7. It discourages “experiments in democracy” and raises the costs of reform by directing the entire effort at the federal level. I expect more states to follow Colorado and Washington’s lead in fighting back.

I could go on; this is simply a list off the top of my head. Medical marijuana reforms are good as small steps to a more rational and liberty-minded drug policy, but they are more fragile. Though it becomes harder to crack down on individuals for possession, the DEA and local governments can throw a massive wrench into the system simply by targeting dispensaries. In a situation where people can legally grow their own plants, this kind of crackdown becomes exponentially more difficult. Instead of a list of names and addresses, the places they want to bust could be anywhere. Needless to say, I expect these crackdowns to be gradually abandoned.

The federal government will be very concerned about this, as marijuana legally grown and possessed in Colorado and Washington inevitably ends up in other states. It will continue to rely on a ludicrous interpretation of the Commerce Clause as its justification for Prohibition, but despite its best efforts it will be fighting against the tide. I’ve never tried growing a marijuana plant—and I’m not about to start—but from what I gather it is not that difficult. The federal government might as well try to enforce laws against leaving dishes in the sink.

All of this rests on the premise that it is possible to simply use marijuana and not abuse it, a distinction the federal government does not make. If these reforms lead to massive social chaos and millions of lost or wasted lives, my optimism will have been misplaced. But I hardly think these fears are even worthy of consideration. Besides, marijuana is already consumed all across country, and many (most?) Americans have tried it at some point in their lives without losing their minds and fortunes. There are costs and benefits to everything, true, but one could hardly argue that alcohol should be legal while marijuana is not, nor could one argue that alcohol prohibition is a sane policy.

Viewed from many years in the future, I think these initiatives will be seen as marking a major turning point in the advance of liberty. In the short term, perhaps near-future crackdowns by the Obama administration will open at least some peoples’ eyes to the mistaken belief that the Democratic Party really cares about civil liberties and may help some people of good intentions break free from the false consciousness that has kept them there.

The US criminal justice system, evidence of a massive societal failure

The country I live in has a criminal justice problem. A big one. In 2009, 7,225,800 people were in jail or prison or on probation or parole. That’s 3.1% of the population. Rates of incarceration have been sharply rising for a generation. To put it in perspective, the US has the highest rate of incarceration in the world. Higher than those of Russia, Cuba, China, Iran, higher than any other country’s. It’s so high that more people are incarcerated in the US than in China, even though China has four times the population of the US.

This represents a massive societal failure. It could be that people in the US are so highly criminal that this is what we could call the “natural” rate of incarceration, but I doubt it. There’s no reason for the rate of incarceration to start shooting upward in 1980 if we are simply more criminal.

If the underlying culture of the United States did not make the country more criminal on the supply side, the only other explanation is that there was more criminality on the demand side. Who are these people demanding increased criminality? There are a few culprits, but in my estimation almost all of it is due to US government policy.

However, it’s not simply Congress, the prison lobby, the prison guard lobby, the prosecutors lobby, the police lobby, and all the other usual suspects behind the growth of government. The segment of society that deals with criminals and criminal behavior is larger than the sum of these lobbies, and this segment as a whole started to use imprisonment as a solution to problems at a far higher rate. Ultimately, ordinary citizens in their capacity as voters were part of this group as well.

I don’t have the whole solution. I’m not a criminal justice expert. But surely it contains at least some combination of these elements:

1. Ending the second prohibition. This is bound to happen some day, and it’s a terrible thing, so let’s cut it out right now. Overnight millions of criminals can become productive members of society merely by undoing a stupid and destructive legal classification.
2. Thinking about the people we trust to run the criminal justice system. What incentives and constraints do they face? Why should we believe that their interests always run in the same direction as the public’s?
3. Thinking about the conditions that lead people into the criminal justice system. A large part of this is contained in point 1, but not all of it. What led to the conditions that now lead so many people into the criminal justice system? This line of inquiry is wide and deep. If part of the problem is conditions in the “ghetto”, how did city planners do harm? How and why is the public education system failing people? How do the thousand-and-one economic regulations at all levels cut off opportunity for the poor?
4. Considering the racial impact. People already focus on this, but not enough if you ask me. Blacks and Hispanics are hit all out of proportion by current practices in the criminal justice system. If I were a community leader in either group I would be agitating all the time.
5. Assessing the values we express by these practices. As I write this, Jon Corzine is implicated in “reassigning” $1.6 billion from a failing enterprise into a safe account. He’s a free man. Shoplifting and bad check writing pale in comparison to this kind of crime, yet people are given over to the criminal justice system every day for these activities and punished much more harshly than it looks like Corzine will be.

John Lovell, prohibition lobbyist

In a previous post I discussed the “law enforcement-industrial complex”, one of the main influences behind the continuing disaster that is drug prohibition. Here is a profile of one such drug warrior, a lobbyist for California police unions. It mentions that police unions spent about $105,000 to combat Prop 19. If the police are merely supposed to enforce the laws that exist, why would they join the campaign against changing the law?

Strategies for anti-prohibitionists, pt. 2: the Law Enforcement-Industrial Complex

In part 1 we looked at the moralists who support the prohibition of certain kinds of substances. They are a large and influential group, and their influence extends far beyond their actual numbers. The other key group I had in mind is the law enforcement-industrial complex.

The law enforcement-industrial complex consists: the DEA, local and state police at all levels, federal, state, and local prosecutors, prison systems both public and contracted, manufacturers and suppliers of weapons and armor, and a host of other related “private” concerns who sell law enforcement products to police. Flashbang grenades, Lenco Bearcats, kevlar vests, etc., are all made by companies with a vested interest in the militarization of law enforcement, and while terrorism is the magic word that makes the money pour in, the bread and butter of the industry is the War on Drugs.

I’d be remiss to leave out the President, the US Congress and their equivalents at the state level. By pandering to the law enforcement-industrial complex and the neo-Puritans they acquire and maintain power. Even when giving only verbal support to the neo-Puritans, they give material support to their allies.

The US has the highest rate of incarceration in the world, and it’s these people who benefit directly. Their position is much less philosophical. They profit, both materially and intangibly, from prohibition. More money, more power, more gadgets, more career advancement. I’m sure some of them actually believe that certain substances cannot be used responsibly and that the state has a moral obligation to target them, but it’s my intuition that for the vast majority of them that’s just fluff. (In the same way that some KGB agents were probably true believers in the Soviet system, though after the collapse they adapted quickly to other systems.)

As for how to counteract the influence of this group, well, the strategies are considerably more varied. The overall theme is that we all suffer as prohibition is ramped up. However one feels morally about the consumption of certain plants and chemicals, the benefits that prohibition may have pale in comparison to the costs. It’s mainly the work of academics, journalists, and activists that will make a difference.

Very briefly, here are some of the domestic costs:
1. Rights—for everybody—diminish in proportion to the power and influence of the law enforcement-industrial complex. Only last year did the Supreme Court decide that police who had followed a drug dealer into an apartment complex were legally allowed to break down someone else’s door without a warrant because they thought they heard sounds of evidence being destroyed. In this case the people in the other apartment were smoking marijuana, which attracted the attention of the police. They began to flush it down the toilet when the police kicked in their door. They were completely unrelated to the drug dealer the police initially followed, but the Supreme Court said they were within bounds. This kind of case could only come up in the context of prohibition. Now the police are entitled to kick in your door merely on their say-so that they thought they heard evidence being destroyed. Almost all of the major encroachments on first amendment rights since the Drug War began were because of the Drug War. See: Civil Asset Forfeiture.
2. Rights for minorities suffer in particular. The more marginalized people are in society, the less people will look out for them, even the well-meaning NPR-listening bluehairs. Being Hispanic and having a large amount of cash is grounds at minimum for having the cash confiscated, even if it is funds raised by a church for the purchase of church vehicles. Being black is grounds in New York City for being stopped and frisked, even if you’re just walking down the sidewalk. That this is so was not inevitable; prohibition made it happen.
3. Imprisoning so many people imposes many non-monetary costs on society. Beyond the simple costs of paying the police, district attorneys, and prison guards, social welfare is set back even more. A person who has served prison time for non-violent drug-related offenses has a record afterwards that makes it harder for him to find gainful employment. The jobs he is likely to find will be worse, and he, his family, and his community suffer a lifelong drag on his productivity. This is particularly harmful for people on the lower end of the skill spectrum. People argue that a person can avoid this fate by not having anything to do with drugs in the first place, and that’s usually true, and those people may not be swayed by my argument that non-violent drug-related crimes should not even legally be crimes. Let’s think of it this way: does facilitating someone’s getting high deserve an invisible lifetime ball and chain? I think most reasonable people will answer no. (For the moral monsters who answer yes, we can’t waste our precious resources swaying them.)
4. The rule of law is undermined. As I’ve written before elsewhere, many of the people arrested and convicted of drug crimes aren’t even guilty. (I wrote this, I think, in response to a video showing cops planting drugs on a man they pulled over and then immediately arresting him for the possession of said drugs.) This kind of arbitrariness is exactly the opposite of the rule of law. If it can happen once, it can probably happen again, and it probably happens all the time. I was once told by a defense lawyer that cops lie in court so often and so routinely that it’s usually not worth objecting to. The entire culture of law enforcement is infected with this.

Even more important are the international costs. All of the points just given apply to other countries, a hundred or a thousand times more. The War on Drugs is not always a metaphor—from Colombia to Mexico, and in many other places around the world, it is quite literal. Many thousands of people die violent, gruesome deaths every year who would not have without prohibition. “El Chapo” Guzmán, the most powerful drug lord currently living in Mexico, is said to have someone on his payroll in every law enforcement agency in the country. This may be a bit of a stretch in one way, and may fail to capture the damage of prohibition in another. I’m sure there’s a small town in the Yucatán to which he and his agents have never given a thought, but it’s very clearly the case that in some areas the entire police force is working for him or one of his rivals. And not just the police, but the military as well. The Los Zetas Cartel was founded by defectors from the Mexican special forces. Moreover, fighting the War on Drugs has led the US government to support awful regimes in Latin America, corrupting their societies and leaving a trail of bodies behind. Sure, maybe fewer people get high or overdose. Is that worth it?

Strategies for anti-prohibitionists, pt. 1: The neo-Puritans

People advocating the legalization of some or all drugs are really fighting more than one kind of opponent. Clarifying this may help with strategy. Some audiences need one line of reasoning, and some need another.

Before we dive in, there is one very, very important point to get out of the way: drugs are everywhere. Everywhere. People even become addicted to drugs inside federal prisons. I’m sure that drugs would be more prevalent without prohibition, but this would not mean cities would have to start dealing with drug problems that previously had not.

Another more obligatory point is that drug abuse is a bad thing, and we’d all like to see less of it. I’m not advocating people waste their lives, health, and financial resources away. Aside from the fact that this already happens, I believe that it would happen less under a legal drug system. This is an empirical point about which I could turn out to be wrong, but I think those odds are pretty slim.

So who are these different categories of prohibitionist? The first is the neo-Puritans. Many people feel that drug use is a moral evil that the state is obligated to oppose, no matter how badly the effort goes. I would guess that the vast majority of these are Christians, but the two groups are not identical.

As I mentioned in an earlier post, the way that Jesus was supposed to have revealed his powers, and thereby his identity as the Messiah, was turning water into wine. Clearly the consumption of alcohol is not strictly forbidden by the Christian faith.

You might object: we’re talking about different substances here. Jesus did not turn water into heroin. And you’re right about that. But the point is that some amount of pleasant intoxication, even if small, is sanctioned in the Gospel of John. Again: intoxication is not categorically bad, at least according to John’s version of Jesus.

There are others who hold a similar position to the one just mentioned, only without the Christian basis. They’re a much smaller group and ultimately I think even their positions usually derive from the Christian one, so duking it out with them is probably not necessary. If it becomes necessary in ten or twenty years I’ll revisit this paragraph.

Alcohol and other intoxicants are different in degree, not in kind. Other people are aware of this fact. Many people who oppose drug use also oppose alcohol use, and it seems that the only reason they don’t push for prohibition of alcohol is that the US already tried that and gave it up. It’s a dead issue. So instead they hold the line where it is now, even though this is not a philosophically consistent position.

Part of the neo-Puritan view is that all use is abuse, that there is simply no way to use some drugs responsibly. Once the mystic patina is taken away from intoxicating substances, this too seems ridiculous. Clearly a glass of wine does not make one a raging alcoholic who abuses his family. Many prominent politicians sheepishly admit (or otherwise let on) to having used marijuana or cocaine or both in their youth, and yet there they are in high positions anyway. Some of them are even abusers of alcohol, such as the late Charlie Wilson. While this certainly harmed him in the long run nobody could deny he got pretty far in life as an alcoholic.

What is the strategy with this group? Delegitimizing their argument using more sophisticated expositions of what I’ve written above. There are too many true believers out there to convince them all, but around this core is a much larger group of people who accept the argument but could be convinced otherwise. The core group has so much influence because the outer group follows them, but deprived of this outer group they would become much less powerful.

There’s another way to delegitimize that position as well: even if something is categorically bad it does not necessarily follow that the state needs to prohibit it and try to enforce this prohibition. In questions of morality, if you’re not able to do wrong you earn no credit by doing right. In questions of living in the real world, you need to evaluate policies at least partially in terms of consequences. The consequences in this case are a rapid erosion of the very rights and freedoms that made America so iconic in the first place, a legal system that imprisons people at more than the rates of Russia and China put together, leading to further degradation of the economic and social culture, and, oh yeah, widespread availability of drugs anyway. There’s no shame in admitting that prohibition failed once and it is failing again. In fact, there’s only shame in refusing to admit it.

You might say that there are better arguments to use against them. I don’t doubt that. I’m only pointing out the arguments that seem to me to address their objections with the most bang for the buck. And only taking the arguments as far as needed to change the political landscape, not to convert everybody over to my position. There is almost a critical mass of legalization advocates, and all that is needed to win in the ten-to-twenty year term is a little more mass and ever so slightly less resistance to that mass.

Part 2 will continue this discussion by looking at another group.

David Friedman and organized crime

I went to an informal seminar of David Friedman’s tonight based on his academic workshop and developing book about Legal Systems Very Different from Ours. I encourage you to read the available material so far, as it’s very interesting law & economics. He mostly talked about the section on Amish law, with some comments also about Gypsy and Somali law. During the Q&A he solicited feedback about other possible areas to explore for the book, and somehow organized crime came up.

Friedman’s thinking about organized crime is that it’s not quite as organized as it’s made out to be. The optimal size of the firm is determined by economies and diseconomies of scale. One of the things larger organizations need is constant information flow between the different levels, and one problem with organized crime is that this information can put people in jail, so it would tend to flow less. This would be a minimizing tendency on the size of the firm. [I am paraphrasing his words here.] As he writes in Price Theory:

My own conjecture is that what the Mafia really is, at least in part, is a substitute for the court system; its function is to legitimize the use of force. To see how that might work, imagine that you are engaged in some criminal enterprise and one of your associates pockets your share of the take. Your obvious response is to have him killed–murder is one of the products sold on the market you are operating in. The problem with that is that if people who work with you get killed and it becomes known that you are responsible, other participants in the illegal marketplace will become reluctant to do business with you.

The solution is to go to some organization with a reputation, within the criminal market, for fairness. You present the evidence of your partner’s guilt, invite him to defend himself, and then ask the “court” to rule that he is the guilty party. If it does so–and he refuses to pay you appropriate damages–you hire someone to kill him; since everyone now knows that he was in the wrong, the only people afraid to do business with you will be those planning to swindle you.

That, I suspect, is one of the functions that the Mafia and similar organizations serve on the criminal market. This is a conjecture about organized crime, not something I can prove; but it is not, so far as I know, an implausible one.

This came up at the talk, and he suggested that organized crime, far from being a large group (or several) is more likely a lot of smaller “family businesses” that deal with each other as more-or-less independent groups.

All of this so far is very reasonable, and I wouldn’t dispute it entirely. But I brought up the Mexican drug cartels as a possible counterexample. It seems to me that these organizations actually might be fairly large. I think immediately of Amado Carrillo Fuentes, “the Lord of the skies”. Carrillo earned this nickname by having a fleet of 27 Boeing 727’s for drug distribution. This, of course, suggests a fairly large and somewhat hierarchical organization, even if the actual street-level distribution is carried about by smaller, related but separate groups.

Carrillo is dead—allegedly—but several cartels are still operating, shipping really massive amounts of drugs at this very moment. Based on what I know and have observed, I have no trouble believing that the organizations really can be quite large.

A cause of skepticism is that most of the information about these groups comes from various government agencies, and it’s in the best interests of these agencies to inflate the power and numbers of their opponents. That’s certainly true. But Mexican news agencies view this as more of a domestic issue and don’t fetishize the DEA and CIA in the way that American news agencies do. A lot of the ideas I’m suggesting here come from them, so it’s not obvious that I’m way off base here.

(Yet another reason is in considering the gruesome warnings that cartels routinely leave for others: hacked-up, tortured bodies with messages attached. These are always signed with the names of the large organizations, even if they happen over fairly large geographical areas. It could be that the Zetas, for instance, are more of a confederated franchise system, but I don’t see messages indicating subunits within the Zetas, just the Zetas. I haven’t thought this one out as much, but at first glance it seems ok.)

I briefly mentioned at the talk, and can expound here on another reason why his objection might not hold for the cartels, which is that the free flow of information dangerous to the organization is less of a problem in Mexico. The legal system is so corrupted by Prohibition, with so many members on the take or too intimidated to speak out, that loose lips don’t sink near as many ships there as they would here. (Note that this could also apply in other relatively corrupt legal systems like Russia’s, Colombia’s, or Afghanistan’s.)

This is perhaps a minor point, but one worth thinking about.