by Henry Farrell on January 6, 2004

“Fabio Rojas”: has an interesting entry at _Marginal Revolution_ on the the evolution of organized crime in Russia. He suggests that one of the more interesting features of the Russian Mafia is “that Russian business and organized crime have become symbiotic,” as gangsters have come to act as guarantors of transactions. As it happens, this is true of the original Mafia too, as Diego Gambetta points out in a “classic essay”: on the evolution of the Mafia in Sicily. Gambetta argues that the Mafia’s main traditional role has been to enforce local monopolies, and to guarantee transactions between economic actors. However, he also points out that Mafiosi may sometimes have an interest in brokering bum deals – they will want to regulated amounts of distrust into market transactions in order to prevent people from coming to trust each other independently, and thus to maintain their own effective monopoly as enforcers of market deals. This analysis suggests that Mafia-style rackets may lead to the long term persistence of markets in which people don’t trust each other, and transaction costs are high.

Gambetta is an economic sociologist who likes game theory. His analysis reminds us that from the point of view of economic theory, the state and the Mafia are functional equivalents in several important respects. Both enforce agreements among economic agents in exchange for a slice of the profits. Indeed, the modern state very likely had its origins in Mafia-style protection rackets, a point made eloquently in another classic of the literature, Chuck Tilly’s “War Making and State Making as Organized Crime”:



Zizka 01.06.04 at 5:52 pm

I’m working on an interpretation of the Mongols and other barbarians in terms of Tilly. (Steensgard’s “Asian Trade Revolution of the XVI C.” and Fredrick Lane’s “Venice and History” also talk about this).

The Mongols were proetection-providers without a real economy. Essentially they drove the other Eurasian military elites out of business and replaced them — sort of like Walmart.

The Mongols dominated the materialistic means of destruction while controlling only the skimpiest productive capacity. (Engels in “Anti-Duhring” overstated his case.) They needed to conquer more productive sedentary regions in order to survive. Genghis Khan’s 2006 ulus which united the steppe could not have survived without expanding.

Lane actually analyzes “protection” as a commodity to be provided for a price. Besides “negative protection” against bandits, etc., he also describes “positive protection”, which means destroying competitors or forcing trade with reluctant suppliers. Essentially “protection” just means violence.

This fits with Hobbes and the “King of the Vultures” theory of the state described by Mill.

I have a prototype version at my URL — it needs major revision, and (for whatever reason) the typeface shrank on me.


Zizka 01.06.04 at 5:58 pm

Try this URL.


Doug 01.07.04 at 8:05 am

And if you recall that the USSR was not exactly a bastion of the rule of law, the stat-big business-organized crime symbiosis becomes even clearer. With a man from the KGB – for much of the USSR’s history, the mafiyest of all the mafiyas – in the Kremlin for a long time to come, that is a useful lens to use in looking at Russia.


Neel Krishnaswami 01.07.04 at 7:09 pm

zizka: that’s really cool. Is the Secret History collected into a single volume anywhere?


Zizka 01.08.04 at 3:47 am

The definitive European-language edition by de Rachewiltz just came out from Reidel. A mere $214 US (1400 pages — probably text/translation/notes/commentary).

Onon’s Oxford (Cambridge?) version is good, but out of print. Cleaves’ Harvard version is scholarly but completely unreadable. Kahn’s poetic edition might be OK in some ways, but he misrepresents the nature of the book. There are probably OK editions in German or French. Lots of good stuff in Russian and Hungarian.

The Secret History is a real gold mine but requires a very critical reading (I believe that it was a pasteup from various mostly-oral sources long after the fact, and it gets chronology far wrong in places and also suppresses embarassing information).


Markku Nordstrom 01.09.04 at 2:09 am

Henry: the clustering of specific trades in a city is not unique to Italian cities. New York has a Diamond District, a Meat-Packing District, the Fulton Fishmarket (traditionally Mafia controlled!), the Chelsea West Side galleries (used to be in Soho), Wall Street Financial District, Madison Avenue advertising industry agencies, 7th Avenue garment district, etc. etc.

Perhaps the most interesting was the transfer of the art galleries to the West Side: they were forced out of Soho because their presence in Soho made the area chic, driving up the rents. That has some interesting socio-economic implications…

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