Pros And Cons Of Organized Crime

• PROTECTION

Organized crime differs from regular business firms though it provides services due to a service that it exclusive to it, that of protection. Organized crime groups develop a sort of governmental authority in the market within which it operates. It is argued that it forms a governance structure mostly addressing the underground world and that this keeps it from restricted to supplying goods. Gambetta addressed this by using the term ‘supply of trust’ and the argument made is that there is a voluntary demand for services like provision of barriers against entry and enforcing collusive agreements in addition to protection of property rights and enforcement of contracts in the form of dispute settlement.

For example, in case of regulations aimed at increasing quality standards like licenses, the side effect is that they tend to increase the costs of the firms. A demand for public services by the organized crime is created and it steps in to control the distribution of these licenses instead. Distribution of licenses could be achieved by enforcing collusive agreements between the firms or by centralizing its control over corrupt law enforcement personnel. Additionally, organized crime also effectively controls prices, subsidies or other restrictions on exchanges in the same manner.

WHEN DOES ORGANIZED CRIME ARISE?

Subsequently, we proceed to the question of when such ‘organized crime’ arises. Economic models assume the perfect enforcement of property rights