The Economics of Prison and Street Gangs

David Skarbek

Advisor: Peter Boettke

Committee Members: Peter Leeson, Virgil Storr

April 23, 2010, 06:00 AM to 07:00 AM


Can self-ordering communities create order without the State? This dissertation examines the robustness of self-ordering institutions by investigating their effectiveness in criminal enterprises and within an inmate-run prison. First, for the La Nuestra Familia prison gang to organize effectively behind bars, the gang needs to provide a credible commitment for member safety to potential entrants and a means of preventing predation and misconduct within the gang. I analyze the governance structure outlined in the gang’s written constitution and show that these self-enforcing mechanisms are successful because they provide each member of the gang with the ability to monitor predation, an incentive to stop it, and a mechanism for doing so. Second, I examine the inmate-governed San Pedro Prison in La Paz, Bolivia, and I argue that peaceful self-governance within prison is possible when inmates can engage in economic exchange and have access to well-established markets that they expect to persist. Third, this chapter identifies three critical governance functions that constitutions perform in criminal organizations. Constitutions promote consensus, regulate behavior characterized by externalities, and generate information about misconduct. Despite the fact that participants in each of these self-ordering contexts are biased to be less cooperative, self-ordering institutions have proven robust enough to facilitate large-scale criminal enterprise and to maintain a relatively peaceful and prosperous prison community.