IDEAS home Printed from https://ideas.repec.org/a/sae/ratsoc/v33y2021i1p52-105.html
   My bibliography  Save this article

Property rights’ emergence in illicit drug markets

Author

Listed:
  • Jefferson DP Bertolai
  • Luiz GDS Scorzafave

Abstract

Governance rules are efficient mechanisms in the sense that they increase people’s welfare. They emerge even when the state is unable or refuses to create and enforce them. We study a situation in which this demand for governance manifests itself through the emergence of property rights in illicit drug markets: a privately-provided governance. Specifically, we propose a model for property rights emergence in illicit drug markets as predicted by the theory on governance provided by prison gangs. It is studied a situation in which an agreement among criminals, resembling property rights enforceability on its allocative effect, can emerge in illicit drug markets. Our Mechanism Design approach shows that a change inside the prison system, from a competitive environment to the hegemony of a group of criminals, implies the equilibrium in illicit markets to shift from warfare to peace: the hegemonic group is shown to desire to promote the collusive agreement when it is able to do so. This contrasts with the equilibrium under no hegemony, in which the possibility to conquer consumers/territories drives violence up to a positive level. The novel empirical perspective implied by the model is explored using data from Brazil, a context for which the theory of governance provided by prison gangs has been pointed as a key explanation.

Suggested Citation

  • Jefferson DP Bertolai & Luiz GDS Scorzafave, 2021. "Property rights’ emergence in illicit drug markets," Rationality and Society, , vol. 33(1), pages 52-105, February.
    • Handle: RePEc:sae:ratsoc:v:33:y:2021:i:1:p:52-105
    DOI: 10.1177/1043463120968288
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/1043463120968288
    Download Restriction: no
    File URL: https://libkey.io/10.1177/1043463120968288?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Martin C. McGuire & Mancur Olson, 1998. "The Economics of Autocracy and Majority Rule: The Invisible Hand and the Use of Force," International Economic Association Series, in: Silvio Borner & Martin Paldam (ed.), The Political Dimension of Economic Growth, chapter 3, pages 38-73, Palgrave Macmillan.
    2. Lee, Li Way, 1993. "Would Harassing Drug Users Work?," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 939-959, October.
    3. Leeson, Peter T., 2005. "Endogenizing fractionalization," Journal of Institutional Economics, Cambridge University Press, vol. 1(1), pages 75-98, June.
    4. Robert Burrus, 1999. "Do efforts to reduce the supply of illicit drugs increase turf war violence? a theoretical analysis," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 23(3), pages 226-234, September.
    5. Peter T. Leeson, 2007. "Trading with Bandits," Journal of Law and Economics, University of Chicago Press, vol. 50(2), pages 303-321.
    6. Umbeck, John, 1981. "Might Makes Rights: A Theory of the Formation and Initial Distribution of Property Rights," Economic Inquiry, Western Economic Association International, vol. 19(1), pages 38-59, January.
    7. Juan Camilo Castillo, 2013. "Should drug policy be aimed at cartel leaders? Breaking down a peaceful equilibrium," Documentos CEDE 11471, Universidad de los Andes, Facultad de Economía, CEDE.
    8. Peter T. Leeson, 2009. "The Laws of Lawlessness," The Journal of Legal Studies, University of Chicago Press, vol. 38(2), pages 471-503, June.
    9. Skarbek, David, 2016. "Covenants without the Sword? Comparing Prison Self-Governance Globally," American Political Science Review, Cambridge University Press, vol. 110(4), pages 845-862, November.
    10. Peter T. Leeson, 2014. ""God Damn": The Law and Economics of Monastic Malediction," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 30(1), pages 193-216.
    11. Sylvaine Poret, 2002. "Paradoxical effects of law enforcement policies: the case of the illicit drug market," Post-Print hal-02960430, HAL.
    12. Harris, Colin, 2018. "Institutional solutions to free-riding in peer-to-peer networks: a case study of online pirate communities," Journal of Institutional Economics, Cambridge University Press, vol. 14(5), pages 901-924, October.
    13. Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 1-54, National Bureau of Economic Research, Inc.
    14. Emily C. Schaeffer, 2008. "Remittances and Reputations in Hawala Money- Transfer Systems: Self-Enforcing Exchange on an International Scale," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 24(Fall 2008), pages 95-117.
    15. Poret, Sylvaine & Tejedo, Cyril, 2006. "Law enforcement and concentration in illicit drug markets," European Journal of Political Economy, Elsevier, vol. 22(1), pages 99-114, March.
    16. Stewart, James I., 2009. "Cooperation when N is large: Evidence from the mining camps of the American West," Journal of Economic Behavior & Organization, Elsevier, vol. 69(3), pages 213-225, March.
    17. Umbeck, John, 1977. "A Theory of Contract Choice and the California Gold Rush," Journal of Law and Economics, University of Chicago Press, vol. 20(2), pages 421-437, October.
    18. Benjamin Powell & Edward Stringham, 2009. "Public choice and the economic analysis of anarchy: a survey," Public Choice, Springer, vol. 140(3), pages 503-538, September.
    19. Peter Leeson, 2007. "Efficient anarchy," Public Choice, Springer, vol. 130(1), pages 41-53, January.
    20. Poret, Sylvaine, 2002. "Paradoxical effects of law enforcement policies: the case of the illicit drug market," International Review of Law and Economics, Elsevier, vol. 22(4), pages 465-493, December.
    21. Herschel Grossman & Daniel Mejía, 2008. "The war against drug producers," Economics of Governance, Springer, vol. 9(1), pages 5-23, January.
    22. Leeson,Peter T., 2014. "Anarchy Unbound," Cambridge Books, Cambridge University Press, number 9781107629707, January.
    23. Skarbek, David, 2011. "Governance and Prison Gangs," American Political Science Review, Cambridge University Press, vol. 105(4), pages 702-716, November.
    24. Keith Hartley & Todd Sandler (ed.), 2007. "Handbook of Defense Economics," Handbook of Defense Economics, Elsevier, edition 1, volume 2, number 1.
    25. Ostrom, Elinor & Walker, James & Gardner, Roy, 1992. "Covenants with and without a Sword: Self-Governance Is Possible," American Political Science Review, Cambridge University Press, vol. 86(2), pages 404-417, June.
    26. Peter T. Leeson, 2012. "Ordeals," Journal of Law and Economics, University of Chicago Press, vol. 55(3), pages 691-714.
    27. Catherine Hafer, 2006. "On the Origins of Property Rights: Conflict and Productionin the State of Nature," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(1), pages 119-143.
    28. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(2), pages 283-290.
    29. Garfinkel, Michelle R. & Skaperdas, Stergios, 2007. "Economics of Conflict: An Overview," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 2, chapter 22, pages 649-709, Elsevier.
    30. Jeffrey A. Miron & Jeffrey Zwiebel, 1995. "The Economic Case against Drug Prohibition," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 175-192, Fall.
    31. Lane, Frederic C., 1958. "Economic Consequences of Organized Violence," The Journal of Economic History, Cambridge University Press, vol. 18(4), pages 401-417, December.
    32. Adolphson, Mikael & Ramseyer, J. Mark, 2009. "The competitive enforcement of property rights in medieval Japan: The role of temples and monasteries," Journal of Economic Behavior & Organization, Elsevier, vol. 71(3), pages 660-668, September.
    33. Skarbek, David, 2012. "Prison gangs, norms, and organizations," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 96-109.
    34. Peter T. Leeson, 2008. "Social Distance and Self-Enforcing Exchange," The Journal of Legal Studies, University of Chicago Press, vol. 37(1), pages 161-188, January.
    35. Umbeck, John, 1977. "The California gold rush: A study of emerging property rights," Explorations in Economic History, Elsevier, vol. 14(3), pages 197-226, July.
    36. Olson, Mancur, 1993. "Dictatorship, Democracy, and Development," American Political Science Review, Cambridge University Press, vol. 87(3), pages 567-576, September.
    37. Clay, Karen, 1997. "Trade without Law: Private-Order Institutions in Mexican California," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 13(1), pages 202-231, April.
    38. Peter T. Leeson, 2006. "Cooperation and Conflict," American Journal of Economics and Sociology, Wiley Blackwell, vol. 65(4), pages 891-907, October.
    39. Biderman, Ciro & Sergio De Lima, Renato & Pinho De Mello, João Manoel & Schneider, Alexandre, 2014. "Pax Monopolista and Crime: The Case of the Emergence of the Primeiro Comando da Capital in São Paulo," Research Department working papers 712, CAF Development Bank Of Latinamerica.
    40. Peter T. Leeson, 2007. "An-arrgh-chy: The Law and Economics of Pirate Organization," Journal of Political Economy, University of Chicago Press, vol. 115(6), pages 1049-1094, December.
    41. Murtazashvili, Ilia & Murtazashvili, Jennifer, 2016. "The origins of private property rights: states or customary organizations?," Journal of Institutional Economics, Cambridge University Press, vol. 12(1), pages 105-128, March.
    42. Lessing, Benjamin & Willis, Graham Denyer, 2019. "Legitimacy in Criminal Governance: Managing a Drug Empire from Behind Bars," American Political Science Review, Cambridge University Press, vol. 113(2), pages 584-606, May.
    43. Jack Hirshleifer, 1989. "Conflict and rent-seeking success functions: Ratio vs. difference models of relative success," Springer Books, in: Roger D. Congleton & Arye L. Hillman & Kai A. Konrad (ed.), 40 Years of Research on Rent Seeking 1, pages 251-262, Springer.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Skarbek, David, 2012. "Prison gangs, norms, and organizations," Journal of Economic Behavior & Organization, Elsevier, vol. 82(1), pages 96-109.
    2. Roth, M. Garrett & Skarbek, David, 2014. "Prison Gangs and the Community Responsibility System," Review of Behavioral Economics, now publishers, vol. 1(3), pages 223-243, May.
    3. Harris,Colin & Cai,Meina & Murtazashvili,Ilia & Murtazashvili,Jennifer Brick, 2020. "The Origins and Consequences of Property Rights," Cambridge Books, Cambridge University Press, number 9781108969055.
    4. Skarbek, David, 2016. "Covenants without the Sword? Comparing Prison Self-Governance Globally," American Political Science Review, Cambridge University Press, vol. 110(4), pages 845-862, November.
    5. Skarbek, David, 2011. "Governance and Prison Gangs," American Political Science Review, Cambridge University Press, vol. 105(4), pages 702-716, November.
    6. Peter Leeson, 2014. "Pirates, prisoners, and preliterates: anarchic context and the private enforcement of law," European Journal of Law and Economics, Springer, vol. 37(3), pages 365-379, June.
    7. Alexander Fink, 2015. "Governance without a state? Policies and politics in areas of limited statehood meets positive political economy of anarchy: A review essay," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 28(1), pages 93-105, March.
    8. Palagashvili,Liya & Piano,Ennio & Skarbek,David, 2017. "The Decline and Rise of Institutions," Cambridge Books, Cambridge University Press, number 9781316649176.
    9. Benjamin Powell & Edward Stringham, 2009. "Public choice and the economic analysis of anarchy: a survey," Public Choice, Springer, vol. 140(3), pages 503-538, September.
    10. Edwards, Griffin & Robinson, Joshua J., 2019. "You gotta fight for your right? Publicly assigned but privately enforced property rights," International Review of Law and Economics, Elsevier, vol. 59(C), pages 31-39.
    11. Leonid Krasnozhon & John Levendis, 2018. "Weekend racer: cheating and self-governance in road racing," Economics of Governance, Springer, vol. 19(1), pages 75-90, February.
    12. Peter T Leeson, 2014. "Oracles," Rationality and Society, , vol. 26(2), pages 141-169, May.
    13. Rosolino A. Candela & Vincent J. Geloso, 2021. "Trade or raid: Acadian settlers and native Americans before 1755," Public Choice, Springer, vol. 188(3), pages 549-575, September.
    14. Peter T. Leeson, 2007. "Anarchy, Monopoly, and Predation," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(3), pages 467-482, September.
    15. Ilia Murtazashvili & Jennifer Murtazashvili, 2015. "Anarchy, self-governance, and legal titling," Public Choice, Springer, vol. 162(3), pages 287-305, March.
    16. Vincent Geloso & Louis Rouanet, 2023. "Ethnogenesis and statelessness," European Journal of Law and Economics, Springer, vol. 55(3), pages 377-407, June.
    17. Flores, Daniel, 2016. "Violence and law enforcement in markets for illegal goods," International Review of Law and Economics, Elsevier, vol. 48(C), pages 77-87.
    18. Andrew Young, 2015. "From Caesar to Tacitus: changes in early Germanic governance circa 50 BC-50 AD," Public Choice, Springer, vol. 164(3), pages 357-378, September.
    19. Peter T. Leeson & David B. Skarbek, 2010. "Criminal constitutions," Global Crime, Taylor & Francis Journals, vol. 11(3), pages 279-297, August.
    20. Freire, Danilo, 2017. "Prison Gangs," SocArXiv kuqqx, Center for Open Science.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:ratsoc:v:33:y:2021:i:1:p:52-105. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.