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The Rational Racketeer: Pasta Protection in Depression Era Chicago

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  • Alexander, Barbara J

Abstract

This study evaluates a Depression Era Chicago pasta racket against predictions generated by alternative economic models assuming varying levels of racketeer control over the industry. Models of an 'all-powerful" racketeer and of a racketeer in an omnipotent alliance with a dominant firm are rejected because the actual protection payments were much lower than those implied by the models. Moreover, the regressive structure of the payments made per macaroni press--a portion of the total racketeer-levied "tax"--was contrary to the models' predictions that the most efficient large-press firms would pay the highest tax rates. In contrast, all of theavailable information on the racket is consistent with a model in which the racketeer acts as a cartel ringmaster whose primary duties are to monitor and control members' output levels. In addition, the regressive tax would block entry by any displaced workers seeking to produce pasta using small, previously mothballed presses. Copyright 1997 by the University of Chicago.

Suggested Citation

  • Alexander, Barbara J, 1997. "The Rational Racketeer: Pasta Protection in Depression Era Chicago," Journal of Law and Economics, University of Chicago Press, vol. 40(1), pages 175-202, April.
    • Handle: RePEc:ucp:jlawec:v:40:y:1997:i:1:p:175-202
    DOI: 10.1086/467370
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    References listed on IDEAS

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    1. Alexander, Barbara J., 1997. "Failed Cooperation in Heterogeneous Industries Under the National Recovery Administration," The Journal of Economic History, Cambridge University Press, vol. 57(2), pages 322-344, June.
    2. Alexander, Barbara, 1994. "The Impact of the National Industrial Recovery Act on Cartel Formation and Maintenance Costs," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 245-254, May.
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    Cited by:

    1. Michele Battisti & Andrea Mario Lavezzi & Lucio Masserini & Monica Pratesi, 2018. "Resisting the extortion racket: an empirical analysis," European Journal of Law and Economics, Springer, vol. 46(1), pages 1-37, August.
    2. Edwards Griffin Sims, 2014. "The Power of the Racketeer: An Empirical Approach," Review of Law & Economics, De Gruyter, vol. 10(2), pages 1-16, July.
    3. Andrea Mario Lavezzi, 2008. "Economic structure and vulnerability to organised crime: Evidence from Sicily," Global Crime, Taylor & Francis Journals, vol. 9(3), pages 198-220, August.
    4. Anja Shortland & Federico Varese, 2012. "The Business of Pirate Protection," Economics of Security Working Paper Series 75, DIW Berlin, German Institute for Economic Research.
    5. Mastrobuoni Giovanni & Patacchini Eleonora, 2012. "Organized Crime Networks: an Application of Network Analysis Techniques to the American Mafia," Review of Network Economics, De Gruyter, vol. 11(3), pages 1-43, September.
    6. Giovanni Mastrobuoni & Eleonora Patacchini, 2010. "Understanding Organized Crime Networks: Evidence Based on Federal Bureau of Narcotics Secret Files on American Mafia," Carlo Alberto Notebooks 152, Collegio Carlo Alberto.
    7. Garoupa, Nuno, 2007. "Optimal law enforcement and criminal organization," Journal of Economic Behavior & Organization, Elsevier, vol. 63(3), pages 461-474, July.
    8. Campaniello, Nadia & Gray, Rowena & Mastrobuoni, Giovanni, 2016. "Returns to education in criminal organizations: Did going to college help Michael Corleone?," Economics of Education Review, Elsevier, vol. 54(C), pages 242-258.
    9. Mikael Priks, 2012. "Competition among officials and the abuse of power," Public Choice, Springer, vol. 150(3), pages 425-438, March.
    10. Soeren C. Schwuchow, 2023. "Organized crime as a link between inequality and corruption," European Journal of Law and Economics, Springer, vol. 55(3), pages 469-509, June.

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