The Public Interest

Economics and criminal enterprise

Thomas C. Schelling

Spring 1967

At the level of national policy, if not always of local practice, the dominant approach to organized crime is through indictment and conviction. This is in striking contrast to the enforcement of anti-trust or food-and-drug laws, or the policing of public utilities, which work through regulation, accommodation, and the restructuring of markets. For some decades, anti-trust problems have received the sustained professional attention of economists concerned with the structure of markets, the organization of business enterprise, and the incentives toward collusion or price-cutting. Racketeering and the provision of illegal goods (like gambling) have been conspicuously neglected by economists. (There exists no analysis of the liquor industry under prohibition that begins to compare with the best available studies of the aluminum or steel industries, air transport, milk distribution, or public-utility pricing.) Yet a good many economic and business principles that operate in the “upperworld” must, with suitable modification for change in environment, operate in the underworld as well– just as a good many economic principles that operate in an advanced competitive economy operate as well in a socialist or a primitive economy.

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