The Economics of Gangs

You must read this article. It's fascinating. Fascinating. No other word. There is no hardcore math. There is no impossible to understand jargon. Well, it has some slightly difficult to understand jargon. But, nothing you can't figure out. I know jackshit in Economics and it made sense to me. So, read it and enjoy!

An Economic Analysis of a Drug-Selling Gang's Finances

It has tree diagrams in it where the don is at the top of the tree and called 'Central Gang Leadership' and gives into leaves called 'Enforcer','Treasurer' and 'Runner'. Below the 'Enforcer' there are 'Foot-soldiers'. It's kind of written in a dispassionate way. I find it amusing.

"..Given the relatively low economic returns to drug selling, the implied willingness to accept risk on the part of the participants is orders of magnitude higher than is typically observed in value of life calculations. That suggests that gang members have very unusual preferences, that the ex post realization of death rates was very different then the ex ante expectation, systematic miscalculation of risk, or the prescence of important noneconomic considerations."

"Morever, the violence keeps customers away. This negative shock to demand is associated with a fall of 20-30 percent in the price and quantity of drugs sold during fighting. In spite, of thus the gang discussed in this paper fights with rivals roughly one fourth of the time."

In the first, he is just trying to say that some stupid niggars are getting their ass shot up. In the second, he actually gives economic considerations why gang wars are not good for 'business'. It also looks at the dynamics of these wars - average duration, territory conquered and so on. According to him, crime doesn't pay - in a fundamental economic way. The average gangster earns about 15,000$ a year, about half the national average. Its the anticipation of future earnings which motivates. A very well written piece.

Anyway, I happened to come upon it during some random browsing. It's by Steven Levitt. He is a Professor of Economics at the University of Chicago. He won the the John Bates Clark Medal in 2002 given to promising economists under 40. A number of those went on to win the Nobel Prize in Economics. This article has a co-author Sudhir Alladi Venkatesh. Indian. There is an Indian Physicist called Alladi Ramakrishnan (he started Institute for Mathematical Sciences, in Taramani, behind IIT), I was wondering if it's his son or relative. I won't be too surprised. If you feel like it, read this one is worth reading as well. Same guy. It gives the background to the first link I put up.

"Are we a family or a business : American Urban Street Gangs"

PS: How is this erudite type stuff? If it's painful I won't put up such stuff :D.