The political economy of criminal governance

How can people who do not rely on effective government institutions establish property rights, enforce agreements, and facilitate social and economic exchange? Scholars of public choice have long studied anarchic settings to understand foundational questions of political economy, such as the viability and robustness of self-enforcing exchange, the emergence of coercive power, and the Madisonian challenge of self-enforcing constraints. Recent work turns this conceptual, theoretical, and empirical work to the topic of the underground economy and criminal governance. Because of its illicit nature, people involved in criminal activity cannot rely on legitimate, state-based legal institutions. In this absence, a wide range of criminal governance institutions and organizations have emerged to facilitate illicit activity. Based on studies of California prison gangs, I show how classic public choice approaches explain why incarcerated people need extralegal governance, survey some of the internal governance solutions they rely on, and demonstrate how and why they govern, not only themselves, but thousands of people inside and outside of prison.