Mafia protection resembles ordinary goods bought through collective-action equilibria

Evidence

If we call this practice extortion, we must also interpret as extortion our paying for a number of other goods which we buy simply to avoid the consequences others impose on us by buying them first. Cars and advertising are two good examples. In a city where most people travel by car, the efficiency of public transport is reduced, and this further encourages more people to buy cars. Similarly, if all firms in an industry pay for advertising, then every new firm planning to enter that industry must take advertising costs into account whether they like it or not. Protection is not dissimilar from other supposedly innocuous commodities based on collective equilibria which are far from ideal. — Diego Gambetta, The Sicilian Mafia The Business of…, 78

Categorization

• XREF: The cars-and-advertising comparison echoes the coordination problems central to Milgrom’s and Shapiro’s work on network effects and tipping equilibria; connects to the reader’s institutional-economics framework.
• SHARE: Worth sharing with anyone studying extortion vs. legitimate insurance — the claim that standard network-effect goods (cars, advertising) exhibit the same coercive structure as mafia protection is a striking economist’s point.