Protection markets emerge spontaneously from simple threat environments

Evidence

When still a schoolboy the American gangster Charles (“Lucky”) Luciano noticed that some of the older Irish and Italian kids were waylaying the younger and smaller Jewish kids on their way home from school, beating and robbing them. [Lucky] turned this to his profit. For a penny or two a day, he sold his protection to the potential victims. If they paid they could be sure that their daily trips to and from school would be made in safety, for though young [Lucky] was never a giant, he was tough enough and old enough to make his promise of protection stick. — Diego Gambetta, The Sicilian Mafia The Business of…, 91

Categorization

• XREF: A clean miniature of the Gambetta model: demand (victims), supply of credible force, exchange of small fees. A usable anecdote for teaching the supply-side logic.
• SHARE: Send to anyone teaching the economics of protection or organized crime — this is the canonical entry-level anecdote.