State law enforcement keeps mafia firms small and loosely organized

Evidence

For this argument to hold, one has to assume further that the costs of the organization required to overcome such diseconomies of scale are higher than the returns. There muse come a point at which the return from an additional guaranteed seller requires an uneconomical addition of organization and fighting him off is cheaper than letting him in. The arrival at this point may be accelerated by state action. If mafiosi are energetically pursued by the law, they have more difficulty writing, telephoning, meeting, organizing, and operating over a wide territory than would otherwise be the case (Reuter 1983). Thus, the action of the law is an incentive to maintain smaller units that arc more informal, flexible, and loosely organized. The counterfactual side of this argument is the suggestion that, left to themselves, mafia firms would become bigger, tougher, and fewer in number, eventually evolving to the point of themselves becoming a “state.” This argument is not implausible, as we shall see in Chapter 5. But there is no a priori reason why the long-term equilibrium should necessarily converge on one firm-state. It would be like expecting the long-term equilibrium among nation-states necessarily to lead to just one world state. And even if it were possible, the crucial question for us, obviously, is what happens in the meantime. — Diego Gambetta, The Sicilian Mafia The Business of…, 777

Categorization

• XREF: A parallel to state action economizing enforcement in Milgrom; and the counterfactual of mafia as proto-state echoes the reading on private enforcers substituting for state legitimacy.
• QUESTION: The claim that energetic prosecution shrinks mafia firm size contradicts standard deterrence logic — worth checking Reuter 1983 for the empirical basis.