What is Organized Crime?

Organized Crime | Week 1, Lecture 2

Professor Julian E. Gerez

April 1, 2026

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Question for you: How were the group sizes on Perusall?

Roadmap: Defining organized crime

  • Last time: introduction to the class, logistics
    • Any questions from Monday?
  • Today:
    • Why is defining organized crime so hard?
    • How have definitions evolved over the past century?
    • Key theoretical perspectives
    • A viable working definition

Why definitions matter

Opening exercise

What makes a good definition?

Sport: a competitive physical activity that develops physical ability and skills

  • Includes what belongs: football, swimming, tennis ✓
  • Excludes what doesn’t belong: sleeping, eating ✓
  • Discriminates between related concepts: chess? Esports? Competitive eating? Darts?

Definitions have real consequences, which is how they can become political

  • If competitive eating is not a sport, then athletes don’t get Olympic funding or athlete visas

Soccer match in Bloomington, Indiana: offensive player in red sprints past two defenders toward the goal

Close-up of plastic chess pieces on a wooden board, with a white pawn and black rook in the foreground

Competitive eater Joey Chestnut holding a tray of hot dogs and wearing a Nathan’s Famous championship belt

What counts as “organized crime”?

Raise your hand if you think the following is organized crime:

  • The Sicilian mafia?
  • A Mexican drug cartel?
  • A prison gang running operations from behind bars?
  • A lynch mob with tacit police support?
  • Apple and Google secretly agreeing not to hire each other’s engineers?

The answer depends on the definition and these are not easy questions

  • Speculation has flourished for almost 100 years about the true nature of organized crime
  • Definitions have consistently served political purposes, not just analytical ones

“A concept so overburdened with stereotyped imagery that it cannot meet the basic requirements of a definition” — Dwight Smith (1971)

Why bother defining organized crime?

  • Definitions determine what we study and how
    • A bad definition produces bad research and policy
  • Definitions are never neutral: they reflect political and institutional priorities
    • The FBI’s definition shaped by what the FBI wanted to prosecute
    • Congressional definitions shaped by what politicians wanted to investigate
    • Media “definitions” tend to oversimplify and sensationalize to capture audiences
  • Defining OC too narrowly: misses important phenomena
  • Defining OC too broadly: the label becomes meaningless
    • “Organized crime” applied to any criminal activity deemed harmful or “serious”

Before we can study organized crime, we need to agree on what we are studying

Why does organized crime matter?

  • Citizens are sometimes its direct victims: e.g., robbery, extortion, violence
  • Billions of dollars in tax revenue go uncollected
  • Law enforcement, prosecution, and incarceration impose enormous costs on the state
  • Not just law enforcement: organized crime is integral to the societies where it operates
    • It shapes political, social, economic, and everyday life
    • It can fill gaps left by the state: providing order, employment, and protection

Residents holding CJNG-branded food boxes distributed as cartel community outreach in Mexico

Definitions of organized crime

The hierarchical model of organized crime

“The organized criminal, by definition, occupies a position in a social system, an ‘organization,’ which has been rationally designed to maximize profits by performing illegal services and providing legally forbidden products demanded by members of the broader society in which he lives.”

  • A formal hierarchy and specialized roles (boss, soldiers, etc.)
  • Centralized leadership and rational “bureaucracy”
  • Rules and codes of conduct
  • Increasing control over illegal markets
  • Long-term, stable, growing organizations

Donald Cressey, American criminologist and consultant to the 1967 President’s Commission on Organized Crime

Donald Cressey (1969)

Critiques of the hierarchical model

  • Cressey’s model was built almost entirely on the Italian-American mafia
    • Its prominence was a product of televised Congressional hearings
    • Even this case was empirically wrong: the mafia was decentralized
    • And of course, not all organized criminals are Italian
  • Agency problems: difficulty of monitoring whether people working for you do what you want
  • All organizations face agency problems—criminal organizations especially
    • Employees work covertly: hard to monitor
    • No written records, no courts, no contracts to enforce compliance
    • Can’t even fire people safely!

By the 1970s, a new view emerged: organized crime is not an ethnic conspiracy but a business

The enterprise perspective of organized crime

  • OC are entrepreneurs with same motivations and logic as legal business
  • Illegality forces criminal enterprises to stay small and informal
  • To avoid arrest: limit information, limit employees, avoid written records
    • Harder to achieve economies of scale (cost advantages of operating at larger scale)
    • Harder to vertically integrate (control multiple stages of your supply chain)

Result: illegal markets should be populated by small, fragmented, competing enterprises

Hierarchical model

Boss Underboss Capo Capo Soldier Soldier Soldier Soldier

Enterprise perspective

Group A Group B Group C Group D Group E Group F

What holds criminal groups together?

Despite agency problems and the pressures of illegality, criminal groups persist and can grow

Factors that can provide cohesion (and vulnerability!):

  1. Personal affiliations: family, friendship, ethnicity, shared history
    • Trust is scarce in the underworld; pre-existing relationships substitute for contracts
  2. Drive for profits: shared financial interest aligns incentives
  3. Organizational fit: complementary skills and resources
    • A supplier, a distributor, and someone who handles bribes need each other

Family photo of the Arellano Félix siblings, founders of the Tijuana Cartel, circa late 1980s

From enterprise to networks.. and back

  • Problem with enterprise perspective: some organized criminal groups can become very large
    • Examples: Parts of Russia after Soviet collapse, Mexico in drug war zones
    • This happens when states are weak or fail
  • This led scholars to focus on networks
    • Who actually communicates with whom, beyond formal titles
    • Position in the informal network predicts future interactions better than formal rank

But both enterprise and network concepts are too broad to be analytically useful

  • Any illegal business is an “enterprise”
  • Any two criminals are a “network”
  • Neither can distinguish a corner drug dealer from a cartel
  • Neither explains why some groups stay small while others grow into powerful organizations

Schelling: You are what you do

  • Thomas Schelling makes the crucial distinction between:
    • Producers of illicit goods and services (the bookmaker, loan shark, brothel keeper)
    • …and organized crime which seeks to regulate those producers
  • Schelling’s insight: OC is not defined by its structure but by its function
  • But Schelling went too far: he argued OC always seeks monopoly
    • Monopoly: a market in which one actor is the only supplier of a particular good or service
    • Not all organized criminal groups try to monopolize their market
    • Some regulate without eliminating competition entirely

Black and white portrait of economist Thomas Schelling wearing glasses and a tie, seated before a bookshelf

A working definition of organized crime (Varese)

An entity that attempts to regulate and control the production and distribution of a given commodity or service unlawfully.

  • Key elements:
    • Governance (set of rules and norms that regulate exchange)
    • Requires attempted control over violence (to enforce decisions)
    • Requires information (to know who deals in what, to prevent entry)
    • Does not imply realized control or a specific organizational structure
    • But requires some structure: e.g., system for orders, continuity over time
  • Empirical indicators: gang wars and truces, market-sharing arrangements
  • Why this is better than “enterprise” or “network”: it identifies the governance ambition
    • Two car thieves are a network and an enterprise
    • But neither aspires to regulate the market for car theft

Think-pair-share: Varese vs. the UNODC

UNODC (2002)

A structured group of three or more persons, existing for a period of time and acting in concert with the aim of committing serious crimes for financial or material benefit

  • Focuses on: who and how many
  • Three people, ongoing, profit-motivated

Varese (2010)

An entity that attempts to regulate and control the production and distribution of a given commodity or service unlawfully


  • Focuses on: what the group does
  • Governance, violence, information

For discussion:

  • Which definition would include more phenomena? Which would exclude more?
  • Does a lynch mob qualify under UNODC? Under Varese? Can you think of other edge cases?
  • Which is more useful for research? For policy?

What does organized crime do?

  • Provision of illicit services: gambling, loan-sharking, prostitution
  • Provision of illicit goods: drugs, weapons, counterfeit products
  • Extortion: extracting payments from businesses or individuals under threat
  • Corruption: buying protection from law enforcement and politicians
  • Penetration of legitimate business: money laundering, labor racketeering
  • Conspiracy: coordinating criminal activity across individuals and groups

Police raid on an illegal gambling den with rows of electronic gaming machines in a dimly lit warehouse

Rifles and handguns with price tags in a pickup truck bed, likely a law enforcement arms seizure

Organized crime in a globalized world

  • Rather than discrete local markets, we now have a single global market
    • Criminal groups can source, produce, and sell across borders
    • A cartel in Mexico sells to consumers in the US and Europe
  • Globalization creates new opportunities and new vulnerabilities
    • Weak states become hubs for production and transshipment
    • Global financial systems enable money laundering at scale
  • But the impact of globalization is not the same everywhere
    • Comparative advantage: specialize in what you produce most efficiently
    • If the US is the biggest drug consumer country, why aren’t most drugs produced in the US?

Comparative advantage: an example

Michael Jordan (MJ) wants to paint his house

  • MJ is better than his neighbor Joe at everything
  • MJ can paint his house in 8 hours, Joe can do it in 10 hours

Who should paint MJ’s house? Why?

Michael Jordan smiling in a brown plaid blazer against a beige background

Comparative advantage: the answer

We must consider the opportunity cost of each person

  • Opportunity cost is the value of your best foregone alternative
  • In those 8 hours, MJ could film a commercial and earn $50,000
  • In those 10 hours, Joe could work retail and earn $100
  • MJ’s opportunity cost of painting: $50,000
  • Joe’s opportunity cost of painting: $100
  • Joe has the comparative advantage in painting
    • …Despite being slower in absolute terms!
    • Because he “loses out” on less from painting
    • \(\implies\) MJ should film the commercial and pay Joe to paint

Worker on bamboo scaffolding painting a building’s exterior wall bright orange with a roller

Comparative advantage and organized crime

The same logic applies to criminal markets:

  • Production generally happens where it is least costly, not where demand is highest
  • Costs include: labor, geography, and risk of enforcement
  • Weak states become hubs because they lower the opportunity cost of crime
  • For example, coca is grown and refined in the Andes, shipped to New York

Fragile States Index 2024 world map, color-coded from dark blue (sustainable) to dark red (alert)

Organized crime and the mafia

  • The term most commonly associated with organized crime
  • From the Sicilian dialect, where mafiusu/mafiusa: bold, swaggering, confident
  • But organized crime is much broader than the mafia, so what distinguishes them?

Organized crime group

Attempts to regulate and control the production and distribution of a given commodity

Mafia

Attempts to control the supply of protection

  • Protection is a natural monopoly: once you can govern one market, you can govern any
  • Tilly argues the state made exactly this journey

Organized crime and the state as forms of governance

Entity Markets controlled Collective action mechanisms constraining governance? Organized crime group Single or several markets (e.g., drugs, gambling) Absent Mafia group Market for protection (any transaction) Absent Insurgencies / paramilitaries Several markets + protection Partial / contested (popular support varies) State All markets (legitimate monopoly on force) Present (elections, courts, rights)
  • All four entities share a fundamental aspiration: governing exchanges
  • What distinguishes them is accountability and legitimacy
  • Possible evolutionary trajectory?

Think-pair-share: organized crime as governance

For discussion:

  • Does thinking of OC as “governance” change how you see it?
  • Where does a cartel that collects “taxes” from local businesses fit in the typology?
  • Does Varese’s distinction between an OC group and a mafia hold up?
    • Can you think of a case that fits one but not the other?
  • Is OC purely predatory or does it provide genuine (if coerced) protection?
  • What conditions push an OC group toward becoming a mafia?
  • For Monday: Tilly argues the early modern state got here the same way

For Monday: the state and organized crime

  • Organized crime and the state belong on the same spectrum of governance
  • This week we defined the “crime” side of that spectrum
  • Monday: Charles Tilly argues the state itself is a form of organized crime
  • Questions?

Read before Monday:

Tilly, Charles. 1985. “War Making and State Making as Organized Crime.” In Bringing the State Back In, ed. Peter B. Evans, Dietrich Rueschemeyer, and Theda Skocpol, 169–187. Cambridge University Press.

(Available on Perusall via Canvas)

Organized Crime | Spring 2026