The State and Organized Crime

Organized Crime | Week 2, Lecture 3

Professor Julian E. Gerez

April 6, 2026

Roadmap: the state and organized crime

  • Last time: defining organized crime
    • Varese: OC as an attempt to regulate and control production and distribution
    • OC group vs. mafia vs. state as forms of governance
    • Any questions from Wednesday?
  • Today:
    • What is the state?
    • What problems does it solve… or create?
    • The origins of the state
      • Tilly on the state
      • The predatory view of the state

Last class: OC 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?

When does organized crime become a mafia or more?

  • Last time we discussed how organized crime, insurgencies, and the state share characteristics
  • When does organized crime expand?
  • Key conditions in the literature:
    • State weakness: where the state cannot or will not enforce contracts and property rights
      • Or where the state is absent entirely!
    • Demand for governance: economic actors need dispute resolution and protection
    • Organizational capacity: the group can actually deliver on protection promises
  • This is not inevitable as most OC groups stay OC groups
    • Escalation requires opportunity and capacity

Preview of today’s class: the early modern state got here the same way

What is the state?

Attempts at defining the state

Max Weber, German sociologist

Max Weber (1919)

“a human community that (successfully) claims the monopoly of the legitimate use of physical force within a given territory. […] Specifically, at the present time, the right to use physical force is ascribed to other institutions or to individuals only to the extent to which the state permits it. The state is considered the sole source of the ‘right’ to use violence.”

Attempts at defining the state

Douglass North, American economist

Douglass North (1981)

“an organization with a comparative advantage in violence, extending over a geographic area whose boundaries are determined by its power to tax constituents”

Attempts at defining the state

Charles Tilly, American sociologist and political scientist

Charles Tilly (1985)

“relatively centralized, differentiated organizations, the officials of which more or less, successfully claim control over the chief concentrated means of violence within a population inhabiting a large contiguous territory.”

Think-pair-share: definitions of the state

  • Compare and contrast these definitions
  • What are the key components of each definition?
  • Which definition makes the state sound most like organized crime? Why?


Weber (sociologist)

“a human community that (successfully) claims the monopoly of the legitimate use of physical force within a given territory.”

North (economist)

“an organization with a comparative advantage in violence, extending over a geographic area whose boundaries are determined by its power to tax constituents”

Tilly (political scientist)

“relatively centralized, differentiated organizations, the officials of which more or less, successfully claim control over the chief concentrated means of violence within a population inhabiting a large contiguous territory.”

Possible requirements for a state… and organized crime?

Reflections on the state

  • An entity that uses coercion and the threat of force to rule in a given territory
  • The state is “a violence-producing enterprise”
    • All states use the threat of force to organize public life
    • States never perfectly monopolize force — and this is where OC enters
    • States never perfectly enforce their will
  • Coercion may:
    • Be justified in different ways
    • May be used for different purposes
    • Lead to different effects
  • However, all states use coercion

State capacity and organized crime

State capacity: the ability of the state to make and implement its decisions

  • Variation in organization, territorial/violence control, taxation ability, and legitimacy
  • High capacity: state can enforce laws, collect taxes, and project power throughout its territory
  • Low capacity / state failure: the state can no longer perform basic functions

Where state capacity is low, organized crime can fill the gap

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

What problems does the state solve… or create?

Normative justifications for the state

  • If the state produces violence, how can it ever be justifiable to have one?
  • Possible answer: without a state to consolidate violence, everyone can use violence
  • Hobbes, Locke, Rousseau: paying someone to threaten to hurt you can make you better off
  • Thought experiment: what would life be like without a state?
  • Hobbes called this the state of nature: a “war of every man against every man”
    • Life was “solitary, poor, nasty, brutish, and short”
  • To show this, we will use game theory, a tool used by social scientists
  • Game theory is a way of reducing complex interactions to only their most important elements
  • Do not panic, this is not a math class!

The state of nature game

  • First, set the players: A and B
  • Next, set their possible moves
    • Refrain, or steal
  • This yields four possible outcomes. Then, set the pay-offs:
    • Stealing while the other refrains is best (4)
    • Both refraining is the second best (3)
    • Both stealing is the third best (2)
    • Refraining while the other steals is the worst (1)
  • Finally, play the game
  • We can represent all this as a table and solve the game for Nash equilibria
  • A “Nash equilibrium” is a set of strategies (one for each player)
    • …such that no player has an incentive to unilaterally switch to another strategy
  • What action yields the highest payoff given what the other player is doing?

Playing the state of nature game

B: Refrain B: Steal
A: Refrain 3,3 1,4
A: Steal 4,1 2,2
  • Players: A and B
  • Possible moves: refrain, or steal
  • Payoffs:
    • A and B both refrain
    • A refrains but B steals
    • A steals but B refrains
    • A and B both steal

If B refrains, what should A do?

B: Refrain B: Steal
A: Refrain 3,3 1,4
A: Steal 4,1 2,2

If B refrains:

  • A chooses between 3 and 4
  • A prefers?

If B steals, what should A do?

B: Refrain B: Steal
A: Refrain 3,3 1,4
A: Steal 4,1 2,2

If B steals:

  • A chooses between 1 and 2

  • A prefers?

Dominant strategy and Nash equilibrium

B: Refrain B: Steal
A: Refrain 3,3 1,4
A: Steal 4,1 2,2

Steal is always better for A, no matter what B does

  • This game is symmetric (try proving this to yourself at home!)
  • This means steal will also be the dominant strategy for B
  • The Nash equilibrium is that both players steal

Think-pair-share: the state of nature game

B: Refrain B: Steal
A: Refrain 3,3 1,4
A: Steal 4,1 2,2
  • The Nash equilibrium is that both players steal
  • What is strange about this outcome?
  • What could the players do to avoid it?
  • This game is also known as the prisoner’s dilemma
  • How many of you had heard of this before?
  • A simplified account of a collective action problem
  • Many social problems involve a conflict between individual and collective rationality

The social contract: a solution to the state of nature

  • Hobbes: create a sovereign powerful enough that individuals would stand in “awe”
  • A social contract is an implicit agreement among individuals in the state of nature:
    • To create the state, empower it, and define its rights and responsibilities
    • Under this contract citizens give up their natural rights
    • …in exchange for civil rights that would be protected by the sovereign
    • Because the sovereign can punish individuals who violate the social contract, i.e., “steal”

A giant sovereign figure composed of many human bodies, holding sword and scepter

Think-pair-share: the social contract

B: Refrain B: Steal
A: Refrain 3 - t, 3 - t 1 - t, 4 - t - p
A: Steal 4 - t - p, 1 - t 2 - t - p, 2 - t - p
  • p is the punishment the state imposes on those who steal
  • t is the taxes or other costs the state imposes on everyone
  • When will people prefer to live with the state?
  • Can organized crime play the same role?

The origins of the state

State formation in Europe: warfare and commerce

  • Medieval Europe: warlords, no citizenship, no rule of law, no standing armies
  • Feudalism relies on personal relationships, family obligation, and inherited power

Feudalism \(\rightarrow\) absolutism \(\rightarrow\) state via warfare and commerce

  • Wealth comes from land; taking new land creates new wealth
  • Holding land requires eliminating rivals, which requires extracting resources
  • Urbanization requires trade; trade requires standardized policies, currency, and taxation
  • This is governance (setting rules and norms that regulate exchange)

A 15th-century depiction of the Battle of Agincourt

A historical painting of a bustling medieval market during winter

Protection versus racketeering

A local tough guy approaches your business:

  • “Pay me $500/month”
  • “I’ll make sure nothing bad happens”
  • “Also, I’ll ensure the other gangs leave you be”

The government approaches your business:

  • “Pay taxes”
  • “We’ll provide police protection”
  • “We’ll defend you from foreign threats”

What’s the difference between these two scenarios? Tilly: Who creates the threat?

  • Racketeer: “someone who produces both the danger and, at a price, the shield against it”
  • Protector: “someone who provides a needed shield but has little control over the danger”

Gray area: what if the threats are partially of the protector’s own making?

“If protection rackets represent organized crime at its smoothest, then war making and state making—quintessential protection rackets with the advantage of legitimacy—qualify as our largest examples of organized crime.” — Tilly (1985)

Tilly and the predatory view of the state

  1. War-making (eliminating external rivals)
  2. State-making (eliminating internal rivals)
  3. Protection (eliminating enemies of clients)
  4. Extraction (acquiring the means of war-making, state-making, and protection)
  • Like the mafia, the state uses violence externally and internally
  • Organization and sophistication come about because of the expenses of that violence
  • Sovereignty and legitimacy are essentially a “might makes right” outcome

Portrait of King Henry VIII

Tony Soprano

Thinking through Tilly

So why the state? Social order is a public good

Excludable (can prevent non-payers) Non-excludable (cannot prevent non-payers) Rivalrous (use reduces supply) Non-rivalrous (use doesn't reduce supply) Private good Excludable + rivalrous A sandwich, a car, a seat on a train Common-pool resource Non-excludable + rivalrous Forests, fisheries, a public road Club good Excludable + non-rivalrous Netflix, a toll road, a private park Public good Non-excludable + non-rivalrous Clean air, a lighthouse, social order, protection
  • A public good is non-excludable and non-rivalrous
  • Creates a free-rider problem: each individual is incentivized to let others pay for it
  • So where does order come from if everyone free-rides?

Another thought experiment

  • Imagine a society with no state: only roving bandits
  • Roving bandits plunder indiscriminately
    • If you produce anything, it will be stolen
    • So no one produces anything… and eventually there is nothing left to steal
  • This is a terrible equilibrium for everyone, including the bandits
  • Even a self-interested bandit can do better

Henry Morgan’s pirates raiding and plundering a Spanish colonial town

Photograph of Feng Yuxiang, Chinese warlord of the 1920s

The stationary bandit

  • A rational bandit realizes: settle down
    • Monopolize theft in one territory
    • But fully plundering leaves nothing to take in the future
    • Take theft in the form of regular taxation rather than plunder
    • Protect subjects from other bandits
  • Now subjects have an incentive to produce: they keep what remains after taxes
  • The bandit collects more in taxes than he ever could through plunder
  • A warlord becomes a king

“The rational, self-interested leader of a band of roving bandits is led, as though by an invisible hand, to settle down, wear a crown, and replace anarchy with government.”

The encompassing interest

  • The stationary bandit now has an encompassing interest in their territory
    • They receive a share of everything produced there
    • So they benefit when their subjects are productive
    • This creates an incentive to provide public goods: roads, courts, security

Does this sound familiar?

  • A cartel that taxes local businesses and fills potholes
  • A prison gang that enforces contracts between inmates
  • A mafia that offers protection to merchants the police won’t help

Olson’s logic is the logic of criminal governance before it becomes state governance

For Wednesday: origins of criminal groups

  • We’ve seen that the state and OC share a common logic
  • The state solved the collective action problem, but imperfectly, and not everywhere
  • Next question: why does OC emerge when and where it does?
  • Questions?

Read before Wednesday:

Albanese, Jay S. 2000. “The Causes of Organized Crime: Do Criminals Organize around Opportunities for Crime or Do Criminal Opportunities Create New Offenders?” Journal of Contemporary Criminal Justice 16(4): 409–423.

(Available on Perusall via Canvas)

Organized Crime | Spring 2026