Henry Thompson (George Mason University)
Abstract
This paper uses economic reasoning to analyze the traditions and institutions of one of the most successful criminal organizations in modern American history: La Cosa Nostra (LCN). Drawing on recently declassified FBI reports, the paper’s analysis shows that LCN’s core institutions are best understood as attempts to protect its secrecy, an asset vulnerable to free riding by its own members. Individual members did not bear the full costs of secret-revealing police investigations and thus had a perverse incentive to resolve disputes violently. LCN preserved its secrecy by incentivizing peaceful reconciliation. La Cosa Nostra rules, and, more importantly, its informal court system, kept disputes from escalating into violence, thereby helping LCN avoid secrecy-threatening investigations. LCN's longevity and success are, in part, a testament to the institutions' efficacy.