How to Organize Crime1

Abstract

In criminal organizations, diffusing information widely throughout the organization might lead to greater internal efficiency (in particular, since these organizations are self-sustaining, through enhancing trust). However, this may come at the cost of leaving the organization more vulnerable to external threats such as law enforcement. We consider the implications of this trade-off and characterize the optimal information structure, rationalizing both “hierarchical” structures and organization in cells. Then, we focus on the role of the external authority, characterize optimal detection strategies, and discuss the implications of different forms of enforcement on the internal structure of the organization and policy. Finally, we discuss a number of applications and extensions. In this paper, we study the interplay between trust within an illegal organization and its vulnerability to the authorities. Illegal organizations function more effectively when the people who constitute them trust each other. We argue that information sharing is an important factor in building internal trust and cohesion but that can leave the organization vulnerable. Understanding how this trade-off affects an organization’s information structure and productivity can allow us to assess detection policies designed to destabilize such organizations. Since 9/11, the U.S. Congress has passed a $400 billion annual budget for the war on terror; new domestic institutions have been created or enhanced (among many others, the Counterterrorism section at the U.S. Department of Justice’s Criminal division); international intelligence cooperation has been strengthened; and new protocols and controversial legal tools such as the Patriot Act have been developed. However, these new agencies and institutions face the same basic questions that have challenged the prosecutors fighting organized crime in Italy, South America, and Eastern Asia, as well as authorities fighting terrorism all over the world now and in the past. How can we learn about the internal structure of criminal organizations? How should we go about investigating a criminal organization in order to break its internal cohesion? How does a criminal organization react to investigation policies? We highlight the fact that simply understanding the information links within an organization gives us insight into addressing these questions. The anecdotal evidence suggests that there is a wide heterogeneity across the information structures of different criminal organizations. The most credited theory about the Mafia, developed in the early 1990’s, has identified the so-called Cupola as the highest level of the organization—supposedly consisting of agents who hold large amounts of information about the organization itself and carry out the enforcement needed for the organization to function. 2 These crucial agents are shielded from the authorities since they are typically not directly involved in criminal activities. This theory suggests a centralized information and enforcement structure. 1. Previous drafts have circulated under the titles “Power and Organizational Structure under an External Threat”