Hayek and the Mexican Mafia

From Miller's Genuine Draft:

(The following is a draft of an article for the Mises Institute)

A case study from David Skarbek of Duke University which analyzes how the Mexican Mafia has developed its own form of governance within the Los Angeles county prison system recently appeared in the American Political Science Review.  The following is a portion of the study's abstract:

How can people who lack access to effective government institutions establish property rights and facilitate exchange? The illegal narcotics trade in Los Angeles has flourished despite its inability to rely on state-based formal institutions of governance. An alternative system of governance has emerged from an unexpected source—behind bars. The Mexican Mafia prison gang can extort drug dealers on the street because they wield substantial control over inmates in the county jail system and because drug dealers anticipate future incarceration. The gang's ability to extract resources creates incentives for them to provide governance institutions that mitigate market failures among Hispanic drug-dealing street gangs, including enforcing deals, protecting property rights, and adjudicating disputes.

The formation of "spontaneous order" often comes as a surprise to those who see the state as the end all to civilization.  Spontaneous order was of course defined by Freidrich Hayek as:

A spontaneous order is a system which has developed not through the central direction or patronage of one or a few individuals but through the unintended consequences of the decisions of myriad individuals each pursuing their own interests through voluntary exchange, cooperation, and trial and error.

Through the past 50 years, the Mexican Mafia has developed its own system of property rights, protection, and order within the Los Angeles prison system.  This phenomena began in 1956 as incarcerated Hispanics joined together for the sake of protection.  Since the government, which initially locked up the inmates, failed to enforce adequate property rights, an internal system of government emerged as a response.  From this establishment of basic protections arose an order of governance to both extract wealth over a given geographical area and provide law and order.  The Mexican Mafia has essentially created a State within the confines of the United States and the state of California.

Like many States, some have risen to positions of more influence despite the egalitarian model of members having "only one official rank...one vote, and no one can give another member an order."  No State would be complete without taxes and the Mexican Mafia doesn't disappoint.  By utilizing a form of extortion by taxing profits from drug dealers with the threat of violence upon incarceration, the Mexican Mafia still plays the role of enforcer even behind bars. This tax typically runs in the range of 10%-30% of revenues.  In exchange for tax revenues comes protection from fellow inmates if one is unlucky enough to be locked up.  In order for the Mexican Mafia to maximize tax revenue from drug sales, this practice strives to mitigate actual violence.

A system of dispute arbitration has also developed to ensure peace.  Skarbek points to an example in February of 1994 where representatives of the Mexican Mafia and the representatives of two street gangs known as "18th Street Gang" and "MS-13" met to resolve animosity stemming from one gang member killing another.  After arbitration, peace was reached and a gang war averted for the sake of maintaining cash flow from drug dealing.  This process was repeated to settle future conflicts. Drive by shootings are even regulated by the Mexican Mafia as unauthorized shootings are punishable by death upon incarceration....MORE