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Abstract: This paper uses economic reasoning to analyse 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 incentivising 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. Such institutions helped LCN to become one of the most successful and long-lived criminal organisations in the U.S.

The Extra-Legal Governance Seminar Series is convened by Federico Varese and Zora Hauser. For more information about this or any of the seminars in the series, please contact federico.varese@nuffield.ox.ac.uk and zora.hauser@sant.ox.ac.uk