Youth Gangs as Pseudo-Governments: Implications for Violent Crime

[Acknowledgment]

The authors wish to acknowledge Ronald Balvers, Andrea Dean, Stratford Douglas, George Hammond, Peter Leeson, Santiago Pinto, two anonymous referees, and seminar participants at the Annual Meeting of the Southern Economic Association, the Association for Private Enterprise Education, and San Jose State University for helpful comments on previous drafts of this paper.

1. Introduction

In the early 1970s, fewer than 300 cities cited having problems with youth gangs.¹ Since then, gangs have been identified in all 50 states, with over 2500 cities reporting problems by the late 1990s.² Anecdotal evidence, along with casual empiricism, has led many people to hold a strong belief that youth gangs are a serious problem because areas with more gang activity also tend to have higher rates of violent crime committed by youths. Simply put, the commonly accepted wisdom is that gangs cause violence.

In this paper, we propose and test a hypothesis suggesting that the causal relationship between youth violence and gang activity might flow in the exact opposite direction of what is commonly accepted. We propose that the failure of government to protect the rights of individuals from violence committed by youths has led to the formation of gangs as protective agencies among those populations who are most victimized by unpunished juvenile offenders in areas with high preexisting rates of violent crime. By banding together under the threat of mutual retaliation, potential victims of youth violence can secure increased safety. This same phenomenon also explains the widespread prevalence of gangs within prisons, where the rights of individuals are largely unenforced. While gangs, like governments, use coercion and violence to enforce their rules through retaliation, the net impact of gangs (like governments) is likely to lower the overall amount of violence.³ Generally, for an equilibrium to exist in which gang-type agencies prevail, the deterrence effect must reduce violence by more than the amount of violence used by the enforcement agency.⁴

Our analysis is solidly founded in the economic literature on the formation and evolution of "governments"...