Some commenters on my earlier post on the law and economics of The Godfather noted that I ignored the strong theme of family and personal loyalty in the book. True enough. But this element of the book also fits in with the libertarian/law and economics story I emphasized in my post. The Mafia and other large black market enterprises are often organized on the basis of family, personal, and ethnic ties in large part because it is difficult for them to enforce agreements and ensure loyalty in other ways. Obviously, they cannot rely on courts to enforce labor contracts, address principal-agent problems, prevent employees from appropriating their bosses' property, and so on. Thus, they try to hire people whose family or ethnic loyalties will ensure at least some degree of trustworthiness. Not only do Prohibition, the War on Drugs, and other similar policies foster organized crime - they also increase nepotism and ethnic discrimination. This inference, unlike the ones I mentioned in my last post is not explicitly drawn by Mario Puzo in his book and I don't know if he would have agreed with it or not. But it is a natural extension of the standard economic analysis of organized crime and black markets.
More on the Law and Economics of the Godfather: