This year is the 35th anniversary of the release of The Godfather, the famous 1972 movie based on the 1969 book by Mario Puzo. To celebrate, I recently reread The Godfather, and discovered that it has a lot of interesting material on on law and economics that wasn't always emphasized in the movie.
Everyone remembers Don Corleone's famous saying that he's going to make "an offer you can't refuse." But for some reason, people forget that the Don also said that "a lawyer with his brief case can steal more than a hundred men with guns" (Godfather, pbk. edition, 52). One of the recurring themes of the novel is that people turn to the Mafia for help because of the corrupt and self-serving nature of many political and legal institutions that systematically allowed elites to plunder the politically weak. Puzo recognized, as sociologist Diego Gambetta explained more systematically, that the Sicilian Mafia flourished because it provided better "protection" against crime and violations of property and contract rights than did the official authorities, who generally protected only the politically powerful elite. To a lesser extent, a similar dynamic enabled the America Mafia to emerge in Italian immigrant communities in the early 1900s, as Puzo vividly portrayed in his chapter on the rise of Don Corleone.
Puzo also shows how Prohibition and afterwards the War on Drugs, provided opportunities for organized crime to grow and flourish. It was Prohibition that enabled the Godfather to go from being an "ordinary . . . businessman" to a "great Don in the world of criminal enterprise" (pg. 213). And, of course, the great Mob war that forms the central plot of the book is a conflict over Don Corleone's unwillingness to help other crime families expand into the illegal drug business.
Puzo further explains, as economists would predict, that Prohibition, laws banning gambling, the War on Drugs, and other legislation that creates black markets stimulates criminal violence in another way. Since bootleggers and drug dealers cannot go to court to enforce their contracts and other business arrangements, they often have little choice but to resort to private violence to do so. And, of course, a black market organization that starts off by providing "protective" defensive violence also has strong incentives to engage in aggression as well. This is what Puzo's Mafia characters have in mind when they repeatedly say that their violent actions are just "business" and not "personal." Puzo also shows how Prohibition, anti-gambling laws, and the War on Drugs stimulated police corruption. Captain McCluskey, the corrupt NYPD officer whom Michael kills, collects enormous bribes from criminals because he is in effect the gatekeeper of several highly lucrative illegal markets (gambling, drugs, prostitution).
Finally - and perhaps most radically - Puzo repeatedly emphasizes the similarities rather than the differences between Mafia leaders and conventional politicians and public officials. Both force people to pay for "protection," both are portrayed as corrupt and self-serving, and both cover their crimes with a veneer of moralistic rhetoric.
I do not mean to say that Puzo was deliberately advocating a libertarian view of government in The Godfather. As far as I know, his politics were conventionally liberal, and The Godfather also includes a very negative view of private industry (which, like the government, is portrayed as being more similar to the Mafia than different from it). Nonetheless, the novel vividly highlights some of the shortcomings of modern government, particularly the ways in which its failure to provide protection and its efforts to stamp out alcohol and drug use stimulate the rise of organized crime.
Most readers would perhaps deny that this is the central theme of The Godfather, pointing instead to the story of the moral corruption of Michael Corleone, who gradually becomes enmeshed in his family's criminal enterprises. Michael's fall from grace is indeed the main focus of the book. But it is worth noting that that fall was itself the result of an attack on the Corleone family by rival Mafia cliques seeking to control the emerging market in illegal drugs. The dispute between the Corleones and their rivals cannot be settled peacefully in large part because the market in question is an illegal one.
The Godfather was not intended to be a libertarian critique of the state. Indeed, Puzo apparently wrote the book in large part because his earlier, more literary novels failed to make money, and he wanted to write a relatively dumbed down book that could become a bestseller. Sometimes, however, a book goes beyond the author's intentions, and so it was with The Godfather.
UPDATE: Over at Crooked Timber, Henry Farrell claims that the emergence of the Mafia in Sicily cannot be blamed on the failures of the Italian state because "the Italian Mafia preceded the expansion of the Italian state [after unification in 1860-61], and . . . its success can't be attributed to the Italian state's innate weaknesses (or over-repressive nature)." This argument confuses the absence of a unified Italy with the absence of a state. Before Italian unification, Sicily was part of the Kingdom of Two Sicilies, which also included Naples, and earlier still was a fully autonomous monarchy. The Sicilian government of that era was famously ineffective and corrupt, and also biased in favor of the elite, thus providing little protection for ordinary people (and even for some elites) and helping to stimulate the rise of the Mafia as an alternative source of "protection."
Farrell also criticizes my interpretation of Diego Gambetta's work. However, in this article, Gambetta specifically identifies the shortcomings of the state in Sicily as a major contributor to the rise of the Mafia (though he also notes other contributing factors):
Virtually everything Franchetti [a 19th century Italian scholar] wrote is supported by the evidence which has since emerged, and what we know about the way the mafia has evolved is largely consistent with his analysis.
Franchetti essentially identifies two related sets of causes for the emergence of the mafia. The first is eminently political and has to do with the absence of credible or effective systems of justice and law enforcement. From at least the time of the sixteenth century . . . , Sicilians were able to trust neither the fairness nor the protection of the law. This pre-existing state of affairs caused considerable difficulties to the newly formed [unified] Italian state, which, in spite of its weakness and its mistakes, might otherwise have claimed the right to a far higher degree of legitimation than any of the previous regimes [in Sicily]....