The Vertical Dis-Integration of Organized Crime

16 February 2007 at 11:57 am 10 comments

| Peter Klein |

It’s said to be happening in manufacturing, services, and even higher education; why not organized crime? The Financial Times reports that Japanese gangs are relying increasingly on part-time mobsters. According to Japanese police statistics part-timers now make up 51 percent of total gang membership, up from 33 percent in 1991.

One explanation: the Dilbert-style bureaucracy of the established gangs:

Part-time gang members may also be opting out of the hierarchical world that full-time membership entails. Onerous duties include making cash payments to the oyabun, a young hoodlum’s father-figure boss, and keeping long hours, for instance by preserving a henchman’s precious parking space.

Similarly, in regular business, many young Japanese prefer bouncing between part-time jobs to joining a rule-bound company. Like yakuza gangs, Japanese businesses tend to be hierarchical, with strict dress codes, mind-numbing duties and compulsory overtime.

Would these mob Bosses pass Bob Sutton’s test?

Responding to such pressures, the gangs have learned to outsource (presumably “non-core”) tasks to contract workers. Says one Japanese lawyer familiar with underworld issues: “These guys are the best entrepreneurs in the country, certainly the most responsive to change in business conditions.” (HT: PSD Blog)

Entry filed under: - Klein -, Theory of the Firm.

Call for Papers: Law and Economic Development Nerd Alert, Part II

10 Comments Add your own

  • 1. Cliff Grammich  |  16 February 2007 at 12:49 pm

    Interesting, but this quote struck me:

    “Estimates of the size of crime-related activity remain notoriously sketchy, making it impossible for economists to calculate gains in total mobster factor productivity.”

    Undoubtedly true. But then how are mobster labor hours–and numbers and proportions of “part-timers”–measured? I’m doubting that payroll records or labor force surveys are involved. Ethnography, maybe, but, as my economist friends would tell me, that field isn’t given to much precision . . .

  • 2. Peter Klein  |  16 February 2007 at 2:22 pm

    Measuring productivity growth is notoriously difficult in services, where “output” is hard to define, let alone measure. I once attended a seminar on hospital productivity in which the speaker was using the number of days between a patient’s admission and subsequent discharge as the efficiency measure. Someone pointed out that by this criterion, a hospital that killed all its patients as they came in would be the most efficient. So one can only imagine how mobster productivity would be measured.

  • 3. Chihmao Hsieh  |  16 February 2007 at 2:44 pm

    The outsourcing of non-mainstream ‘value-creating’ services reaches beyond gangs, to everyday people. I used the following, quite recent article on the outsourcing of protesting in my latest quiz to the kiddies.

  • 4. Dick Langlois  |  16 February 2007 at 2:44 pm

    Peter, I’m surprised you didn’t draw out more fully the obvious connection to the NYT article on the University of Phoenix. This kind of outsourcing — the use of adjuncts instead of tenure-track made men — reflects the deplorable lowering of standards in Japanese organized crime. Probably related to the profit motive.

    Speaking of outsourcing: you might find interesting this account of the use of incentives, spot contracts, and piece rates in professional sports.

  • 5. Chihmao Hsieh  |  16 February 2007 at 3:39 pm

    I’m guessing Prof Langlois already knew this, but the outsourcing article from is actually a joke. As with virtually all of the other ‘articles’ on that website.

    In reality, Doug Christie signed a 10-day contract with the LA Clippers at the end of January, and signed another 10-day contract with them last week. was merely poking fun at these recurring 10-day contracts, which started emerging as commonplace in the NBA only a few years ago.

  • 6. Peter Klein  |  16 February 2007 at 4:14 pm

    You mean the Superconducting Monkey Collider wasn’t real?

  • 7. Cliff Grammich  |  16 February 2007 at 4:37 pm

    I’ve taken the Onion quite seriously since they were a year ahead of the “mainstream media” in predicting Gillette’s five-blade razor, though possibly years behind Mad Magazine and Saturday Night Live on this (see

  • 8. Chihmao Hsieh  |  16 February 2007 at 5:00 pm

    Actually, I almost fell for the above Christie 10-minute contracting story. It’s been a VERY long time since I’ve read The Onion, and I had to glance through a couple more news articles before it all came back to me.

    Speaking of ideas such as the Monkey Collider, have any of you seen the website Found it yesterday and it’s amazingly entertaining — a bunch of half-baked ideas submitted by everyday folk. Entrepreneurship researchers and instructors in particular are bound to have fun with it. (A tip: Click on ‘best’ under “Idea” on the left-hand-side, and look for the ‘Custard Filled Speed Bumps.’ That one is great!)

  • 9. Bo  |  19 February 2007 at 2:32 pm

    Here is another example of ingenious outsourcing (from the Globe and Mail):

    Passport wait is paying off for homeless
    Standing in line for others becomes a job

    Special to The Globe and Mail

    VICTORIA — If Josh Teriard had a business card for the crush of people
    waiting on the sidewalk to get into the passport office, it would read,
    “Have Time, Will Stand.”

    But Mr. Teriard is not a businessman. He is a 28-year-old homeless man
    suffering from pneumonia, unable to work because of injuries suffered in a
    skateboarding accident five years ago and unwilling to pay $78 for a
    doctor’s prescription for a few pills.

    “When I get a job, I can’t keep it” said Mr. Teriard, who has picked up $80
    — to him, a big financial windfall — for standing in line for two downtown
    businessmen who couldn’t afford the daylong wait to get into the passport

    Panhandling across the street from the passport office, Mr. Teriard said a
    man approached him to stand in line. The two men negotiated a flat fee of
    $40 each for the service because there was no way to calculate how long the
    wait would be just to enter the building.

    “It’s only the suit-and-tie guys that can afford it,” he said.

    The first job took six hours and the second took three hours in pouring
    rain, resulting in his pneumonia, Mr. Teriard said.

    He fears the opportunities created by the United States requiring that
    Canadian visitors show passports may be coming to an end soon.

    “What’s happening now is that people are coming with their friends, making
    it a fun day,” he said.

    However, the Community Casual Labour Pool, run by the Victoria Cool-Aid
    Society, has the opposite view.

    Co-ordinator Wendy Stone said yesterday that the first phone inquiry for
    people to stand in the passport-office line came on Tuesday and the demand
    has been building since.

    “We’ve had about a dozen calls,” said Ms. Stone, who added that the fee is
    negotiable and that the going rate has been between $11 and $13 an hour.

    For Mr. Teriard, it has been an easier way to make money than panhandling.

    Five years ago, he was married with a son and a landscaping job. His life
    changed after he was hit by a car while skateboarding in Nanaimo.

    “They [the RCMP] gave me a ticket for skateboarding in town,” said Mr.
    Teriard, who suffered a concussion as well as shoulder, back and hip
    injuries in the accident.

    He couldn’t work for six months and his life began falling apart after he
    left his family and moved to Ontario.

    Mr. Teriard, who has been homeless for two years, and his girlfriend, Liz,
    hitchhiked to British Columbia this year to escape the Ottawa winter. She
    has been homeless for four years — since she was 16.

  • 10. Dick Langlois  |  2 March 2007 at 11:44 am

    It turns out that Japanese organized crime (the Yakuza) has also had problems in attempting to integrate vertically — into the studio production of Yakuza movies.

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