Organized Crime: Thomas J. DiLorenzo on Political Predation and the Incentives Behind Rules

Thomas J. DiLorenzo's Organized Crime: The Unvarnished Truth About Government, published by the Ludwig von Mises Institute in 2012, gathers 52 short essays into six sections on regulation, political favors, centralization, central banking, unions and market-failure arguments. DiLorenzo argues that people holding political power use costly rules and hidden finance to take resources from the people they govern. His introduction places the book in Austrian political economy, and he borrows public choice reasoning to give officials and interest groups the incentive analysis economists normally apply to firms.

The book rewards critical reading. Its value lies in mechanisms a reader can test against any rule or budget. Its weakness is DiLorenzo's habit of promoting them into laws of government. His First Law, that failure gets rewarded, rests on examples from welfare agencies, schools, NASA and the Federal Reserve that illustrate a pattern without measuring how often it holds.

The method starts from what Harold Demsetz called the nirvana fallacy: judging real markets against perfect competition, then prescribing intervention by a government presumed free of failures. DiLorenzo compares real institutions on both sides. In chapter 3 he argues that large firms can favor expensive safety and environmental rules because compliance costs fall harder on small rivals and deter entrants. Chapter 9 draws on Fred McChesney's work to describe a less visible rent: legislators propose punitive bills, such as pharmaceutical price controls, collect contributions from the threatened industry and drop the bill. A reader learns to ask who drafted and enforces a rule, who pays to comply and who gained when a proposal died.

Chapter 1 explains that a binding price ceiling encourages consumption while taking the profit out of supply, producing shortages and black markets. Chapter 32 links this to money. Financing war through money creation, including central-bank purchases of government bonds, hides its cost better than taxes or borrowing, DiLorenzo argues, because citizens meet the bill as higher prices and may blame sellers. Inflation then brings calls for ceilings, and the resulting shortages give officials grounds to allocate goods themselves. The loop helps in reading any war or emergency budget, though his historical episodes come through secondary sources and need checking individually.

Chapter 16 turns to the structure of government. DiLorenzo holds that only individuals have rights, so states are instruments, and he declines to claim that state politicians are wiser or more honest than national ones. The Jeffersonian case he presents rests on two mechanisms: a nearer government is easier to watch, and competing jurisdictions give people somewhere to go. That check reaches only as far as people can monitor officials and afford to move. The chapter also quotes Lord Acton's praise of the Confederate Constitution, and neighboring essays carry the framework into nullification and secession, history the exit mechanism alone cannot settle.

Chapter 37 argues that politicians facing public-employee unions concede moderate raises and generous pension promises, since pensions push the cost past their own terms in office. Every compensation deal is worth reading alongside the date its costs come due. Chapter 51 adds the jobs voters never see: the taxes, debt or new money funding a public payroll pull resources from other uses, so a count of public hires is incomplete without the alternative given up. That accounting is sound. DiLorenzo's further claim, that government spending can never add jobs on net, needs more than opportunity cost: evidence on where the money would otherwise have gone and what employment it would have supported. His historical episodes are offered as that evidence and need separate examination. The figures and union arrangements he describes date from 2012.

Chapter 45 puts the same question to utilities. Drawing on George T. Brown's 1936 history of Baltimore gas, DiLorenzo describes rival companies whose 1888 merger attempt was undercut by Edison's electric light, followed in 1890 by a bill offering a 25-year monopoly in exchange for payments to the city. He adds Walter Primeaux's statistical study of direct electric competition and Thomas Hazlett's comparison of competitive and franchise cable cities. The chapter's lasting use is separating economies of scale from legal exclusion. His conclusion that the natural-monopoly story lacks any supporting evidence goes further, and since these studies reach the reader through his summary, the originals are where to test it.

Each essay runs a few pages and assumes no technical training. The book suits readers who want incentive reasoning applied to concrete policy and will stop to check citations. Begin with the introduction and chapters 3 and 9, then pair 1 with 32 and 37 with 51 before ending on 16 and 45. Brown's and McChesney's books are the sources to examine next.

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Thomas J. DiLorenzo, Organized Crime: The Unvarnished Truth About Government (Ludwig von Mises Institute, 2012). Reprinted in full under the publisher's permission to reprint with full credit. Unmodified copy; original notices retained.