Gang Economics, I: Levitt and Ventakesh

This is 22 minutes long and very interesting. One thing that Steven Levitt (of Freakonomics fame) does is provide actual numbers and a dispassionate model to gang drug trafficking on the street end of the deal.

There is also a written transcript, and the scholarly paper to which he refers. From the transcript:

But the thing that really makes the gang seem like McDonald's is its franchisees. That the guys who are running, you know, the local gangs -- the four-square-block by four-square-block areas -- they're just like the guys, in some sense, who are running the McDonald's. They are the entrepreneurs. They get the exclusive property rights to control the drug-selling. They get the name of the gang behind them, for merchandising and marketing. And they're the ones who basically make the profit or lose a profit, depending on how good they are at running the business.

One thing Professor Levitt leaves out: you might be able to watch your kids and sell drugs at the same time. (Okay, not well, but still.) At McDonald's, you can't. You can talk back to people selling dope on the street. At McDonald's, you say, "Thank you for your order." Professor Leavitt may have worked a low-paying job in the service sector, working with the public. But I don't think he included all of the benefits of being a semi-independent contractor on the street.

A lot of poor people work at home. That includes in the garment trade, the drug trade, and other kinds of subcontracting in work scenarios that do not have benefits worth leaving home for.

I thought this was great work. I'm a little jealous of Sudhir Ventakesh's experiences, too.

Further reading: Sudhir Ventakesh on the Freakonomics blog in 2007.
The book Freakonomics, sold darn near everywhere.

Credit: Thanks to Ted dot com for the video.