An Analysis of Gang Dynamics
After an analysis of the economic figures of 37 gangs, Professor Steve Levitt concluded that being in a gang is disadvantageous to the individual economically. In his paper, discussing the basic financial and social structure of a gang published some years back, he notes that the most profitable role in gangs involves the sale of narcotics. Furthermore he broke down the general structure of a gang as shown below:
The economy of such a network can easily be compared to a large franchised economy both in structural and in financial aspect. Professor Levitt noted that the ‘foot soldiers’ in a gang (largest portion of gang members and generally the ones on the street selling the drugs) had an hourly income of about half that of an average ‘foot soldier’ working for a company such as McDonalds.
Using Professor Levitt’s figures in an application of game theory gives an insight on the behavior of gangs in a metropolitan area where multiple gangs present, sparking a competition for land, new members and customers. The lack of violence for example is a key factor in the amount of profit a gang make; violence tends to significantly drive people away and causes a 20-30% loss in profit. The following depicts an analytical analysis to this situation; we will assume that there are two gangs from which narcotics can be purchased and that if there is violence in the territory of one gang then the customers that gang loses will buy from the other. Furthermore we will assume that if the two gangs are at war then the violence escalates and each gang will lose more than 20-30% of its clients(we will estimate 45% for this example). ‘Cheat’ refers to a strategy used by a gang to dive customers away from the other by creating a violent environment on that gang’s territory. The numbers in the table signify that change in profit in percent for each gang. As the table demonstrates, equilibrium naturally occurs at no violence or at a full drug war; if only one gang cheats the other has the option to also change to cheating, resulting in escalated violence.
While the apparent wealth in a gang and the security it provides seems to be the primary draw for member recruitment, as Professor Levitt research revealed, the expensive cars associated with a gang were rentals, the gold ‘bling’ was almost certainly gold plated jewelry and the cash was borrowed. Furthermore, disadvantages included long work hours for little pay, unstable income (the foot soldiers only get paid if they sell above a certain level), and the widespread open fire on drug fronts which led to an annual death rate of 7% among gang members (for comparison the death rate for prisoners on death row in the United States is about half that at 4%).
It might be intuitive to try analyzing how each new member becomes involved in a gang and the advantages and disadvantages that each gang has in competing for new members using game theory. I propose and alternate method for analyzing this situation: an application of Triadic Closure Property and the principles of balanced networks. First we can look at the gangs themselves and the social networks only among current gang members. It can be safely assumed that the members of each gang despise the members of the other and that in general the gang members within each gang have a positive relationship with each other resulting in a overall balanced network. Now suppose there is an individual not associated with a gang; logically, he can have a strong tie with someone in one gang, have a strong tie with someone in both gangs or have no strong ties with members in either. If the individual has a strong tie with someone in one gang, then by Triadic Closure, we can assume that over time this individual will develop weak ties with many other members of this gang and will naturally develop antagonistic feelings towards members of the other gang over time. If an individual happens to have strong ties with a member from each gang, then this unbalanced situation inevitably resolves to one member turning the individual against the member of the opposite gang. Finally if an individual does not have any close ties with any gang members, then out of the three possibilities it can safely be assumed that he or she is the least likely to end up in a gang unless he develops a strong tie with someone in a gang. In regions of the country where gang violence is fairly prominent, the gangs tend to be large and have a deep impact on the community socially. As a result, it is likely that there are more individuals with ties to gang members allowing for the gang to easily recruit and grow.
Finally, it is curious that the most famous gang rivalries-past and present- almost always involve two gangs. This is a phenomenal example of a balanced network. Working with two gangs, we can assume that everyone in each gang likes each other and that members of opposite gangs are enemies as stated before. The two types of triangles which can be formed in the network include three +s or one + and two -s: both of which are stable. Suppose we now introduce a third gang where everyone in this gang is friends with each other but despises all members from other gangs. We have now added a triangle of three -s to the network, which is not a stable relation; over time it is clear that two of the gangs can potentially align to take down a third, a result of which will be two strong opposing gangs and a stable network once again.
An Economic Analysis of a Drug-Selling Gang’s Finances by Steven D. Levitt and Sudhir Alladi Venkatesh
<http://pricetheory.uchicago.edu/levitt/Papers/LevittVenkateshAnEconomicAnalysis2000.pdf>