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David Skarbek

The legal centrism hypothesis argues that the state is necessary to define and enforce property rights, and in the absence of state-based institutions, self-governing groups will be incapable of engaging in economic exchange and extended commercial enterprise. This chapter provides evidence against legal centrism by examining the operation of the Nuestra Familia prison gang. The gang protects inmates’ property rights and facilitates trade in contraband in California prisons, and operates an illicit business enterprise in the free world from behind prison walls. An important reason for the success of its organization is a system of information transmission mechanisms between gang members in different facilities. These mechanisms allow self-governance among people with high discount rates and criminal histories.