II. Perfecting Criminal Markets
To understand how lawmakers inadvertently perfect criminal markets, one must appreciate the ways in which second-order crimes promote first-order market failures. There is a certain incongruity in describing the failure of a criminal market. In a sense, one might expect a perfectly efficient criminal market to internalize the ill effects of the criminalized good or activity and thus naturally produce zero crime. However, for purposes of this Article, it is more useful to momentarily set aside the fact that crimes are, on the whole, harmful to society, and instead think of markets for crime as no different from markets for legal goods and services. A perfect market for crime --like a perfect market for toasters, computers, or the imaginary widget--is thus one in which supply meets demand and the marginal cost of producing the good or service is equal to the price charged to the consumer. Critically, while the failure of an ordinary market involves an inefficient use of resources and a net loss to society, a criminal market failure generally leads to an underproduction of crime--a net gain. Thus, while policymakers generally seek to minimize market failure in the legal economy, one would expect them to promote failure in criminal markets.
This Part proceeds as follows. Part II.A examines three mechanisms by which second-order crimes can weaken first-order criminal markets. First, second-order crimes can create asymmetries of information that undermine first-order criminal markets. Second, second-order crimes can impose new costs on first-order criminal activity. Finally, second-order crimes can reduce competition in first-order criminal markets. Part II.B then identifies how efforts to fight second-order antisocial activity through criminalization can strengthen first-order criminal markets.
