David R. Henderson  

Trust, Even in the Face of Government Hostility

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The Fiscal Prognosis... Machismo vs. Appeasement...

In markets, even illegal ones, we sometimes trust.

Seventy miles to the southeast in Quebec's Eastern Townships [DRH note: this is where my grandfather and grandmother grew up in the 1800s: my grandfather was born in 1855, my grandmother in 1875], a collection of roadhouses and dives known as "line houses" sprouted along the U.S. border. The tiny town of Abercorn, population three hundred, soon had five hotels catering to Americans arriving after a seventy-five-cent taxi ride from the train station in Richford, Vermont. The line houses branched into bootlegging as well. At Labounty's, a line house east of Abercorn in a hamlet called Highwater, young men from Vermont searching for legal booze also found lucrative work. Bootleggers hired the Vermonters to drive cars loaded with liquor seventy-five miles south to Barre. All were instructed to leave the cars in a designated garage, go for a walk, and return an hour later, when they'd find $125 waiting on the seat. The drivers never touched the goods or met anyone involved at the American end of the trip.

This is from Last Call: The Rise and Fall of Prohibition by Daniel Okrent.

What I find fascinating is that there was more trust than I expected. Obviously, a driver who, say, had been cheated out of his $125 could not go to the government. He broke the law and, besides, he wouldn't know the name of anyone in America to report to the government. So if they left, say, $25 on the seat, he would be upset but he would probably move on.

Russ Roberts interviewed Okrent about the book on Econtalk.


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COMMENTS (10 to date)
MikeP writes:

This is a repeated game within a small community. You stiff a player, and he will tell others. It only takes one to drive to the police station on the way to the garage in Barre.

NZ writes:

I know nothing about this particular case, but my guess is there are several caveats to the "trust" thing:

-Cab drivers may not have met the guys who picked up the liquor, but eventually word got around and they all generally knew. Besides, somebody on the Canadian side had to meet with somebody on the American side to set up the whole thing, and those people's connections could be investigated.

-An enterprising cabbie might secretly go to the cops and offer himself as a snitch. The cabbie wins because he can bargain for more than $125 per transaction, or even if he gets less he still is freed of the risk of being arrested for it. The cops win because for just a few hundred bucks or less per transaction, they get more and more info and can build a case against the gangsters who are buying the liquor.

The other "trust" element to this is there was just a lot of trustfulness, innately, among the population in question, who were also rather homogeneous.

Dan Meyer writes:
So if they left, say, $25 on the seat, he would be upset but he would probably move on.

Two ideas on this:

The consequences of private violence from the young man who was stiffed could be high enough that "probably" was still too risky (for the hiring bootlegger).

The stiffed young man could have friends/brothers to bring along (and/or to save face with).

happyjuggler0 writes:

NZ,

It is my understanding that there was a tremendous amount of police corruption under (alcohol) Prohibition. Snitching to the police could be a death sentence in that scenario.

I also agree with MikeP.

mike davis writes:

This is a fun example to use in thinking through Williamson's various categories of "trust" (from his 1993 JLE paper ). I guess this is best described as "calculative trust" but we're all speculating on why it might be best for each side to trust the other.

(BTW, note that the trust works both ways. The guy driving the booze south will be tempted to steal the load, and maybe to car too.)

[broken link fixed, maybe--Econlib Ed.]

NZ writes:

@happyjuggler0:

While the cops may have been colluding with the gangsters, it doesn't make them friends. They might still want a CI to keep tabs on that end of the operation. In fact, this would help the cops appear like they were doing their job.

But even if they were friends with the gangsters, why would the cops kill or harm a cabbie who offered himself as a snitch? That would be a lot of work and could lead to a scandal that blows the cover off your scheme. It would be a lot easier and safer just to give some dismissive reason why you don't need/want a snitch and send the cabbie back on his way.

happyjuggler0 writes:

NZ,

I am not saying the cops would kill the snitch; however all it would take is one dirty cop to tell the "drug gang" (for lack of a better phrase) that Mr. X is a snitch and it is easy to imagine that Mr. X will soon be sleeping with the fishes.

I guess all I am saying is that the cost for snitching, and the likelihood of getting caught would seem to radically reduce the reward/risk ratio of doing so as to make it non-lucrative.

NZ writes:

@happyjuggler0:

But again, if Mr. X believes he is reporting to the cops, what do the cops care if Mr. X is wasting his time? It's easier just to let him believe he's snitching for a good cause than to sic the gangsters on him, who will create one more murder for the cops to "solve" (i.e. have to explain in a way that doesn't reveal their own complicity).

happyjuggler0 writes:

NZ,

If Mr. X is disappeared, then there is no murder to solve.

All it takes is one corrupt cop to turn him in to the bad guys.

NZ writes:

@happyjuggler0:

Let me know if I've got the scenario straight:

Cabbie X doesn't trust the gangsters who have propositioned him as a liquor mule, and decides to offer his snitching services to the police.

His best bet is to subvert the hand-off system either by taking his walk meticulously close to the parking facility or by alerting the police to the specifics of the gangsters' activity.

On the police force is a crooked cop, Officer Y, who doesn't want the gravy train to run out of steam, so he has a motive to keep Cabbie X from talking. Officer Y has connections to gangsters who know how to "take care of" people in a way that won't wind up as a heap of paperwork on his own desk.

I think that's a plausible scenario, but it doesn't exactly support the "Look how much trust there was among those guys" argument.

I couldn't tell if David was trying to make this point, but it seems to me that the story is simply emblematic of how much more trustworthy society was at that time and place, largely (though not entirely) due to homogeneity.

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