game theory and gang tattoos

A review of a very interesting book-- from Katherine Mangu-Ward in Reason...

It is a truth universally acknowledged that messing with a guy who has facial tattoos is a really bad idea.

Getting dirty words tattooed on your eyelids—a popular choice, judging from the mug shots available online—is a serious commitment. It is, as social scientists say, a “signal that is costly to fake.” The bearer of a facial tattoo announces to the world: I expect to be in prison for most of my life, or to hang out with people who consider prison experience a character reference.

Those of us who are not a part of the criminal underworld have a much cheaper system: Asked for a reference, we happily provide our colleagues’ phone numbers and email addresses. But for crooks, broadcasting signals about their professional pasts and current social networks is a good way to wind up with a new pair of concrete shoes. In Codes of the Underworld: How Criminals Communicate (Princeton), the Oxford sociologist Diego Gambetta uses colorful stories and a minimum of jargon in his quest to analyze how people advertise when their business happens to be illegal....

The (acknowledged) ghost inside Codes of the Underworld is the Nobel-winning economist Thomas Schelling, who has for decades been applying this kind of economic analysis to the coordination and signaling problems inherent in bank robberies, blackmail, and negotiations. Schelling’s 1960 book about the nuclear arms race, The Strategy of Conflict, centers around those paradoxical situations when it makes sense to impose limits on yourself in order to improve your negotiating position. His famous “madman theory” holds that a “careless or even self-destructive attitude toward injury…can be a genuine strategic advantage.”

Guided by those words, Gambetta sets out to illuminate the world inhabited by these face-tattooed, duel-scarred, razor-brandishing inmates. The result is a book that explains the hidden logic of their behavior in language intelligible to those of us who make it a point to steer clear of both well-armed dictators and well-decorated mafiosi....