The policy construction of illegal markets: Exploring variation, success, failure, and unintended consequences
PNAS 123/33 pp. e2515300123-e2515300123 2026-08-10 Original The policy construction of illegal markets: Exploring variation, success, failure, and unintended consequences
Letizia Paoli, Peter Reuter
Abstract
Illegal markets, broadly defined to include markets where only specific transactions are illegal, are the consequence of policy, either a prohibition or highly restrictive regulation. They are generated by a variety of concerns, some moral, some pragmatic. They are often tied to legal markets, complicating the policy process. These markets are ubiquitous, rarely well controlled and little studied as markets. This article examines variations in illegality from the case studies in this Special Feature and synthesizes what can be learned about the success and failure of different approaches to controlling these markets. Control is often weak because powerful legal interests are opposed to tight regulation and, especially in markets with large underlying demand, rarely leads to substantial reductions in the targeted activity, unless draconian methods are used. As demonstrated by drug markets, tough enforcement can have large adverse collateral consequences. The paper concludes by suggesting that an extension of the harm reduction framework developed specifically for drug policy can be applied usefully to making policy choices in controlling other illegal markets.