"Mexican Mafia" gang controls prison bottleneck and becomes a government outside of jail collecting tax and offering dispute settlement

Tabarrok, summarizing Skarbek's 15 page paper, "Governance and Prison Gangs".  The paper is worth a read.. It's not too long or fancy-written and has lots of first hand detail.

   "The Mexican Mafia is a fairly small prison gang (perhaps 150-300 made members) and it has significant operational control only within prisons in Southern California yet the Mexican Mafia is extremely powerful. In fact, the MM taxes hundreds of often larger Southern California street gangs at rates of 10-30% of revenues. How can a prison gang tax street gangs? ...
   The key to the MM’s power is that most drug dealers will sooner or later, usually sooner, end up in prison. Thus, the MM can credibly threaten drug dealers outside of prison with punishment once they are inside prison. Moreover, prison is the only place where members of many different gangs congregate. Thus, by maintaining control of the prison bottleneck, the MM can tax hundreds of gangs.   
   As the MM grew in power it started to provide public goods, i.e. it became a kind of government. Thus, the MM protects taxpayers both in prison and on the street, it produces property rights by enforcing gang claims to territory and it adjudicates disputes, all to the extent that such actions increase tax revenue of course. The MM is so powerful that it often doesn’t even have to use its own enforcers; instead, the MM can issue what amounts to a letter of marque and reprisal, a signal that a non-taxpaying gang is no longer under its protection, and privateers will do the rest".

The governance extends to limiting the number of drive-by shootings in other gang areas.  This reminds me of Goldblatt's Theory of Constraints, that it is sufficient to manage the bottleneck in a system to optimize the output of the whole system. Also relevant is the "Sovereign Individual" concept authored by Davidson and Rees-Moog. All forms of government involve optimizing the returns on ownership of violence in a society.  It is not a coincidence that there appears to be a continuum from brigands and despots to republics and democracies.   Citizen/customers generally surrender the right to settle things with their own violence and receive protection and benefits in exchange.   That most Americans defend the right to carry a firearm is exceptional in the modern world, as is the Swiss requirement that males complete militia training and keep an army-registered weapon in their own home.