18. Suppose that there are two types of gangsters in the world: Hustlers, who are productive gangsters,
and Wannabes, who are lazy. The market would pay $60,000 to hire a Hustler but only $25,000 to
hire a Wannabe. The problem, of course, is that the gang cannot tell on sight whether an applicant
is a Hustler or a Wannabe. One way to separate the two groups of workers is to require some sort
of initiation. In this case, a murder of a rival gang member. It is easy for a Hustler to complete the
initiation (the planning costs $20000 in total for the Hustler). It is harder for a Wannabe to
complete the initiation (planning costs are $30,000). Killing adds nothing to productivity, just serves
as a signal.
