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Breaking them down reduces their political power, but it also increases the amount of resources needed to police their behaviour since you need more inspectors to supervise more firms, even if the total amount of business done by all the firms in the sector stays constant.

And that would be in itself criminogenic: Schneier on Security: Control Fraud

"Systems capacity" theory examines why under deterrence is so common. It shows that, particularly with respect to elite crimes, anti-fraud resources and willpower are commonly so limited that "crime pays." When systems capacity limitations are severe a "criminogenic environment" arises and crime increases. When a criminogenic environment for control fraud occurs it can produce a wave of control fraud.

"Neutralization" theory explores how criminals neutralize moral and social barriers that reduce crime by constraining our decision-making to honest enterprises. The easier individuals are able to neutralize such social restraints, the greater the incidence of crime.

I do think this explains why VAT evasion is so prevalent among small businesses in Spain.

Economics is politics by other means
by Carrie (migeru at eurotrib dot com) on Mon Apr 25th, 2011 at 05:38:28 AM EST
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