The Law of the Taxi: Informal Property Rights Institutions in the Uninhibited State

We use the private protection institution we discovered while interviewing taxicab drivers in Trujillo, Peru, to illustrate a theory of clubs. This institution incentivizes joint production of security by taxicab companies. Historic episodes of such private institutions abound, and they are increasingly important in developed countries today where public police are underfunded and often unreliable. Unlike in developed countries, where private security providers usually operate legally and often collaborate with public law-enforcement agencies, private security in the developing world is often extralegal and not officially sanctioned. We contribute to the literature on private enforcement mechanisms by providing an example of a private protection institution that exists in the developing world today.