By Jonathan P. Caulkins

Illegal markets create untold societal and environmental harm, but they have attracted surprisingly little scholarly attention. This paper explores illegal markets as a class of objects. It considers similarities and differences across markets, with particular attention to nine: human smuggling, commercial sex, firearms, money laundering, illegal fishing, international wildlife trafficking, counterfeit goods, drugs, and tobacco products. These nine markets display enormous variation, stemming in part from differences in the “physics” of the good or service they provide. Other differences can be seen as adaptations to different policy and enforcement pressures. Some markets have changed in fundamental ways over recent decades, while others remain more stable. The overall rate of true innovation is not necessarily high, but most appear quick to
adopt innovations that are created by the larger economy such as cryptocurrencies, secure communications, and dark web distribution. Low rates of investment in research and development, branding, and marketing along with simultaneous high rates of adaptability may be a natural outgrowth of these markets being dominated by relatively small organizations. It is hypothesized that one can group the common illegal markets into those that: 1) Supply goods stolen from a common heritage, either natural (illegal fishing,
wildlife trafficking, illegal mining) or cultural (antiquities); 2) Supply goods or services to people committing crimes beyond just consuming the banned products (guns, money laundering); 3) Undermine an authority’s rights (smuggling humans across borders, counterfeiting goods, tax-evading cigarettes); and 4) Supply products that harm the user and/or seller (drugs, commercial sex, gambling, raw milk).

By Jay P. Kennedy

Product counterfeiting is a pervasive crime that involves the unauthorized use of a legitimate trademark, a violation of intellectual property rights. Counterfeiting is also one of many forms of global illicit trade, mirroring legitimate markets in structure and reach. Counterfeit goods span nearly every product category from luxury items and electronics to pharmaceuticals and military components, posing risks that range from consumer deception to threats to public health. The globalization of commerce and trade and the rise of e-commerce and social media have significantly expanded counterfeiters’ reach, enabling them to exploit legitimate supply chains and marketplaces and reach consumers around the world. The production and
distribution of counterfeit goods often involve sophisticated networks, including legitimate businesses and transnational criminal organizations, and are sometimes linked to human trafficking and forced labor. Despite regulatory efforts and public–private partnerships aimed at curbing counterfeiting, enforcement remains challenging due to the complexity of global supply chains and the difficulty in distinguishing counterfeit operations from legitimate ones. This article describes what product counterfeiting is and addresses how
markets for counterfeit goods represent an illicit parallel market that is in many ways intermingled with aspects of legitimate markets. The role of consumers as drivers of demand for counterfeits is addressed, and motivations for consumers’ willful purchase of counterfeit goods are explored. This article also provides exploratory insights about the supply chains for some of these products