The welfare theory approach to the economics of crime seeks to estimate the losses from crime and to allocate resources for the protection of internal security. The behavioral model of crime structure attributes certain types of crime to social, legal, and economic circumstances. The likelihood of certain individuals' committing crimes is, for example, correlated to their social position and to personal advantages of committing the crime. The goal of criminal behavior is maximization of individual profit; the degree of criminal involvement depends on availability of criminal opportunities ('offense supply') and the costs to the individual for criminal involvement. According to the model, violations of the law are not possible without previous lawmaking, and violations are not relevant unless the offense is punishable ('reactions to law breaking'). Organized crime particularly lends itself to such an economic theory because organized crime structures are similar to those of big business and involve continuous ongoing activities. To illustrate these principles, the author shows how Prohibition in the United States provided a singular opportunity for involvement of individuals in production and supply of alcoholic beverages and how numerous individuals were gradually replaced by large-scale criminal organizations with more efficient technology. Steps of the economic process were horizontal market concentration, monopolization of political functions by the illegal organization, and diversification of organized crime into both legal and illegal activities. In the end, organized crime threatens even the legitimate power of the state because of corruption and bribery of public officials. Tables, notes, and an extensive bibliography are supplied.