BASIC ECONOMIC FACTORS IN ORGANIZED CRIME ARE DISCUSSED, AND A TYPOLOGY OF UNDERWORLD BUSINESS -- BLACK MARKETS, RACKETEERING, BLACK-MARKET MONOPOLY, CARTEL, CHEATING, ORGANIZED CRIMINAL SERVICES, CORRUPTION OF POLICE AND POLITICS -- IS OUTLINED. INCENTIVES TO ORGANIZATION IN THE UNDERWORLD ARE DISCUSSED, AS IS THE EVALUATION OF GAINS, COSTS, AND LOSSES IN ORGANIZED CRIME. CIRCUMSTANCES UNDER WHICH ORGANIZED CRIME MAY HAVE ADVANTAGES OVER NONORGANIZED CRIME ARE CONSIDERED. A DISCUSSION OF THE RELATIONSHIP OF ORGANIZED CRIME TO LAW ENFORCEMENT DISTINGUISHES BETWEEN BLACK-MARKET MONOPOLIES DEALING IN FORBIDDEN GOODS, AND THE RACKETEERING ENTERPRISES, SUCH AS EXTORTION AND CRIMINAL ELIMINATION OF COMPETITION. IT IS POINTED OUT THAT THE BLACK-MARKET MONOPOLIES ACTUALLY DEPEND ON THE LAW. THE NEED TO UNDERSTAND CERTAIN INSTITUTIONAL PRACTICES IN THE UNDERWORLD AND THE POSSIBLE POLICY IMPLICATIONS THAT SUCH AN UNDERSTANDING COULD HAVE ARE DISCUSSED. IT IS NOTED THAT, IN CONTRAST TO TACTICAL APPROACHES AIMED AT THE APPREHENSION OF INDIVIDUAL CRIMINALS, A STRATEGIC ANALYSIS OF THE CRIMINAL UNDERWORLD CAN HELP IN IDENTIFYING THE INCENTIVES AND LIMITATIONS THAT APPLY TO ORGANIZED CRIME, IN EVALUATING COSTS AND LOSSES DUE TO CRIME, IN RESTRUCTURING LAWS AND PROGRAMS TO MINIMIZE THE COSTS, WASTES, AND INJUSTICES THAT CRIME ENTAILS, AND IN RESTRUCTURING THE BUSINESS ENVIRONMENT IN WHICH ORGANIZED CRIME OCCURS. (LKM)