We hypothesize the failure of government to protect the rights of individuals from violence committed by youths has led to the formation of youth gangs as protective agencies. Our theory predicts an opposite direction of causality between gang activity and violent crime than is widely accepted. While areas with more gang activity also have more violence, our theory suggests gangs form as protection agencies precisely in areas with high violent crime rates. While gangs, like governments, use violence to enforce rules, the net impact of gangs is to lower violent crime. We test this hypothesis and offer significant policy implications.