Ep. 3: Luigi Zingales on Italy, Google and Conglomeration, and Donald Trump

In the third event of this series, Tyler and Luigi Zingales discuss Italy, Donald Trump, Antonio Gramsci, Google and conglomeration, Luchino Visconti, Starbucks, and the surprisingly high productivity of Italian cafés.

You may subscribe to the audio edition via iTunes, Stitcher, Soundcloud, or your favorite podcast app.

Listen to the full conversation

Read the full transcript

TYLER COWEN: Luigi Zingales, my conversant, is one of the best and best-known economists, both in the United States and in Europe. He’s written three best‑selling books, the most recent of which just came out in Italian. It’s called Europa o no.

A Capitalism for the People, from three years ago is, in my view, perhaps the best book on the current American economy, what’s wrong with it, and what should be done. With Raghu Rajan, he has an earlier book, Saving Capitalism from the Capitalists.

Luigi’s contributions are far-ranging. He’s been at the Graduate School of Business of University of Chicago for now, I think, 27 years. He is a major contributor to theory of the firm, politics, culture, governance. This is just a small sliver of the papers he has written, in addition to the three books.

He is now the director of the Stigler Center at the University of Chicago. Most of all, in recent times, Luigi has been known for his biting critique of what we all sometimes call crony capitalism. There’s more I could say, but let’s get to the dialogue.

On Italy and its economy

COWEN: I think of a lot of your work as bringing the ideas of culture and governance into economics. There’re a few major strands in your thought, and I want to explore a few of them. Since you’re Italian, let’s start with the question of Italy.

If you look at the economic performance of Italy, the country is just coming out of a triple‑dip recession. Unemployment is about 12 percent. By some measures I’ve seen, per capita income is not higher than what it was 15 years ago, and they’re over €2 trillion in debt. Some serious problems, and a low birth rate.

How do you see this playing itself out, and what is the endgame? How pessimistic or optimistic are you?

LUIGI ZINGALES: I think that you said correctly. It’s not just the fact we’re coming out from a triple recession. It’s the fact that Italy did not grow for the last 20 years. There are a lot of things that don’t go well in Italy, but when I left it 27 years ago, a lot of things were not working, and Italy was growing.

In fact, in the period 1945 to 1995, Italy grew at a rate that was at least as good, if not better, than Europe and the United States, especially in terms of productivity. Since 1995, Italy stopped growing in terms of productivity. Of course, if you don’t grow in terms of productivity, you don’t grow in terms of income per capita, and so on and so forth.

The question of why, I think, is one of the most important questions, not just for the future of Italy, but for the future of Europe, in general. With a coauthor, I have tried to analyze the various theories. One theory, which is very popular, particularly in Italy, is that it’s all the fault of the euro, because it is true that this sudden stop happened roughly at the time Italy joined the euro.

I don’t think there is any evidence that’s the case, in spite of the fact that it’s a very strong correlation, temporally. I think that the sad reality is that the institutional deficits present in Italy are particularly severe as you approach the technological frontier.

If you have institutions that don’t work and are corrupt, et cetera, you can get by if the only thing you have to do is improve agriculture and produce t‑shirts. We’ve seen in Cambodia, not great institutions, but they produce great t‑shirts, and it works.

Once you try to compete in the first league, when you try to be at the frontier of the technology, you need to have a relatively non‑corrupt government, a system where people pay taxes without too much tax evasion, but not too much taxes, because otherwise they don’t produce. Italy has failed, in my view, to do that. I think that the government by Renzi is trying to do this. The jury is still out whether it will succeed.

COWEN: When I hear other people speak about Italy, there’s a certain tension as to how long these cultural effects last. You read Robert Putnam, things matter from hundreds of years ago. In some of your papers, it matters how many years a region had as an independent city‑state. It matters in the year 1,000 whether you had a medieval bishop in your city.

Those are very durable cultural effects. I think back to being in Italy in the mid‑1980s, when it passed the UK in terms of per capita income, it was, in a sense, then at the European frontier and still growing. Now, it’s not so much later, and what feels like the same culture seems to be giving very different results. How’s the way we make sense of that?

ZINGALES: Two things. First of all, the distinction that Putnam makes and a lot of people make about the North and the South. I think, in some sense, it’s disappearing in Italy, but in the worse direction. All Italy is looking more like the South.


ZINGALES: The Northern people . . . I come from the North, even if my grandfather came from the South, but I came from the North. People in the North, when I go back home, they still feel very proud that they’re much better than people in the South. I say, “You know, when you are in the Titanic, being on the third deck or the first deck doesn’t make a huge difference.”


ZINGALES: “Yeah, you are on the third deck is better than the first, because you just sink a little bit later, but you still sink.” There is this arrogance in the North that I don’t think is fully justified, because many of the bad practices of the South have been imported to the North.

The Mafia used to be only in Sicily, today, is present in Milan, is present in Venice, is present everywhere. When we are questioned, “What has gotten worse?” I think there is this component.

The second is the boom. What people did not fully realize, but the boom of Italy in the 1980s was a boom of a developing country that had a protected currency area. We were playing the catch‑up nation within Europe.

While everybody else in Europe was moving in more advanced production and services, they were leaving behind market space for us to capture the less technological production, and we did it with gusto. It was a boom in the ‘80s, but it was a boom in the wrong direction.

COWEN: Let’s say we go back to 1860. Was Verdi wrong? Say Italy had not become a single nation. There had been a North and a South or even half a dozen or more nations competing against each other or more of a Swiss model. Was the nationalist model for Italy a mistake?

ZINGALES: This is a very hard question, but let me try to say that what I think was wrong is precipitating the unification without really a national culture. There was a small elite that felt Italian, but the rest of the population did not feel Italian.

A number of accidents, including the errors of the only Italian who actually was a military leader, Garibaldi, made unification possible against all odds. I’m sure that if you ask people in 1858, “What are the chances of within three decades Italy gets unified?” they will say, “1 out of 100.” Within two years, it unified — most of it.

It was really a chance, but then, because this happened before there was a national spirit, it turned out it was basically an annexation of the South by North, in which the North imposed its laws to the South, and they were not good for the South.

One of the best Italian thinkers and most unknown, is this guy Vincenzo Cuoco, who was part of the Neapolitan revolution in 1799, and was actually convicted to death to participate in this revolution. This revolution, for people who are not familiar with Italian history, was a Jacobin revolution trying to imitate what they were doing in Paris and in Naples. This revolution initially succeeded, and then a cardinal brought some troops from the South of very simple peasants that massacred the Neapolitan elite and brought back the Ancien Régime. Then it, of course, went back and forth with Murat, et cetera.

The interesting thing about this guy is that after he was convicted to death and then escaped, he wrote a history about that revolution. He’s probably the only person who wrote a history of something that he lived in and gave an interpretation that is valid to this day. His interpretation is you can’t export other models in different contexts.

The Neapolitans who tried to copy France are silly, because they don’t understand the social, cultural, economic context of France at that time was completely different than one of Naples. He has this analogy say, “Every place has its own clothes.” You’re not going to put Finnish clothes to a Greek or Greek clothes to a Finnish, because you’re either going to sweat to death or be freezing.

Why do you want to impose the same rules to everybody? Italy tried to do this, and the result was that in the South, a complete rejection of the Northern model. So much so that there was a revolt that we in history call bandits, but in reality was the liberation front that just lost. When you lose, you’re always on the wrong side, and so these are called bandits.

The North did not need this. The South had this revolt, and then they reached a compromise. There was a compromise not unlike, I think, what happened in the South of the United States. It was for the worst of both sides, in the sense that North side agreed with the big landowners of the South that we’ll leave them in power in exchange for consensus, and they will retain their power in exchange for an army that defends their land against the revolt of the people. That led the South to underdevelopment for years.

Very few people know that when Italy got unified, the income per capita of Sicily and the one of Emilia‑Romagna around Bologna were the same. Today, it is almost double the one of Emilia‑Romagna versus Sicily. It’s a huge sort of gap.

Now, why I insist so much on this, because I think there is an analogy that most people don’t fully appreciate between the Italian unification and the European unification.

Europe got unified roughly in the same way. There was a small elite that felt European. Most people don’t really feel European, but a small elite feel European. They speak the same language, which happens to be English. Pretty soon, England would be out of Europe, but they feel part of the same nation. They talk, they go to the same meetings, et cetera. They’re trying to force unification over the desire of the people. The result, I think, is not working very well.

In the old days, you were sending troops to maintain the South and the order. Now, you use the Central Bank, but it’s not that different. At the end of the day, what I fear is a desertification of the Southern part of Europe similar to what happened in the Southern part of Italy.

COWEN: Like in the Industrialization. One of my favorite papers by you is your paper with Bruno Pellegrino. It’s a great name for coauthoring a paper on Italy. The way I read that paper is you’re saying something like this: Italy, right now, doesn’t have enough firms which could be 5 or 10 times larger than they currently are.

The global economy, over the last 20 years, has put greater emphasis on scaling up. The 1980s were much less about scaling up. You could do better with small- to medium‑sized enterprises in the 1980s. Now everything is about scaling up. You have Apple, you have Google. Kind of mega‑scale.

Italy, more or less, has stayed still. China has scaled up. In the new world where scaling up is really what matters, Italy is left behind. That’s the fundamental productivity reason why even the Italian North hasn’t, in some ways, done that well. Is that the way you think about it?

ZINGALES: Absolutely, but it’s not just the Apple of this world. It’s also the Starbucks. If there is one thing Italy is competitive on and is better than everybody else is food. The fact that the major chain of coffee is not Italian is really hurtful.


ZINGALES: No, I understand that Apple is an American product, but when I arrived in this country 27 years ago, you were not really drinking coffee. You were drinking a dark thing that tastes like I don’t say what because we’re online. The culture of coffee did not exist here.

The culture of coffee and a café where you sit and drink, et cetera, what Starbucks is, is an Italian or at most French culture. Why were you unable to export this? This is my little explanation. By the way, the only country in the world where Starbucks has not arrived is Italy.

If you go to an Italian coffee shop, the productivity of the individual working there is five times the one of Starbucks. They do coffee, cappuccino, one after the other, no questions asked. They understand five orders contemporaneously.

I understand that Apple is an American product, but when I arrived in this country 27 years ago, you were not really drinking coffee. You were drinking a dark thing that tastes like I don’t say what because we’re online. The culture of coffee did not exist here.

You come here to the United States, you first go to the cashier. You have to repeat five times what you want, then another repeat five times to the one producing it, and then five times to the one delivering it. How can Starbucks compete? The answer is very simple. The bar, the Italian café, is one shop, one establishment thing.

If you go to a café, you’re going to find that at the register, there is an old woman who is generally owner, and she watches over everything. Why?

COWEN: You can’t scale monitoring.

ZINGALES: Exactly, but why? Because the model they’re doing allows people to steal whatever they want. You take money here, you use coffee all over the place. You have no monitoring of how much coffee is consumed, how much revenue I produce. If you don’t have the lady checking you out throughout the day, at the end of the day, there’s zero revenues and all cost.

In Starbucks, everything is computerized, so you know at the end of the day how many coffee you have to have, how much rent you have to have, how much coffee you have consumed. You can actually order coffee online automatically, because everything is centralized in Seattle, so you can scale it.

The extreme agency problems of Italy make it difficult to scale firms. Either you have family firms in which you have all the employees that are part of the family, and it’s not obvious that family does not steal, but still less so.

COWEN: At least they’re stealing from themselves, right? [laughs]

ZINGALES: Exactly. At least there is some redistribution internally. At the end of the day, you can’t scale these things up. I think that’s a huge problem.

COWEN: Here’s an article from Quartz. Let me read you the headline. Maybe you saw it from a few months ago. “The most common surnames of new entrepreneurs in Italy are Hu, Chen, and Singh.” If you look at Milan, you have to go through 20 names, and at number 20 is the Italian name Colombo for the most common or most frequent names of entrepreneurs.

Is this sustainable culturally, or is this Italy’s future, in essence, to be economically colonized the way parts of Southeast Asia have been by Chinese, Indians, Sikhs, whoever it may be. Maybe Germans.

ZINGALES: One friend of mine was saying that the demise of the Italian firm family structure is the demise of the Italian family. In essence, when you used to have seven kids, one out of seven in the family was smart. You could find him. You could transfer the business within the family with a little bit of meritocracy and selection.

When you’re down to one or two kids, the chance that one is an idiot is pretty large. The result is that you can’t really transfer the business within the family. The biggest problem of Italy is actually fertility, in my view, because we don’t have enough kids. If you don’t have enough kids, you don’t have enough people to transfer. You don’t have enough young people to be dynamic.

The Italian culture has a lot of defects, but the entrepreneurship culture was there, has been there, and it still is there, but we don’t have enough young people.

What the Chinese are doing are taking over, mostly, the bars, the restaurants, the smaller things initially because those are the easier ones to enter. They’re many and they’re very dynamic. I think that’s exactly the Italian problem.

COWEN: Paint a picture for me here of the end game 30 years from now. Typical Italian family has 1.3 kids. Debt‑to‑GDP ratio at least is reported at about 130 percent, second highest in the eurozone after Greece. Productivity problems. Thirty years from now, what do you predict? What are we going to see?

ZINGALES: It’s difficult to predict, especially the future. One thing I can predict fairly confidently is that we are not going to pay the debt. There will be some form of . . .

COWEN: External redistribution.

ZINGALES: No. Unfortunately, we missed the right moment. There was a moment in which 50 percent of the debt was owned by foreigners, and the Germans made sure that we bought it all back. That was part of the system. Now, I think it’s 70 percent owned by Italians, so it’s mostly redistribution. It’s very hard to imagine that we can sustain this level of debt.

I think that the combination between lack of fertility, lack of productivity growth, and not particularly lawful immigration makes demography being the number one consideration. I’ve said this like 10 years ago. Of course, nobody wants to talk about these things, but it’s inevitable.

COWEN: Let me try giving you an optimistic case for Italy, and you tell me if you buy it or not. If you look at debt‑to‑income for Italy, it does look horrible. It is horrible. If you look at debt‑to‑wealth of the eurozone nations, the ratio of wealth to income in Italy is quite high, as you know. A very high percentage of Italian families simply own their houses outright. Private debt is pretty low. Traditionally, a lot of the banks have been in OK shape. When you think about Italian debt relative to wealth, it’s only an extraction or a political economy problem — who is going to pay, who is going to pick up the bill on the table of the restaurant.

Of course, all the Italians are waiting, but when the time comes and things are truly desperate, Italy has often done best in desperate times, and the wealth is there to pay off the debt. Everyone’s simply playing a postponing game. True or false?

ZINGALES: I think it’s false. The only thing that I agree is that Italians get the best in the worst times. I think that that’s definitely the case. However, I’m surprised that you don’t think there are significant deadweight cost of taxation and redistribution. Especially within a more mobile world, this is becoming very serious.

You mentioned correctly houses. That’s the only stuff that cannot run away. People run away. Financial capital runs away. Houses don’t run away. First of all, Italians are taxed very little on houses today. The first decision that Renzi has made is to de‑tax houses completely.

COWEN: Yes, I know.

ZINGALES: It’s going completely in the wrong direction. Why? Because it’s extremely unpopular. If 70 percent of people own houses, then it’s hard to tax houses. Honestly, if you were to do a wealth tax on houses, then the value of houses would go down, because people are very illiquid, and so it would go down.

How can you tax a lot of other stuff? Labor leaves. I’m an example of that. Unfortunately, there is an increasing number of people leaving. When I left Italy, very few people were leaving at that time. Today, it’s hard to find people of the younger generation not leaving. It’s really a major migration that, by the way, decreases the human capital.

Who are leaving? Italy is in the business of exporting high human capital people and importing low human capital people, so it’s not a good trade. As long as you are in the European Union, even financial mobility is like saying — unfortunately, I always choose the wrong places, because I live in Illinois. Illinois is not that different from Italy.

COWEN: Chicago.

ZINGALES: Exactly. In fact, I always say the thing that makes me feel at home in Illinois is Chicago politics.


ZINGALES: If you tried to fix the Illinois budget, et cetera, it’s very hard to increase taxes, because people move to Indiana, or Michigan, or Wisconsin in a second. We can discuss how big is the Laffer curve at the national level, but at the state level, it’s very elastic.

It used to be that in Italy this was not the case, but what the European Union has done is to basically eliminate this bias. I grew up in Veneto, which is not far from Austria and Slovenia. People moved to Austria and Slovenia anytime. Why do you want to stay in Italy where you’re taxed more, things work less well, et cetera? The elasticity is very large.

If you try to catch up in that game, I think that you’re going to lose.

On US politics

COWEN: Let’s try the United States for a while. A lot of us have been very struck by a piece you wrote in 2011. I think it was for City Journal. This was a piece about Donald Trump. You basically said in this piece, “Donald Trump is for real or could be for real. We should be very grateful that he has decided not to run for president.” This is 2011, not 2015.

You’re Italian, a quarter Sicilian, I’m told, and you’ve lived here now, not here, you’ve lived in Illinois for 27 years. What is it you see about us that we don’t? You’re a kind of Tocqueville of Italy. A lot of your papers are on the United States. What’s the insight into us that you get and we lack?

ZINGALES: Let me start with the analogy between Trump and Berlusconi, because I think that they are very similar in every dimension, in a sense. They are both extremely good salesmen. They’re both extremely wealthy and not afraid to show off their wealth. They’re both obsessed with women. They’re both obsessed with hair, or lack of hair for Berlusconi.

They both profess themselves as free marketeers, but they both made their money in businesses that are the ultimate opposite of free markets. This is real estate and gambling versus real estate and TV that is basically a regulated utility in Italy. You make money by having the right connection with government. That’s their version of the free market.

[Trump and Berlusconi] are both extremely good salesmen. They’re both extremely wealthy and not afraid to show off their wealth. They’re both obsessed with women. They’re both obsessed with hair, or lack of hair for Berlusconi.

They’re both extremely good, and this is the success of Berlusconi and the success of Trump, in portraying themselves as a friend of the people. In part, it’s because they speak at a very low level, so people identify with them. They are happy to identify, because even somebody that is so crass like Berlusconi can become rich. Maybe I can make it, too.

That self‑identification is very important. The most important thing, and this is coming to my advantage, having seen what Berlusconi got presented for Italy, I became much more concerned about what the United States are becoming. My favorite line is that the great contribution of Berlusconi to human kind is that he made things transparent.

Berlusconi is the integrated version of the US Congress. In what sense? In the US Congress, you have people that were lobbyists before, they become congressmen, and then they go back to lobby. At least until they are congressman, or secretary of the treasury, et cetera, they are not employee of somebody. They are beholden to somebody because they come there, they go there, but at the moment, there’s a little bit of appearance of separation. Berlusconi did not even care about the appearance. Everything was integrated. He ran a party with his own employees. He created a party.

From a strategic point of view, in three months, he created the party, and he was sending his ad agency guys, being the party leaders, all over the place. The same people became, then, his members of parliament. The others were his personal lawyer, his personal something else, and so on. They became members of parliament, ministers.

You have the minister of telecommunications that was the employee of Berlusconi deciding on rules on telecommunication that affected Berlusconi.

COWEN: Are you saying that we here are more corrupt than we think and that Berlusconi is a kind of mirror on us? You have better access to that mirror, and so through that mirror, you understand America and its crony capitalism, in some ways, better than we do?



COWEN: One thing that strikes me about the literature on corruption, and rent-seeking, and political influence is what is sometimes here called the Tullock paradox. Gordon Tullock worked in this building, and Tullock raised the question of how much is at stake in politics? In the US, it’s about 40 percent of GDP. In Europe, it may be above 50 percent of GDP.

Tullock was actually surprised, in a way, relative to that, how little was spent on lobbying. For him, there’s some kind of structural barrier story. What’s your take on the Tullock paradox? Why aren’t we even more corrupt yet, given what percent of GDP in this country is allocated through mechanisms of a mix of force and democratic whatever you want to call it rather than voluntary exchange?

ZINGALES: First of all, let me spend a word to praise Gordon Tullock. Very sorry he passed away recently, and I’m even more sorry that he wasn’t celebrated the way he deserved to be celebrated. In my view, he was an extremely insightful economist who made the point there is not enough money in politics in 1972, if I’m not mistaken, or ’74.

COWEN: A long time ago, yeah.

ZINGALES: A long time ago, at a time where there was much less money in politics. First of all, he got, clearly, the derivative right, because from 1972 to today, the amount of money in politics exploded. I think he was very far‑sighted in understanding this.

The second is, in my view, the reason why we don’t see enough money is twofold. Number one, there is ideology. You can’t really pay everybody. People will have some preferences — especially when they’re not paid a lot — for some position. That decreases the power of money.

The most important fact is that some people find it very easy to collect money, which are vested interests. They organize because they’re small. This is Mancur Olson. They organize much faster, they can collect money faster.

The public at large finds it difficult to collect money. The paradox of Tullock, the way I like to describe it, the Gordon Tullock paradox is the following. Imagine you have some lottery tickets in which, unlike most lotteries, which the state gets most of it, is pure, actuarially fair.

You know that you are going to buy let’s say $5 trillion that pay off, and you start to sell the tickets. You know that by buying all the tickets, for sure you’re going to get $5 trillion. It seems that why the collective amount of tickets doesn’t sell for $5 trillion?

That’s basically what Tullock is saying. He’s saying why, if we are purely cynical and we try to buy all the votes, if you buy all the votes in Congress and for president, you can get to allocate a lot of goodies.

The value of the votes collectively should be at least the value of the rents you get and all the goodies you allocate, which we can discuss how much it is, but it’s in the order of trillions of dollars.

The point is that the public at large is not able to coordinate and beat very much for those votes. Those votes sell cheap. Why do they sell cheap? Because the parties are not well organized. Since the time of Gordon Tullock to today, people got more and more organized, and so the price is going up, but there is a way to go. If we don’t do something, there is a way to go and spend more. I think that Gordon Tullock was absolutely right.

The interesting thing is that Gordon Tullock implicitly, because the type of game he designed for this, it’s a game in which there is a benefit for society to put some limits. I actually enjoyed, in my book, to pick a little bit on Robert Barro, because Robert Barro defends restrictions in basketball and baseball but not in everywhere else in the United States.

I don’t understand why in the United States the only thing that is really noncompetitive is sports. In Europe, the only thing that is really competitive is sports. In Italy, soccer you are the first division, second division, you are promoted or demoted, according to performance. You don’t buy your way into the NFL or the Major League, et cetera.

Here, you buy the franchise, and once you’re in, no matter how incompetent you are, you stay there, which is completely un‑American.

[laughter and applause]

I don’t understand why in the United States the only thing that is really noncompetitive is sports. In Europe, the only thing that is really competitive is sports. You don’t buy your way into the NFL or the Major League. Here, you buy the franchise, and once you’re in, no matter how incompetent you are, you stay there, which is completely un‑American.

COWEN: I’m very struck by your early work on business firms and hierarchy. Some of this is written with Raghu Rajan. The idea of introducing or reintroducing ideas of culture and governance and hierarchy into the business firm. I wonder sometimes, is this an Italian perspective?

I’m sure you know Luigi Barzini’s analysis of the multiplicity of masks in Italy. Sometimes the outsiders who think it’s so freewheeling overlook these significant elements of hierarchy. The question I want to ask you is these recent New York Times articles about Amazon and how Amazon either treated or allegedly treated its employees.

The woman took off a day to give birth to a child, the next day she was expected to come back in, all kinds of demands. People supposedly left the company crying. A lot of hierarchy. Pay was pretty good. Given your analysis of the business firm and hierarchy, what’s your take on this whole Amazon story?

Do you think Amazon, those people are heroes, or this is inhumane, or we have the balance wrong? What do you say?

ZINGALES: I think that probably we’re going a bit too much in a Southern direction. Take also Netflix. Apparently, Netflix has this credo that “we are a team, not a family,” and like a team, we set aside everybody who is not up to being first team. It works very well to motivate people. It’s also quite hard for many of the people to work.

There is always the trade‑off between incentives and some form of insurance. If you eliminate every insurance, you have all incentives, then incentives are great but people are not particularly happy. You need to find the right trade‑off.

COWEN: Maybe it’s how we get these scalable firms in the US that Italy is somewhat lacking, by being harsher in some ways.

ZINGALES: I always said that the perfect world is a world in which you take the best things from Italy and the best things from the United States. My dream would be to live in Italy and work in the States. The commuting is a bit complicated. I think that you’re absolutely right.

I come from a region in Italy where there are a lot of family firms. What is extremely moving and depressing in this moment is, in these firms, when they go bankrupt, the owners commit suicide. It is a pretty large number of suicides today because, unfortunately, the business is not doing well.

Sometimes, they leave their life insurance to pay the salary of the employees, and then they commit suicide. That’s a completely orthogonal view of the firm like we are a family. Which one is better depends on a lot of things. Depends on how much is important to transfer knowledge within the family.

Italian firms specialize, or used to be specialized, in craftsmanship that is hard to teach unless you have a dedicated person transferring this. That’s the reason why they were family firms, because the parents transferred to the kids. A lot of the education in Italy is done in the family.

One of the best things about Italians, for example, is that they sit down at dinner. You say, “Why so important?” I thought that everybody sit down at dinner with their family. I realized in America, a lot of people don’t sit down at dinner. When I grew up, I sit down at lunch and dinner. Today, it’s difficult, because most people are not around at lunch.

There is a tradition of spending some time around the dinner table. That’s a place where you socialize, you learn, you transfer human capital from the older generation to the younger generation. I think that this is one thing that is lacking in the United States that they can learn from Italy.

[In Italy] there is a tradition of spending some time around the dinner table. That’s a place where you socialize, you learn, you transfer human capital from the older generation to the younger generation. I think that this is one thing that is lacking in the United States that they can learn from Italy.

On Google and conglomeration

COWEN: You’ve written on conglomerates. One of the recent business stories is that Google will turn itself into a kind of conglomerate. The parent firm will be called Alphabet. Google will be one division. Will this matter, and if so, how?

ZINGALES: I think it’s not a bad idea for Google to separate the moneymaking machine from the rest. Why? Because when you don’t see how much transfer takes place, you tend to overdo it. I think it’s a first step to do this separation so that you see, from an accounting point of view, who’s making money and who is investing money or wasting money, depending on the point of view.

COWEN: Won’t it lower innovation by imposing more accountability, or you think it’s the opposite?

ZINGALES: If innovation were just throwing money at it, Greece would be the most innovative country in the world. I think money is a necessary condition, but all the time it’s not sufficient and sometimes it’s also counterproductive. I heard some young entrepreneurs saying, “Look, you don’t want to get too much money early on because it distracts, it doesn’t keep you focused, et cetera.”

I think it’s very important to find where to invest the money. This is why markets are so important, because we’re not that good at it. I admit, I teach entrepreneurship, but if I were that good at picking the right investments, I would be a multibillionaire and I’m not. It’s a difficult business to do. That’s where the market is useful.

My fear is that Google . . . Especially because the governance of Google resembles more the governance of Italian companies rather than the one of American companies. There’s not a lot of floating, voting stock. The power is concentrated in the hand of few people.

As long as these few people are at the top of their game, and they’re smart, and they are in the right sector at the right time, great. As we all know, people age or change, and there will be a time in which they’re not up to the game and they need to be replaced. At that time, the temptation for them to waste a lot of money will be pretty strong.

On the essential Zingales

COWEN: I’m going to try an exercise here. I know I’m the interviewer, but I have a somewhat speculative bent, as well.

You’ve worked in a lot of different areas, and I’m going to try to give my account of what I see as the underlying unities in your thought. You’ve released papers, many more. A true stack would be higher.

There’s a lot of breadth there, but I think it is tied together. I’ll tell you how I see it is tied together and you respond to that. How’s that?

ZINGALES: That sounds fantastic.

COWEN: There’s maybe two or three ways of thinking about what you’ve done. A lot of your main papers, they’re about corporations or politics. I read you as taking core areas of economics, and then pretty consistently suggesting that culture really matters and governance really matters, and doing that consistently for businesses and government.

There’s another way I think of what you’re doing. This is maybe more Italian. Take the Italian Marxist Antonio Gramsci, who wrote about hegemony, and power, and control.

To me, you read like someone who read Gramsci at an early age, was quite struck by it, maybe didn’t agree with it, but you’re taking all of his questions and reasking them about control and hierarchy but with real economics and with something like scientific method.

In both ways, you’re quite this Italian thinker. I have this saying, “All thinkers are regional thinkers. You just have to figure out what the region is.” You’re redoing Gramsci with economics or you’re redoing economics with culture and governance.

Then, there’s this other Gramscian dimension to your thought. He once said, “In the medium of the intellect, I am a pessimist, but when it comes to the medium of the will, I am an optimistic.” There’s this seesawing back and forth of the extreme pessimism and extreme optimism.

I see that in your work, too. You’re an Italian who came to the US with such high hopes. In many ways, you love it, but in other ways, you’re deeply disappointed. You keep on seeing the unities between US and Italy, corporations and government, and the practical pessimism of this state of affairs. Yet, you’re propelled to do something about it by writing, speaking, being a public figure, and so on.

That would be like my two‑minute version of who you are, what you do. What do you say to that?

ZINGALES: It’s fantastic. I wish I had thought about it. Seriously, I think that it’s very true. By the way, the only thing that you probably missed is that this tension between the North and the South is also Gramsci. It’s called the historical bloc. It’s the bloc that ruled Italy for a long time is this alliance between the Northern elite and the Southern elite was exactly Gramsci.

I think that intellectual tradition of Chicago, Stigler, when he invented regulatory capture was borrowing from Marx. It’s right‑wing Marxism.

COWEN: You told me you’re a quarter Sicilian. What’s the part of your thought that’s a quarter Sicilian?

ZINGALES: I have a huge sense of pride, which is not typical of my region. It’s typical of Sicilian. My grandfather was in military, but in his life, he did three duels. Won them all.


ZINGALES: That was part of the culture of Sicily at the time. What is interesting is a very interesting mechanism. If you are in the military and you are challenged to a duel, if you did it, you were punished. If you did not do it, you were demoted. Which is the right way to do it. You don’t want to encourage something like this, but you don’t want to encourage people to be cowards.

I thought it was a brilliant system. I think I have this element that goes back to my Sicilian roots.

If you are in the military and you are challenged to a duel, if you did it, you were punished. If you did not do it, you were demoted. Which is the right way to do it. You don’t want to encourage something like this, but you don’t want to encourage people to be cowards.
I thought it was a brilliant system.

COWEN: Another Gramscian question, also an Italian question. In Europe, you’re European, it seems to many of us there’s some kind of line. Gramsci asked what’s the difference between East and West, and where in Europe would you draw that line? What from culture, what from governance, all the different areas of your research, what determines that line?

Why is, say, Macedonia in the situation it is right now and Southern France is not? It seems to have something to do with that line.

ZINGALES: It’s very interesting. When I go to Istanbul, I find it part of Europe in every sense, at least part of my world. I don’t know whether I belong to Europe or not. It’s all relative. Byzanztium is so similar to Venice that it’s impressive. I feel completely at home in Istanbul. It’s a bit Venice, a bit Rome. How can you feel different?

I’ve never been to Macedonia. Definitely, when you go to Moscow, you feel it’s a different world. It’s interesting because my notion of culture is probably more Mediterranean then East/West. I feel fairly at home in the Mediterranean. I went, actually, to Iran before Obama reached the deal because I’m an Italian citizen so I could go to Iran without any problem.

I was moved by how European, if you want — the Persian culture is very much linked to all the traditions in the Mediterranean. So I don’t feel it’s so much East. By the way, Iranian people are super lovely people, and they’re not anti‑American. In fact, you find more anti‑Americanism in France than you find in Iran.

COWEN: They haven’t seen us for so long, right?


On things under- and overrated

COWEN: I’m going to try an exercise I did with Jeff Sachs. I’m going to toss out a few terms, people’s names, whatever, and just ask you overrated or underrated. First one, campaign finance regulation. Overrated or underrated?

ZINGALES: Paradoxically, overrated in the sense that capture takes a lot more subtle ways than just campaign financing. It is an important consideration, but even if tomorrow we could fix that, I don’t think it would fix the capture problems.

COWEN: Overrated, OK. Angela Merkel, overrated or underrated?

ZINGALES: I think she’s probably underrated. I’m impressed by her ability to, number one, run Europe for the interest of Germans in a very effective way.


ZINGALES: You should be impressed. She’s elected by German people. She has no European constituency, so she does her job as a politician extremely well. Doesn’t correspond to the interest of the rest of the Europeans, but that’s a different. The other thing that I’m impressed is how she handles the immigrant crisis.

Recreating a positive feeling toward Germany that was absent in Europe and taking, I think, the right approach. We want refugees, because refugees are the best people. Not only is there a moral obligation to save people that escape extermination, it’s also an economic consideration.

These are the most talented, the most entrepreneurial, the most dynamic people in the world. We want to have them.

COWEN: Given your work on the persistence of culture, can Germany and Merkel absorb 800,000 Syrians a year for two or three years? Do you think so?

ZINGALES: I think that’s an excellent question. This is something that is not discussed enough about immigration is the process of assimilation. I think that it’s important to try to get immigrants that are more similar so that they assimilate faster, precisely to avoid those fractures that we have seen in the French banlieue, in the suburbs of Paris and so on and so forth.

Probably 800,000 people are less than 1 percent of Germany.

COWEN: That is close to 1 percent.

ZINGALES: Yeah, it’s close to 1 percent. In a year, it would be a lot. It depends on how fast they are learning German. They already have a pretty good Turkish population that is not perfectly integrated, but they made them win the World Cup. I think they are pretty high up in the national respect and prestige.

COWEN: Pope Francis, overrated or underrated?

ZINGALES: I have to say I love Pope Francis. It’s hard to say he’s underrated because everybody loves him. Not being a Catholic — I was raised Catholic, but I’m not a practicing Catholic by any stretch of the imagination. I’ve been known to be anticlerical all my life.

I’ve been anticlerical because I really thought that the problem of Italy was that the Church was there. Once, I actually was discussing with a cardinal in Chicago. They said, “No, no, the problem is the other way around. The problem with the Vatican is the Vatican is in Italy.”


ZINGALES: I thought he was joking, but when they elected Pope Francis, I realized it was true. First of all, Pope Francis was elected, basically, by Northern and Southern American cardinals who were sick and tired of the Italian Mafia in the Church. They were sick and tired of why?

I’ve been anticlerical because I really thought that the problem of Italy was that the Church was there. Once, I actually was discussing with a cardinal in Chicago. They said, “No, no, the problem is the other way around. The problem with the Vatican is the Vatican is in Italy.”

Because they end up being sued in here in the States and losing money in the States for responsibilities of the Vatican, and the Vatican did not chip in one dime. Not only that, it was wasting money with this IOR, Istituto per le Opere di Religione, that was a money‑laundering organization. Something that should be dedicated to charity was a money‑laundering organization.

Pope Francis is changing all this. My only hope is that he’s not killed, because I think the chances of him being killed is not zero. He’s fantastic.

COWEN: So Italy should elect someone from Argentina?

ZINGALES: I wouldn’t go as far as that. I don’t think Argentina has the monopoly of good leaders — actually, the tradition is not in that direction. I’m just saying Pope Francis is a fantastic leader, and I wish Italy had a leader like that.

COWEN: A related question from some of your research. Is Christianity good for economic growth? If we look at those border areas of Africa, does it matter much for their future economies if they go Christian or Muslim?

ZINGALES: If I look at the data, I think that Muslim religion is not generally associated with good attitudes for capitalism.

COWEN: Muslim traders do very well around the world, right?

ZINGALES: Sure. I’m not saying that you can’t be successful and be Muslim. I don’t think that it’s necessarily the Muslim religion, per se. It’s the association of the way religion has been practiced and diffused in countries that are mostly Muslim. I might be wrong of that, because I think Weber was wrong on saying that Catholicism is such a disaster.

I think that Catholic countries caught up fairly well. I think that some of the Protestant ethic is useful in the system, but I don’t think it’s necessarily the major cause of retardation in development. I think it’s something you want to think about, but I don’t think it’s the major cause of underdevelopment around the world.

COWEN: Luchino Visconti, the Italian film director. Overrated or underrated?

ZINGALES: Underrated, I think he’s fantastic. But the best movie ever is The Leopard done by him.

COWEN: What’s the social science lesson in this movie?

ZINGALES: The story is a very sad story, but it’s a very true story. It’s the story of the Northern troops arriving in Sicily and liberating Sicily, and the nobility there saying, “We should change to remain the same.” This ability of Italy, which by the way, I think is absorbed from the Catholic Church, which survived that long, to change — not to change, to appear to change to leave everything unchanged.

It’s really a desperation, but the movie is wonderful. There is Claudia Cardinale out of this world, and Burt Lancaster and Alain Delon, really a fantastic thing. I showed it to my wife. She thinks it’s slow because it lasts three hours and a half. It’s not something that generally you have in Hollywood movies, but the quality of the scenes and the quality, also, of the silences is out of this world.

COWEN: I once saw it on a big screen at American Film Institute. That was quite a help. A classic case where the movie was not worse than the book, you might say.

ZINGALES: I think exactly one of the few cases. I never read a book first and then saw a movie that I thought the movie was the same level as the book.

COWEN: The movie is better, I think, actually.

ZINGALES: I don’t agree. I think they are the same level, which, for me, is the only case I can mention.

COWEN: Beppe Grillo, is he actually funny?

ZINGALES: Yes, he is funny.

COWEN: If I understood Italian, I would laugh?

ZINGALES: Yeah, he has some foul jokes, but most sort of comedians have. I think certainly more funny than Trump.


COWEN: Is he funnier than you?

ZINGALES: Definitely. Look, there is one thing you have to realize about Beppe Grillo. First of all, he has a degree in accounting, which, first of all, is not normal for a comedian. Accountants are not that funny. Second, it makes him more qualified than most people, certainly most comedians, to read income statements and balance sheets.

Before he even was a politician, he started being an agitator in shareholders’ meetings and going to shareholders’ meetings with one share, starting to ask questions and pose problems in Italian corporate governance. Was very successful, at least, at raising the level of awareness. In that sense, he did something very valuable.

COWEN: No coauthors, no colleagues, but who is the most underrated living economist, and why?

ZINGALES: This is a very, very difficult question. Who is the most . . . ? I would have said Gordon Tullock had he not just passed away. I think he was really underrated for what he did.

On monetary policy

COWEN: Around here, we’ll grant you that. How would you say your opinions have changed in the last 7 to 10 years? An awful lot has happened in the world. The EU has not turned out the way a lot of people thought. There’s a lot more opposition to migration. We’ve had a financial crisis. We may be on the verge, possibly, of another global recession because of China. Italy possibly or probably hasn’t turned things around.

Over the course of the last 10 years, how have your views changed? I don’t mean on particulars, but at the conceptual level?

ZINGALES: I think that I got much more interested in monetary problems, and since ironically I started to study economics because I grew up in a country with double‑digit inflation, so I thought that that was a big problem. But then by the time I became an economist, inflation was not an issue and I thought that was not particularly interesting. Now, all this issue of deflation, how to fight deflation, is deflation a problem — I think that are topics that, 10 years ago, I would be completely ignorant about and now I’m fascinated by.

COWEN: Now you think they’re very important.


COWEN: Do you find it striking that the world’s three main currencies all have interest rates of zero?

ZINGALES: Yeah. It is striking, and there is a part of me that say that the zero‑interest rate policy is a redistribution in the wrong direction. This is taking away from the people with the bank deposits and giving it to the guys who can easily engage in speculation, et cetera. From a moral point of view, I think the distribution goes in the wrong direction.

On the other hand, I have seen the eurozone fall slowly into deflation. For six months last year, we’re in the deflation range. This maybe is my Italian heart bleeding, but when you have a huge amount of debt and you start to have deflation — Irving Fisher was right, the debt‑deflation spiral is pretty terrible. That’s probably the worst possible outcome.

I think that generals are famous to be prepared to fight the last war, and so are economists and central bankers. The ECB has been set up to fight inflation. It’s completely unprepared to think in those terms. In fact I would raise this charge, because when the European leaders talk, they say that “Oh, our objective is an inflation below but close to 2 percent,” and I look for a statement of this type. If you look in the web page of the ECB, they say that they want inflation below 2 percent — so there’s no close — below 2 percent. Inflation is measured as the amount expressed in the European level.

Then they want every individual CPI of every country below but close to 2 percent. If you have an average and every term has to be below two, even close to two, the average must be below two, probably by a lot.

COWEN: I think so.

ZINGALES: I think that the ECB has been designed, basically, to have deflation. I don’t think they’re mentally prepared to out deal in this situation. I think that’s a big issue.

On behavioral economics

COWEN: I’m also struck by some of your work on behavioral economics. I like very much the paper where you take some investors, and instead of showing them Visconti’s The Leopard, you show them a horror movie and you see what happens to the risk premium.

There’s another paper I want to ask you about. It’s about impatience and procrastination. It’s often the case the same people who are very impatient and procrastinate — and you give the example of people who were very impatient to get a check — they’ll even settle for a much smaller sum of money to get the check now. Then they get the check, and they don’t cash it or spend it or do anything with it. They get it, and then they procrastinate.

What’s the underlying view or model of human behavior that causes impatience and procrastination to go together?

ZINGALES: Oh, you’re setting me for a very low standard. I don’t think I have a model that includes everything. This is part of a larger experiment, which to some extent is still undergoing. With a colleague at Northwestern, we study an entire cohort of MBA students at Chicago, 550 people.

Many experiments that are done around the world are done with undergrads. Most of them are the poorest undergrads, because they’re the ones that desperately need money, so generally art majors, not really representative of businesspeople.

A lot of people in economics dismiss some of these results because they say, “Oh, these are the weird guys. They’re not the ones that will run big corporations, blah‑blah‑blah.” We started with a sample that, hopefully, will run big corporations and statistically has run big corporations.

What we find in many of the deviations that behavioral economics find are present in our sample. The particular experiment that Tyler is talking about is at the end of a bunch of games that won an amount of money that was going from $0 to $300 — some people were winning a significant amount of money, $300.

We offer them to delay the delivery by two weeks with value interest rate in some cases at 10 percent over two weeks. 10 percent over two weeks, over $300, is both percentage‑wise huge but even $30 is not trivial, at least for me. It may be for my students, it’s more important.

These guys really give up receiving $30 over two weeks to get the check in the mail that day. However, this is not the only clever thing we’ve done in that particular study — we follow when they cash that check. On average it was two weeks, but 10 percent never cash it. They lost it.


These guys really give up receiving $30 over two weeks to get the check in the mail that day. However, this is not the only clever thing we’ve done in that particular study — we follow when they cash that check. On average it was two weeks, but 10 percent never cash it. They lost it.

ZINGALES: They are so eager to get the stuff. I think if I had to give a sense, it’s the salience of this. Honestly, these people, everybody should have accepted delayed payment because we checked, 90 percent of them were not maxed out on their credit cards.

What it means receiving a gift in cash, a check — it’s not even a gift in cash — today over two weeks. Once you know you’ll receive it, we think we were fairly credible as a faculty promising. I think the credibility issue was not major.

If you know you won $300, you can go spend it today on your credit card and get the check two weeks from now. The fact that you want to have it now, I think is an interesting aspect about saliency. The fact that once you have it you relax and you forget to cash it is, I think, really interesting by itself.

On the future of the EU

COWEN: Speaking of procrastination and impatience, what’s your view on the future of the European Union? It seems to me it cannot fully integrate, because unlike with North and South Italy, there you actually have a fully integrated electorate. Right? You have a single set of elections where you choose a national leader, and everyone more or less accepts it. It’s really hard for me to see that for Europe.

I suppose my expectation will be that the ties become weaker and weaker, Schengen falls away, there’s not a fiscal union. The euro becomes a bit more like a currency board. National central banks keep certain kinds of liabilities. What’s your prediction for 20 years from now? European integration: more of it, less of it? What’s the underlying model?

ZINGALES: Quoting Gramsci, let’s first give the pessimistic, rational view. There will be a breakup between the Northern Europe and the Southern Europe. The wishful thinking — no, the wishful thinking is too bad — is the optimism of the desire to make a change. That’s what every sensible human being should be working for is to try to actually make the European project a democratic process.

COWEN: So a European-wide electorate?

ZINGALES: We vote somebody that can decide something. We elect a parliament that has not the real power to appoint a prime minister, to appoint somebody, and nobody really responds to the European people.

I think that an injection of democracy is what is most needed, and hopefully all the tension, will emerge.

If you want to be optimistic, like I want to be, the United States did not have an easy route. As I said at the beginning, there was a lot of tension and there was a civil war. Hopefully, in Europe, we already fought the civil war — two — in the last century, so we don’t want any more of that.

The fact that the process is not linear is inevitable. The fact that there are tensions and bumps is inevitable. The important thing is at least you see the right direction, and this is what sometimes I’m not so sure that everybody sees. I think the right direction is more democracy.

On running a successful organization

COWEN: Last question before we open up to the crowd. You’re now director of the Stigler Center in Chicago, and you’ve studied organizations for your whole career. Given what you’ve learned — we’re here, of course, at the Mercatus Center hosting this event — but how will this shape what you will do with the Stigler Center, as an economist?

ZINGALES: I think that the first thing is spend time in hiring the best possible people. I think that one thing that works well in university is that we spend a huge amount of time selecting faculty. A lot of what we do is listening to seminars, reading papers, refereeing papers, selecting the next generation.

What I’ve learned in various organizations is the best, most successful organizations are the ones that spend a huge amount of time selecting the good people. Because it’s very costly to fire — you don’t want to fire unless you have to. Once you get the right people in place, organizations, I wouldn’t say run themselves, but almost. If you don’t have the right people in place, you spend a lot of time fixing the hiring mistakes.


AUDIENCE MEMBER: Thank you very much for coming. My name’s David Wille. I’m a research assistant with the Mercatus Center. Part of our research is looking at the connection between the financial services industry and small business creation. As you know, on a number of measures, small business creation is down, innovation seems to be down in the US.

What, in your view, is the connection, if any, between the financial services industry, the problems in that industry, and the decline in innovation, the decline of new business creation in the US? Thank you.

ZINGALES: I think that the role that the financial sector has in promoting new businesses, innovation, and also small business, is crucial. Much of the first book with Raghu Rajan was dedicated precisely to celebrate this role. Do they succeed always so well? The answer is no, because there are some frictions.

Ironically, I don’t think we’re there anymore, but there was period in which venture capitalists were so much flooded with money that they had to dish out this money sufficiently fast, that they had to shell it out in big pieces. They were only financing more advanced companies, because they couldn’t find the time to actually shell it out in small pieces at a time. It’s very important that you have capital in the right people to do that.

If I were to point out the major problem to financial innovation today in the United States, I know the financial system. In other countries, I will think it’s the financial system. In Italy, clearly it’s the financial system. In the United States, it’s not. It’s more of a pattern policy and other form of barriers to entry.

One story that I tell in my book that really motivated me to write the book is when I got approached by some students that were trying to start a company. The first thing that they had devised was basically a lobbying plan. I said, “If the first thing, the part of the business plan, is the lobbying plan, then we have a problem in America.”

AUDIENCE MEMBER: Frank Manheim, School of Government Policy and International Affairs right here. I wonder if you have taken a look or compared the environmental regulatory policies in Europe with those in the United States, which are in quite a bit of debate right now, and what your thoughts about the comparisons might be.

ZINGALES: I’m sorry to disappoint you, but I haven’t looked at that. I think that your idea is extremely good to make the comparison, to see also which lobbies are winning the game. My bet is that the differences in regulation are driven entirely by who are the most influential groups across the board.

I was talking to some farmer in Italy who was saying in regulation of how much . . . what it’s called. Not copper. You give on the vineyard to — they use a copper‑based stuff that you put on the vineyard to prevent some diseases. There is some regulation. There is only one exemption in Europe, and it is for the plant, now it escapes the name, that you make beer. Because the Germans wanted to make sure that you could produce enough of that to produce beer.

Regulation, unfortunately, not just in the United States but also in Europe, is driven by the special interests. I think it would be a very nice comparison to do.

AUDIENCE MEMBER: My name is Alexander Skouras, from the Atlas Network. I’m from Greece, so that’s what I’m about to ask you about. Please don’t laugh. I know that you have been following what’s going on in Greece and in other European countries very closely.

The question is very simple. Given the new agreement that the European Union signed with Greece, is there anything, under any conditions, you would see something good coming out of it? The second part, what Greece can do in order to get out of the crisis, if we forget about the debt negotiation, which we must assume that is going to take place some time soon?

ZINGALES: The big hope is that eventually there will be some debt forgiveness in some form that is not called debt forgiveness, but delay of payment to infinity that is tantamount to debt forgiveness.


ZINGALES: This is why politics is so hard, because in economics, you call a spade a spade. If you forgive in present value, isn’t that forgiveness? In politics it’s very different. I think that’s the hope.

The big fear that I have is the political backlash we have seen with the rise of Syriza. Now Syriza has been tamed and made part of the European elite. All of a sudden all the newspapers in Europe are celebrating how great is Tsipras, the same guy that, until yesterday, was a communist, a revolutionary, dangerous. Now, he’s sort of part of the European team. Why? Because he signed on the dotted line whatever they told him to sign.

My frustration is I agree with a lot of the reforms that the European Union is imposing on Greece. I think that longer term would probably benefit Greece, but I am democratic at heart. I think that the reforms, you should own them. They should not be imposed on you.

I think that inevitably the Northern countries are trying to do with Greece what Northern Italy did with Southern Italy. They’re trying not to fix Greece but to minimize the problem for Europe. Nobody really in Brussels, except maybe the Greek representative, cares about Greece and the Greek people.

I think that inevitably the Northern countries are trying to do with Greece what Northern Italy did with Southern Italy. They’re trying not to fix Greece but to minimize the problem for Europe. Nobody really in Brussels, except maybe the Greek representative, cares about Greece and the Greek people.

They care about stability in the EU and getting that problem off their agenda, exactly like in Turin people did not care about people in Sicily. They care that the revolt will be sedated. They did whatever it takes to sedate the revolt — including, by the way, aligning with the Mafia.

One of the reasons why the Mafia is alive and well is because it was a method of control of Sicily that the Northern army used very effectively. The long‑term costs are huge. Now, I’m not saying the European Union is helping the Greek Mafia, but I wouldn’t exclude it. I wouldn’t exclude it.

Also because the people that best can negotiate with the European Union in Greece are part of the Greek elite. They all speak English, travel abroad, are part of the very elite that run the country, up to now, into the grounds. Corrupt, crony, and every negative thing that you’re going to say. Why do you expect these guys, all of a sudden, to change just because they’re blessed by the European Union? I don’t think that that’s the case.

I think that I thought that the so‑called bailout of Greece in 2010 was a disaster, was really a bailout of French and German banks covered with the pretense of helping Greece.

I think that since then, we’re not recovered from that mistake. I think that’s a really sour spot in the European history and something that will weigh heavily in the future.

COWEN: We have time for just a final, very quick question and quick answer. Next, please.

AUDIENCE MEMBER: Hi, my name is Stephen Jones. I’m a MA fellow at Mercatus. I do have a quick question. In your little vignette at the beginning, you noted that the café shop workers are so unbelievably productive. I’m just wondering why you would want somebody to be that productive in a café. Is it because Italians value coffee that more or maybe labor regulations or something else entirely?

COWEN: We come back full circle to Italy.


ZINGALES: You actually raise an excellent point. My wife, who is American, walked into an Autogrill in Italy. She’s amazed by the fact that the guy speaks perfect English. She said, “Much better than yours.”


ZINGALES: She discovered that this guy has a university degree in English literature, and he was serving coffee at the Autogrill. I think that’s pretty depressing. That’s maybe the reason why Italian café are so good is because there are not a lot of opportunities.

Actually, I have this line, again, comparing the United States and Italy. I notice that in Italy, on average, that the personal assistants are great, are really fantastic, and managers are not that good.


ZINGALES: I said, “Wait a minute. Why is that the case?” Obviously, because the market doesn’t work. If you don’t sort out the market, you can have some very talented people doing jobs that generally don’t require the talent, and you have, unfortunately, non‑talented people doing jobs that require a lot of talent.

My favorite line that did not make me very popular in Italy — Italy is the country with the best secretaries and the worst managers.


COWEN: On that, three announcements to close. First, big round of thanks for Luigi. Next, September 24th is Dani Rodrik. Finally, Luigi will be outside signing books. He has three books. Any book you bring, he will sign.

Luigi, thank you again. A great honor and pleasure to have you.

ZINGALES: My pleasure.

The Mercatus Center gratefully acknowledges the assistance of Stephen M. Jones in curating most of the hyperlinks found in this transcript.

A single golf clap? Or a long standing ovation?

By clapping more or less, you can signal to us which stories really stand out.