Chris Blattman, a political science professor at Yale, recently interviewed Ray and Ted on Economic Gangsters, and the entertaining back and forth was posted today on his blog:

Q&A with Ray & Ted

This exchange is among the highlights:

You link diplomats’ unpaid parking tickets to their nation’s corruption. How random. Where did you come up with the idea?

Ted: A couple of years ago, I was listening to an NPR story about the diplomatic parking problem in New York City while drinking my morning coffee, and I asked myself – are the Nigerians any worse than the Norwegians? The rest is history.

Ray: I always tell graduate students that if they want innovative thesis ideas, to read the newspaper, not the economics literature. This is a case in point. You usually don’t get exciting new research ideas while reading Econometrica.

– Ray and Ted

Miller-McCune Magazine recently interviewed Ray and Ted on Economic Gangsters. Check out the online version of the interview, including questions on the book’s ideas, insights and policy proposals, as well as on how Ray and Ted became fascinated with studying human depravity in the first place:

The Rational Ruffian: Why Crime Pays

From the highlight reel:

M-M: Speaking of popular appeal, Ray and his colleagues at Columbia made a big splash last year with their study on speed dating, which concluded that on first impression, men favor good looks and women favor intelligence. How does it feel to get your 15 minutes of fame for a randomized evaluation study?

RF: I’m not annoyed to have so much notoriety, but I’m annoyed that this is the article that made me notorious. I would never have predicted that it would have captured people’s imaginations the way it did. People frequently ask me about the link between studying corruption and studying dating. The obvious link is that they’re both domains of cheap talk. People lie to you a lot, and you have to come up with ways of uncovering how people reveal their preferences in actions, not words.

- Ray and Ted

Q: “Do you reckon that legalizing the drug trade would put major transnational criminal organizations out of business? Or would they adapt successfully to a lower risk, lower reward business environment?”
-Geoff Pigman, Bennington, VT

A: The concept of barriers to entry is critical to understanding how the economic gangsters who operate the world’s leading narco-syndicates would react to drug legalization.

Barriers to entry determine whether a business – criminal or otherwise – makes money in the long run. That is, to keep profits high you need to keep competitors out. Otherwise, would-be entrepreneurs, motivated by the all-powerful profit motive, figure they’ll get a piece of the action. But as new businesses pop up and competition intensifies, profits go down for everyone.

What are these barriers to entry? By definition, something that a company has that isn’t available to potential competitors. Let’s take Coke – a highly profitable business – as an example. Why don’t you open a bottling plant and try to get into the soft drink market yourself? Lots of reasons – money; expertise in bottling; the secret formula – but most obviously there are about six billion people out there that know about Coca Cola and none that know about you or your upstart cola. This “brand equity” allows Coke to keep its corner of the soft drink market all to itself.

Barriers to entry are critical for Coca-Cola, for Microsoft– but also for the drug gangs of Chicago’s South Side. A crucial barrier to entry into narcotics trafficking is the law. Most organizations don’t have the stomach or expertise to operate in the murky, violent shadows of the global economy. But if tomorrow we “legalize it,” these barriers will evaporate and companies from big pharma to agribusiness will rush in, spurred by the money to be made.

What will happen to the Pablo Escobars of the world once their marketplace becomes crowded with these corporate behemoths? There will always be something that society refuses to sanction and remains outside of the law – sex trafficking and other forms of slavery; arms sales to dictators; buying and selling state secrets – and transnational criminal organizations will simply apply their expertise to these other domains. Many of them already do.

Want to learn more? Read Chapter 3 of Economic Gangsters to find out how China’s smugglers fought the law – and the law won - and Chapter 7 to learn about the role played by barriers to entry in Angola’s bloody civil war.

– Ray and Ted