Odd Lots - 64: Stay in School, Even if You're Planning to Join the Mob

Episode Date: January 27, 2017

It's almost a truism that better-educated people earn more money. But suppose you're not interested in a normal job? What if you want to go into the mafia? Well, it turns out that you should still stay in school. On this week's Odd Lots podcast, we speak with Giovanni Mastrobuoni about the relationship between salary and educational attainment in organized crime. He's the co-author of a paper titled "Returns to Education in Criminal Organizations: Did Going to College Help Michael Corleone?" Based on data sets from the first half of the 20th century, Mastrobuoni and his colleagues were able to show that mafia members who got more education also got paid more in the underworld. We discuss how they discovered this, and what it means for the economics of education.See omnystudio.com/listener for privacy information.

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Hello and welcome to another edition of the Oddlaws podcast. I'm Tracy Allaway. And I'm Joe Wisenthall. So, Joe, this is the second edition of our very exciting, very nefarious money markets and crime series. We're really starting the year on a very sort of dark and grim note. Earlier in the year, we talked about possibility of a bond market crash and now we're on this series of the economics and markets of crime. But I'm really enjoying these.

And I'm excited about today's episode. What are we going to talk about? Well, so I was going to ask, are you, I think there's a general tendency for guys in particular to be really into the mafia and mafia movies, especially. Are you one of those guys who kind of, like, worships the godfather? I wouldn't say I worship the godfather. I really liked the godfather movies. I also, The Sopranos was definitely one of my favorite TV shows of all time.

So I wouldn't say I'm like, you know, an obsessive or anything, but I do find it to be a very interesting topic and I like a lot of the media surrounding it. Okay. So today, I think you'll like this topic in that case. So today we're going to be talking about the idea of education and the economics of education and what role they play, if any, in a lot. being a good mafioso, I guess. Right, because we know there's plenty of evidence that having a good education in the non-criminal world is probably helpful for getting ahead, for making more money for all kinds of positive life outcomes. And there's a lot of ambiguity about why.

Is it just about signaling? Does anyone actually learn anything in college that they use? Or is it about something else? And so it's kind of an interesting way to study the value. of education by whether it also helps you get ahead in the world of organized crime. Yeah, but there's also the school of thought that says that if you get a higher education, then you're less likely to resort to crime, right? Right.

So, like, the idea of gangsters actually actively seeking out education, in theory, maybe should deter them from a life of crime. I don't know. That's what we're going to find out, right? You'd think so. Of course, and there's, you know, it's not the mafia. but there's that famous moment in the show The Wire where the drug kingpin Stringer Bell is seen in an economics class at the local college. That's right.

And he learns about supply and demand curve, right? That's a great scene. Okay. So here with us to talk about all of this is Giovanni Master Buoni. He is a professor of economics at the University of Essex. And he is also chair at the Collegio Carlo Alberto. in Italy. And he actually wrote a paper with some of his colleagues called Returns to Education in Criminal Organizations, did going to college help Michael Corleone. So clearly a godfather reference

right there. Let's do it. Giovanni, thank you so much for joining us today. Thank you for having me. I mean, I guess I have to start with the obvious, which is what inspired you to actually look at the subject, because connecting education and returns and college and the mafia isn't necessarily something that a lot of researchers would look into. It was a book, a biography by Bonanno, who was one of the sort of leaders in the Italian-American mafia in New York in Brooklyn.

And in his autobiography, he talks about. about how having sort of a higher level of education than his peers within the mafia helped him to become one of the bosses of one of the New York families. Having already worked on the Italian American mafia and having the data that would somehow allow me to have a measure of sort of economic success and of education sort of made the trick.

Before we get into this question of whether having an education really helps one get ahead in the mafia and why that might be, let's just talk about the data first. How do you even begin to measure something like this? How do you know which of the mafioso went to college and how do you know how well they did economically. It's not like their salaries are made public or anything like that. Yeah, exactly. So it's not easy. So I always joke saying that the mafiosi are somehow the, you know, the less likely to respond to surveys, which is how we usually find out about how much money people make and what level of education they have. So it all starts with some declassified

files by the Federal Bureau of Narcotics, which was an agency trying to crack down the mafia way before the FBI did. So we're talking about the 1950s and 60s when the FBI was quite busy trying to find the communists in the country. So what the federal Beow of Narcotics did was to sort of build like a huge folder where somehow each page was dedicated to a mobster. Now we don't know exactly how they managed to track down so many mobsters. I mean most likely because there's no evidence.

But most likely it was through undercover agents and also monitoring these these mobsers whenever they met. And so what you have in the Federal Bureau of Narcotics files is information about where these mobsters lived, so their place of residence, the age, the name, so first name and last name, the closest associates, and as well as like a short description of their criminal profile. But not all of them had a criminal profile. So some were very good in hiding somehow from the police. So the file, the last update happened in 1960 of this folder and was declassified in, I think in 2007 or 2006 or 7. So I found out about it at, sort of I was waiting for an airplane and there was a bookstore.

And so I started just looking at books. And it turns out that someone printed the whole folder. And so you can buy it on Amazon. And it's called Mafia, very simple. And so what I did is I. first of all, put the whole folder, so each file, each mobster's information in electronic format. And then sort of what was missing for this research was information about their level of education as well as a measure of economic success. So what I what we did, I mean

with my co-authors, is we used the first name, last name, place of birth and date of birth, to merge these mobsters with the US census, the 1940 US census. And in the 1940 US census, you have a whole lot of information, including income, the value of the house, if they own the house, or the rent they pay, as well as the years of education. And so that allowed us to write this paper and to measure returns to education. So what sense did you get about how, I guess, people that either were in the mafia or were going into the mafia thought of education?

Like, did they see the value in it? Was it obvious to them that there was value? Or what was their decision-making process when they decided to go off to college? So again, it's hard. to answer this question because we only have scattered information about that. And it's mainly coming from either historians who typically talk about sort of individual cases or autobiographies, like for example the one by Joe Bonanno. The sense is that they would spend as little time as possible in school.

And there are even stories of parents trying to fake the age of their children to have them spent fewer years in school. So we are not arguing in the paper that they were actively seeking more education, but that those that did have more education were actually making more money and we're living in more wealthy housing. Yeah, I was just going to get to that point. You mentioned Joe Bonano and he cited his own education as a reason for his success. Go through. What are the key data points?

how much more education translated into how much more money in economic success? What is, what was the return on going to school? So we use two economic outcomes. One is income. Now income might be a little bit problematic. So one might think that even in the census, mobsters would be unwilling to declare exactly how much money they make. Right. And so we use also housing. And housing is somehow more difficult to hide because the surveyors would actually visit the homes of individuals and so they could actually see and have a sense of the value of the house. You know, we argue that it would be more difficult to hide the value of the house where they were living or the rent they were paying.

So what we find is that having an extra year of education increases their income, as well as the value of their housing, by about 7% to 8%. And this sort of rate of return is very similar to the rate of return of their neighbors. Because what we do then is we compare the returns to education of mobsters with the returns to of a whole series of possible control groups. Now, the more natural one we think is the one based on their neighbors. So you have individuals who share the same neighborhood, they live in the same city, they live even in the same neighborhood. And what we find is that neighborhoods,

have very similar returns to education, maybe slightly larger by one percentage point. Then we compare them to US citizens who are of similar age and similar gender. I mean, again, I should have mentioned this, we're talking about only men. So the mafia was really a male business. Women were not allowed into the, or still are not allowed into the mafia. And so while it is true that US citizens have higher return certification in those years, so close 10 to 11%, when you compare the mafiosi to another quite reasonable control group, which are immigrants as well as immigrants of Italian origin,

These two groups fare much, much worse. So they have returns to education that are only half as large as the ones of the mobsters. So, I mean, what conclusions do you draw from your conclusion? What is the actual value of education here? And do the differences in results between mafia and non-Mafia people suggest a different value for education? depending on whether it's applied to criminal activity or not. So what we managed to do in the paper, which I think pins down a little bit the mechanism here, is we managed to separate the mobsters into two groups.

And that we did thanks to the Federal Bureau of Narcotics files. So we divided the mobsters into those that were doing. were doing more business types of crimes like for example loan sharking or money laundering or drug dealing with those that instead had a more violent profile like those that were involved in robberies or killings and and there we find striking differences so those that have a more business type profile have returns to education which are similar to the to the ones of the US population so it's close to 11% while those that you know we're doing those that

were so you know called also the soldiers have much much lower returns to education like close to 2 to 3% so slow you know similar to the to the ones of of the other Italian immigrants What was the highest level of education that you encountered in your research? Did anyone have a doctorate or something like that? No. I think the highest was college degree. So what you find on average is that mobsters have one less year of education compared to their neighbors.

So at that time, the average education is seven and a half years for mobsters and eight and a half years, more or less for their neighbors. So I alluded to this in the intro, but just talking about in the non-criminal economy, there's still quite a bit of debate about why people with more education make more money. You could say, well, you learn skills in college, and that helps. Or maybe it's a signaling mechanism to future employers that, okay, this person who I'm going to hire, I'm going to first just do a college screen and not hire anyone who didn't go to college. Or maybe, and I think you mentioned this in your paper, maybe there's a socialization element where you don't really learn anything, but you learn how to behave in a hierarchical organization. Or maybe just the mere act of going to college tells you something about the enrollee that this person has preternaturally. they're smarter and more skilled than other people. And so it's those non, you know, they already had what it took to succeed. You know, this debate about why college is valuable goes on forever.

And I don't think there's a clear answer. Does the study that you have undertaken by taking it outside of the sort of corporate realm, in your view, shed any light on this question? That's a good question. I must have the truth. Like, I haven't thought about it. But, I mean, if we take these potential mechanisms, you know, one at the time, I think they could all be applied to the Italian Mafia. Sort of in the same way, they can be applied to the normal workers. And this is because this is not well known, but the Italian Mafia is somehow a democratic institution,

meaning that the members elect their boss. And so the signaling value of education might work in such a setup in a similar way it works for employers and employees. Although I do think that what we find about business, type of crime criminals having much higher returns to education does suggest that there's also some learning involved potentially better skills in when dealing with numbers for example that might be valuable even in inside the you know the criminal world Well, I have to ask, do we have any data on what exactly mafia members were actually studying? Were they studying economics, for instance?

No, that unfortunately we don't know. In the census, we only know the years of education. And, you know, very few went to college. So again, the average years of education is seven and a half years. So most, you know, didn't go further than compulsory education. But I agree, I mean, that would be very interesting. There are stories of modern mafiosi in Italy, you know, be. having having much higher levels of education than their parents.

Right. I was just going to ask this, you know, there's organized crime exists today. Your study looked at, you know, the first half of the 20th century. Have people or you undertaken similar studies on existing organized crime elements to see if similar phenomena hold? Well, I would love to. but it's just very difficult to get the data. Right.

On top of, I think there being a little bit also of a risk factor probably. So, you know, so in our data, we looked at monsters that were active in the 40s, 50s and 60s. So most of them are, if not dead, they're very old and probably not. very dangerous. I think it would be different if we were looking at current mobsters. And for current mobsters, it's just really hard to get the data. I mean, for one thing, the census, recent census don't have information on first names and last names. So even if one managed to find, the names of mobsters, for example, have been involved in recent crimes.

I think it would be really hard to find out exactly what kind of education they have, because that's simply not information that is typically of use for the police, and so it's not information that the police records. All right, Giovanni Mastrobloni, he's a professor, at the University of Essex and also chair at the Collegio Carlo Alberto. His paper is the returns to education in criminal organizations did going to college help Michael Corleone. Fascinating topic. We really appreciate you coming on. Thank you. Thank you. Topic, do you think Michael Corleone would have studied? I bet he would have studied like a generic

business degree, which to be honest, I never really understood what studying business was in college. or business majors. I never do what that meant. Yeah, or something like that. But I imagine something like that. But maybe if I went back and rewatched the godfather specifically thinking on that, I would come up with some other answer. Don't you think the degree, I mean, granted a lot of people in that study didn't go to college,

but don't you think the degree that would have helped them the most would be law? Like it'd have to be law, right? Oh, yeah. Right, because in a way, organized crime is sort of like legal arbitrage, finding opportunities in the existence of day-to-day life where people need to pay for some extra legal service like protection. I thought one of maybe the most fascinating element is just the process of collecting data. And it seems like a lot of really interesting economics comes out of unusual data sets. Obviously, when the federal drug of narcotics was assembling

these dossiers on mobsters, they weren't thinking that they were creating a future economic data set, but a sort of enterprising researcher can see them for what they are. Do you love the idea of economists doing surveys of criminals and asking them like, hey, your level of education and, by the way, the returns on your business. Right. If you don't mind, please let us also tell us what your annual salary is and your bonus in your take-home pay from last year was. Yeah, but as you rightly point out, like the notion that If we could get that kind of data, what fascinating stuff it would yield.

And again, this is an important topic of debate if you think that higher education should actually deter people from crime for whatever reason or mechanism that comes into play. These are really, really interesting data sets to have. Absolutely. And I think also, you know, there's just this cliche that you should go to college and getting a better education is good for your career. career. And so not only did we learn that that applies to crime as well, which is interesting, but that, you know, for maybe some of the same reasons, the idea that in the corporate world, a sort of pure credentialism could be one reason why someone gets hired over another. And in the criminal world, perhaps having a degree is something that if everybody's voting, like, ah, this guy is

the smart one. He has a degree or he went to school. Could be a factor. And so some of these, you know, might sort of further lend the argument that there is some value, you know, some, if nothing else signaling value in having that degree. Okay. So I guess we haven't definitively established if crime does pay, but education definitely seems to, right? And, well, if we don't know for sure if crime does pay, but if you know that your child is going to go into a life of crime, you could still suggest to them to stay in school. Yeah.

Start saving for that college fund now. All right. Well, that's another edition of the Oddbuff podcast. I'm Tracy Allaway, and you can follow me on Twitter at Tracy Allaway. And I'm Joe Wisenthall. You can follow me on Twitter at the stalwart and tune in next week for the next edition of our money, markets, and crime series. June Grasso, inviting you to join me for the Bloomberg Law podcast. Every weekday, we help you make sense of the legal stories that shape the nation and the world.

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