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A Conversation with Luigi Zingales 15 Medium and Mercatus Center Cowen 0916

The Mercatus Center at George Mason University is the worlds premier university
source for market-oriented ideas.
Tyler Cowen explores the world of ideas in one-on-one dialogues with todays top
thinkers.
September 16, 2015
https://medium.com/conversations-with-tyler/watch-a-conversation-with-luigizingales-c5ed3601a8f0
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 cafs.
You may subscribe to the audio edition via iTunes, Stitcher, Soundcloud, or your
favorite podcast app.
TYLER COWEN: Luigi Zingales, my conversant, is one of the best and best-known
economists, both in the United States and in Europe. Hes written three best-selling
books, the most recent of which just came out in Italian. Its 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, whats wrong with it, and what should be
done. With Raghu Rajan, he has an earlier book, Saving Capitalism from the
Capitalists.
Luigis contributions are far-ranging. Hes 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. Theres more I could say, but lets 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. Therere a few major strands in your thought, and I want to explore a
few of them. Since youre Italian, lets 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 Ive
seen, per capita income is not higher than what it was 15 years ago, and theyre 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. Its not just the fact were coming out
from a triple recession. Its the fact that Italy did not grow for the last 20 years. There
are a lot of things that dont 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 dont

grow in terms of productivity, you dont 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 its all the fault of the euro, because it is true that this sudden stop happened
roughly at the time Italy joined the euro.
I dont think there is any evidence thats the case, in spite of the fact that its 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 dont 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. Weve 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 dont 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, theres 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, its not so much later, and what feels like
the same culture seems to be giving very different results. Hows 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, its disappearing
in Italy, but in the worse direction. All Italy is looking more like the South.
[laughter]
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 theyre 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
doesnt make a huge difference.
[laughter]
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
dont 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: Lets 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. Im 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 unifiedmost 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 Rgime. 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. Hes 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 cant export other models in different contexts.
The Neapolitans who tried to copy France are silly, because they dont 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. Youre
not going to put Finnish clothes to a Greek or Greek clothes to a Finnish, because
youre 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, youre 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 well 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. Its a huge sort of gap.
Now, why I insist so much on this, because I think there is an analogy that most
people dont 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 dont 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. Theyre 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 its 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. Its a great name for coauthoring a paper on Italy. The way I
read that paper is youre saying something like this: Italy, right now, doesnt 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. Thats the fundamental
productivity reason why even the Italian North hasnt, in some ways, done that well.
Is that the way you think about it?
ZINGALES: Absolutely, but its not just the Apple of this world. Its 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.
[laughter]
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 dont say what because were online. The culture of coffee
did not exist here.
The culture of coffee and a caf 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.
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 caf, is one shop, one establishment thing.
If you go to a caf, youre going to find that at the register, there is an old woman
who is generally owner, and she watches over everything. Why?
COWEN: You cant scale monitoring.
ZINGALES: Exactly, but why? Because the model theyre 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 dont have the lady checking you out throughout the day, at the end of the day,
theres 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 its
not obvious that family does not steal, but still less so.
COWEN: At least theyre stealing from themselves, right? [laughs]
ZINGALES: Exactly. At least there is some redistribution internally. At the end of the
day, you cant scale these things up. I think thats a huge problem.
COWEN: Heres 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 Italys 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 youre down to one or two kids, the chance that one is an idiot is pretty large.
The result is that you cant really transfer the business within the family. The biggest
problem of Italy is actually fertility, in my view, because we dont have enough kids. If
you dont have enough kids, you dont have enough people to transfer. You dont
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 dont 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. Theyre many and
theyre very dynamic. I think thats 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: Its 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 its 70 percent
owned by Italians, so its mostly redistribution. Its 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. Ive said this like 10 years ago. Of course, nobody wants to talk about
these things, but its 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, its only an
extraction or a political economy problemwho 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. Everyones simply playing a postponing game. True or false?
ZINGALES: I think its false. The only thing that I agree is that Italians get the best in
the worst times. I think that thats definitely the case. However, Im surprised that
you dont 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. Thats the only stuff that cannot run away. People
run away. Financial capital runs away. Houses dont 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: Its going completely in the wrong direction. Why? Because its extremely
unpopular. If 70 percent of people own houses, then its 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. Im 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, its hard to find people of the younger
generation not leaving. Its 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 its not a good trade. As long as you are in
the European Union, even financial mobility is like sayingunfortunately, 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.
[laughter]
ZINGALES: If you tried to fix the Illinois budget, et cetera, its 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, its
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 youre 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 youre going to lose.
On US politics
COWEN: Lets 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.
Youre Italian, a quarter Sicilian, Im told, and youve lived here now, not here, youve
lived in Illinois for 27 years. What is it you see about us that we dont? Youre a kind
of Tocqueville of Italy. A lot of your papers are on the United States. Whats 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.
[Trump and Berlusconi] are both extremely good salesmen. Theyre both extremely
wealthy and not afraid to show off their wealth. Theyre both obsessed with women.
Theyre 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. Thats their version of
the free market.
Theyre 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, its 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, theres 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?
ZINGALES: Yes.
[laughter]
COWEN: One thing that strikes me about the literature on corruption, and rentseeking, 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, its 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, theres some kind of structural barrier story. Whats your take on
the Tullock paradox? Why arent 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 Im even more sorry that he wasnt 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 Im 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 dont see enough money is twofold.
Number one, there is ideology. You cant really pay everybody. People will have some
preferencesespecially when theyre not paid a lotfor 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 theyre 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 lets say $5 trillion that pay off, and you start to
sell the tickets. You know that by buying all the tickets, for sure youre going to get $5
trillion. It seems that why the collective amount of tickets doesnt sell for $5 trillion?
Thats basically what Tullock is saying. Hes 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 its 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 dont 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, its 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 dont 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 dont buy your way into the NFL or the Major
League, et cetera.
Here, you buy the franchise, and once youre in, no matter how incompetent you are,
you stay there, which is completely un-American.
[laughter and applause]
COWEN: Im 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?
Im sure you know Luigi Barzinis analysis of the multiplicity of masks in Italy.
Sometimes the outsiders who think its 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, whats 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 were 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. Its 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 its 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
youre 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. Thats 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. Thats 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 dont sit down at dinner. When I grew up,
I sit down at lunch and dinner. Today, its difficult, because most people are not
around at lunch.
[In Italy] there is a tradition of spending some time around the dinner table. Thats 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: Youve 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 its not a bad idea for Google to separate the moneymaking
machine from the rest. Why? Because when you dont see how much transfer takes
place, you tend to overdo it. I think its a first step to do this separation so that you
see, from an accounting point of view, whos making money and who is investing
money or wasting money, depending on the point of view.
COWEN: Wont it lower innovation by imposing more accountability, or you think its
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 its not sufficient and sometimes its also counterproductive. I heard some
young entrepreneurs saying, Look, you dont want to get too much money early on
because it distracts, it doesnt keep you focused, et cetera.
I think its very important to find where to invest the money. This is why markets are
so important, because were 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
Im not. Its a difficult business to do. Thats 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. Theres 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 theyre 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 theyre 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: Im going to try an exercise here. I know Im the interviewer, but I have a
somewhat speculative bent, as well.
Youve worked in a lot of different areas, and Im going to try to give my account of
what I see as the underlying unities in your thought. Youve released papers, many
more. A true stack would be higher.
Theres a lot of breadth there, but I think it is tied together. Ill tell you how I see it is
tied together and you respond to that. Hows that?
ZINGALES: That sounds fantastic.
COWEN: Theres maybe two or three ways of thinking about what youve done. A lot
of your main papers, theyre 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.
Theres another way I think of what youre 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 didnt agree with it, but youre 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, youre quite this Italian thinker. I have this saying, All thinkers are
regional thinkers. You just have to figure out what the region is. Youre redoing
Gramsci with economics or youre redoing economics with culture and governance.
Then, theres 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. Theres this seesawing back and forth of the extreme
pessimism and extreme optimism.
I see that in your work, too. Youre an Italian who came to the US with such high
hopes. In many ways, you love it, but in other ways, youre 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, youre 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: Its fantastic. I wish I had thought about it. Seriously, I think that its 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. Its called the historical bloc. Its 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. Its right-wing Marxism.
COWEN: You told me youre a quarter Sicilian. Whats the part of your thought thats
a quarter Sicilian?
ZINGALES: I have a huge sense of pride, which is not typical of my region. Its typical
of Sicilian. My grandfather was in military, but in his life, he did three duels. Won
them all.
[laughter]
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 dont want to encourage something like this, but you
dont 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.
COWEN: Another Gramscian question, also an Italian question. In Europe, youre
European, it seems to many of us theres some kind of line. Gramsci asked whats 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: Its very interesting. When I go to Istanbul, I find it part of Europe in every
sense, at least part of my world. I dont know whether I belong to Europe or not. Its
all relative. Byzanztium is so similar to Venice that its impressive. I feel completely at
home in Istanbul. Its a bit Venice, a bit Rome. How can you feel different?
Ive never been to Macedonia. Definitely, when you go to Moscow, you feel its a
different world. Its 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 Im an Italian citizen so I
could go to Iran without any problem.
I was moved by how European, if you wantthe Persian culture is very much linked
to all the traditions in the Mediterranean. So I dont feel its so much East. By the
way, Iranian people are super lovely people, and theyre not anti-American. In fact,
you find more anti-Americanism in France than you find in Iran.
COWEN: They havent seen us for so long, right?
[laughter]
On things under- and overrated
COWEN: Im going to try an exercise I did with Jeff Sachs. Im going to toss out a few
terms, peoples 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 dont think it would fix the capture problems.
COWEN: Overrated, OK. Angela Merkel, overrated or underrated?
ZINGALES: I think shes probably underrated. Im impressed by her ability to, number
one, run Europe for the interest of Germans in a very effective way.
[laughter]
ZINGALES: You should be impressed. Shes elected by German people. She has no
European constituency, so she does her job as a politician extremely well. Doesnt
correspond to the interest of the rest of the Europeans, but thats a different. The
other thing that Im 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, its
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 thats an excellent question. This is something that is not discussed
enough about immigration is the process of assimilation. I think that its 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, its 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. Its hard to say hes underrated because
everybody loves him. Not being a CatholicI was raised Catholic, but Im not a
practicing Catholic by any stretch of the imagination. Ive been known to be
anticlerical all my life.
Ive 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.
[laughter]

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?
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 hes not killed, because I think
the chances of him being killed is not zero. Hes fantastic.
COWEN: So Italy should elect someone from Argentina?
ZINGALES: I wouldnt go as far as that. I dont think Argentina has the monopoly of
good leadersactually, the tradition is not in that direction. Im 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. Im not saying that you cant be successful and be Muslim. I dont
think that its necessarily the Muslim religion, per se. Its 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 dont think its necessarily the major cause of
retardation in development. I think its something you want to think about, but I dont
think its the major cause of underdevelopment around the world.
COWEN: Luchino Visconti, the Italian film director. Overrated or underrated?
ZINGALES: Underrated, I think hes fantastic. But the best movie ever is The Leopard
done by him.
COWEN: Whats the social science lesson in this movie?
ZINGALES: The story is a very sad story, but its a very true story. Its 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 changenot
to change, to appear to change to leave everything unchanged.

Its 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 its slow because it lasts three hours and a half. Its 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 dont 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.
[laughter]
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, well 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. Theres a lot more opposition to
migration. Weve had a financial crisis. We may be on the verge, possibly, of another

global recession because of China. Italy possibly or probably hasnt turned things
around.
Over the course of the last 10 years, how have your views changed? I dont 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 problemI think that are topics that, 10 years ago, I would be completely
ignorant about and now Im fascinated by.
COWEN: Now you think theyre very important.
ZINGALES: Yes.
COWEN: Do you find it striking that the worlds 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, were 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 deflationIrving Fisher
was right, the debt-deflation spiral is pretty terrible. Thats 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. Its
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 theres no closebelow 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 dont
think theyre mentally prepared to out deal in this situation. I think thats a big issue.
On behavioral economics
COWEN: Im 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

Viscontis The Leopard, you show them a horror movie and you see what happens to
the risk premium.
Theres another paper I want to ask you about. Its about impatience and
procrastination. Its often the case the same people who are very impatient and
procrastinateand you give the example of people who were very impatient to get a
checktheyll even settle for a much smaller sum of money to get the check now.
Then they get the check, and they dont cash it or spend it or do anything with it.
They get it, and then they procrastinate.
Whats the underlying view or model of human behavior that causes impatience and
procrastination to go together?
ZINGALES: Oh, youre setting me for a very low standard. I dont 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 theyre 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. Theyre 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, its 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 weve done in that particular
studywe follow when they cash that check. On average it was two weeks, but 10
percent never cash it. They lost it.
[laughter]
ZINGALES: They are so eager to get the stuff. I think if I had to give a sense, its 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 checkits not even a gift in cashtoday
over two weeks. Once you know youll 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, whats 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. Its 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, theres not a fiscal union. The euro becomes a bit more like a currency
board. National central banks keep certain kinds of liabilities. Whats your prediction
for 20 years from now? European integration: more of it, less of it? Whats the
underlying model?
ZINGALES: Quoting Gramsci, lets first give the pessimistic, rational view. There will
be a breakup between the Northern Europe and the Southern Europe. The wishful
thinkingno, the wishful thinking is too badis the optimism of the desire to make a
change. Thats 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 wartwoin the last century, so we
dont 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 Im 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. Youre now director of the
Stigler Center in Chicago, and youve studied organizations for your whole career.
Given what youve learnedwere here, of course, at the Mercatus Center hosting
this eventbut 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 Ive 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

its very costly to fireyou dont want to fire unless you have to. Once you get the
right people in place, organizations, I wouldnt say run themselves, but almost. If you
dont have the right people in place, you spend a lot of time fixing the hiring
mistakes.
Q&A
AUDIENCE MEMBER: Thank you very much for coming. My names David Wille. Im 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 dont think were 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 couldnt find the time to actually shell it
out in small pieces at a time. Its 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 its the financial
system. In Italy, clearly its the financial system. In the United States, its not. Its
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: Im sorry to disappoint you, but I havent 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 its called. Not copper. You give on the vineyard tothey 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. Im from
Greece, so thats what Im about to ask you about. Please dont laugh. I know that
you have been following whats 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.
[laughter]
ZINGALES: This is why politics is so hard, because in economics, you call a spade a
spade. If you forgive in present value, isnt that forgiveness? In politics its very
different. I think thats 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, hes 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. Theyre 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 revoltincluding, 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, Im not saying the European Union is helping the Greek Mafia, but I
wouldnt exclude it. I wouldnt 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 youre going to say. Why do you expect these guys, all of a
sudden, to change just because theyre blessed by the European Union? I dont think
that thats 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, were not recovered from that mistake. I think thats 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. Im a MA fellow at Mercatus. I do
have a quick question. In your little vignette at the beginning, you noted that the caf
shop workers are so unbelievably productive. Im just wondering why you would want
somebody to be that productive in a caf. Is it because Italians value coffee that
more or maybe labor regulations or something else entirely?
COWEN: We come back full circle to Italy.
[laughter]
ZINGALES: You actually raise an excellent point. My wife, who is American, walked
into an Autogrill in Italy. Shes amazed by the fact that the guy speaks perfect
English. She said, Much better than yours.
[laughter]
ZINGALES: She discovered that this guy has a university degree in English literature,
and he was serving coffee at the Autogrill. I think thats pretty depressing. Thats
maybe the reason why Italian caf 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.
[laughter]
ZINGALES: I said, Wait a minute. Why is that the case? Obviously, because the
market doesnt work. If you dont sort out the market, you can have some very
talented people doing jobs that generally dont 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 ItalyItaly is the country with
the best secretaries and the worst managers.
[laughter]
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. Some rights reserved by the
author