0:33 Intro. [Recording date: March 13, 2015.] Russ: So, I want to warn listeners this episode of EconTalk may be a lot more disturbing than our usual fare. If you are listening with young children, you may want to preview before you share it with them. This has--I forget what the language is in the movie--I think it's 'thematic,' PG-13 for thematic material, or something like that. So I just wanted to let people know up front that there may be some disturbing images or conversation here. This is a really incredible book. I was utterly fascinated by it. I learned an immense amount, way too much, actually, about prisons. I say that with tongue in cheek. It's really, you've done an incredible job, and it's a fabulous application of economics to a wide range of social phenomena. It's really an amazing book. You start with the assumption that people are self-interested and rational; and I think a lot of people are put off by that; and you try to explain why you think that's an important assumption. You'd think prisoners, almost by definition to some people are obviously irrational. They act impulsively and get themselves put in prison. Which probably was not their goal. So, explain, to start us off, why you want to treat them as rational and self-interested. Guest: Well, I think that--the first reason I want to do that is, people who have been in prison say that prison is an incredibly strategic environment. It's an environment where people have to pay attention to how their behaviors are being perceived by other people, the situation where people are willing to act opportunistically and one must protect oneself from those actions. So, the environment is very much, I guess, set in a way and such that thinking that someone is going to be actively paying attention and trying to improve their situation, isn't a big stretch of the imagination. A lot of the inmates in my book do care about themselves, but they also care about some of the other people in their situation. So, what's unique about the prison environment is that we can't just kind of assume good intentions. And assuming that people are self-interested is kind of a nice analytical way to start. Russ: Yeah, it seems like a good starting place. You also started off setting up the information that's to follow in the analysis by talking about the challenge of governance in a prison. And again, as somebody who didn't know as much about prisons--in my view there's sort of two views of prisons. One is the view that some people have that they're just basically like country clubs where people have a great time, watch TV, play sports, lift weights, and take correspondence courses. Versus "The Wire," which is one of the greatest TV shows, I think, ever, literally. And the reality is I think much closer to "The Wire", the cases you are talking about it. If you don't know anything about it, if you don't know much about prisons, you'd say, 'Well, what's the big deal about prison governance? You've got guards; you have a warden; you have people in charge. Why would there be anything else needed?' Guest: Yeah. And it's usually to think or to hope or maybe just assume that prison officials can provide a lot of governance. There's guards that are monitoring inmates' interactions with each other. When violence or fights break out, there are guards that are there that are going to try to stop that violence. So they are clearly providing some security and some safety. The structure of a prison provides some safety. So, if you think, you imagine yourself in your prison cell, the door that's keeping you locked in is also in many ways keeping other people locked out. So there's a lot of security and built-in governance in prisons. But what we find when we study prisons, in really just about every setting, is that that formal governance is insufficient. It's insufficient to meet the demands for governance that inmates have. And there's a couple of different reasons for that. The first is that even when officials do much, even when they are effective at trying to make inmates feel safer, many inmates still feel vulnerable. They still feel like they are in an environment that's dangerous. And so on the margin, they want to spend some time and some energy and try to make themselves a little bit more safe. To provide some of their own governance. And another important reason why inmates require governance is because officials won't regulate the underground economy. And that's an important source of goods and services among the inmates in the prisons that I studied.

5:30 Russ: Yeah, we're going to get to that underground economy in detail. But I want to start just with this basic question of security. Again, most of us, our knowledge of television. Sure, sometimes somebody might get stabbed in a TV drama, but you figure, well, that's to keep the plot going, to keep the viewer interested. It's hard to imagine that there's a lot of violence in a prison, because again--they're in jail. They're in cells, and there's guards. And yet, it's a very dangerous place. Why is it dangerous? Guest: It's prone to danger. There are people--a much greater proportion of that population have committed acts of violence in the past. Across the board these are people who test lowest on self-control measures. It's a dangerous environment because it's an environment that's characterized in many ways by extreme poverty and people most willing to use force to try to alleviate some of that poverty. So, even though officials want to do a lot to keep people safe, the threat of danger is always there. Something that's very interesting about American prisons is that we think of them as being very dangerous, but compared to 30 or 40 years ago, they are much less dangerous than ever before. So, the rate of assaults--the rate of homicides fell 94% between 1973 and 2003, for instance. And when it fell in 2003, that rate of homicide is actually lower than in the general population. So, prisons are places that are much safer than they were previously, but even with those low levels of danger, there is still always a potential for bad things to happen. Russ: But how is that possible? So, again, the movie version, I'm in my cell. And of course I have a roommate, often, which is an issue. But at some point, I go out into the yard, and there's a bunch of guards looking down on the yard. They've got rifles. How does anything bad ever happen? Guest: Yeah. For whatever reason--maybe because the prisons were built too long ago or other architectural restrictions, there's always blind spots. There's always blind spots in the way that a building is set up. There's a limited number of guards to watch people; in a cell at night there's not someone who is monitoring each individual cell. So, there's opportunities for bad things to happen, sometimes just because prisons are overcrowded. When you look at the dormitories that California prisons had for quite a while, these are going to hold 100, 200, maybe more men in a place where guards are walking between 3-bunk bunk beds, and it's very difficult to see what's going on two bunk beds over. It's a very loud environment. There's simply not a Panopticon in California prisons today. There's the threat of something bad happening. Russ: A Panopticon meaning? Guest: A prison where a guard can see everybody's actions all the time, or something along those lines. Russ: So, it's possible that you can take revenge on somebody, beat somebody up, kill them. And I have to say, reading your book I had an ever-present sense of danger as I was reading it, because besides the analysis which deals with these issues, you have some very chilling and powerful anecdotes sprinkled throughout that talk about these kinds of incidents that happen. They're less common; but people are very vulnerable in a prison. And that's a very important theme of your book. So, these blind spots are not like, oh, every three weeks you've got a chance to--let me say it differently. People get killed in prisons because the murderers can kill them. That's the important point I want to establish. Again, going into this, I thought, oh, it must be like somebody goes crazy and he kills somebody. But there are premeditated murders, because they can do it. Guest: Yeah. There's absolutely a threat of these things happening. Every single day there are opportunities where people are potentially subject to serious acts of violence by other inmates. These aren't total institutions such that officials have complete control over everything that happens. There's actually huge arenas of autonomy within this apparently very controlled environment.

10:02 Russ: So, let's talk about gangs. And I think of gangs as something on the street. And yet your book taught me that they're very active--they are dominating in the social environment of a prison today. And their reach extends outside the prison. So--we're going to talk about this the whole time, pretty much. Let's start, though, with: Why are there gangs in prisons? Is it just for cultural identification? Guest: No. The main reason why gangs form, in California, initially is because inmates want safety. So, because they are in this dangerous environment, they join with other people and those are people that they feel can keep them safe in that dangerous environment. Gangs haven't always existed in California. For the first hundred years of the system, there were no prison gangs. But in the 1950s they started to form. And they formed because the level of security that officials provided just simply wasn't enough for what they wanted. Russ: And why was that? Guest: The main reason why inmates turned to gangs, is because prior to the period of gangs, inmate populations in California were very low. The total size of the inmate population in California for a century was fewer than 5000 inmates. There was some growth, that was slow and steady growth during that period. But starting in the late 1950s and through to 1970 there was about a 5-fold increase in the size of the prison population, a 5-fold increase that leads to a height that's unprecedented, a more rapid increase in [?], a more sustained period than ever before. And in big prison populations, the sort of, what the book refers to as decentralized governance mechanisms can't work. So, in the world that inmates live in, the way that they protect themselves looks radically different depending on whether the prison population is small or large. And in large prison populations inmates form gangs for safety. Russ: So I guess it's a question of how you define 'decentralized.' And we'll come back to that. You start with how, in the earlier days of prisons, there was a code, totally decentralized. A set of norms that emerged, that prisoners adapted to. And it just became the culture of the prison. Talk a little bit about the code and why and how the gangs replaced that code. Guest: Yeah. So, when scholars have studied this, when we have histories and reports from people in prison at this time, what's emerged is that there is this norm of good behavior that inmates were expected to follow along with. It wasn't a norm that inmates all sat around and agreed on. It's something that emerged through their interactions with other people. And this code is called the 'convict code' or the 'prisoner code' basically told you how to live your life when you are in prison when interacting with other inmates. It would tell you: Don't steal from people; don't lie to people; don't inform on people. If you incur debts, pay those debts back. Kind of ways in which if you acted that way while you were in prison, other inmates would respect you. Because in acting in those ways you wouldn't be causing conflict with other inmates. So, if inmates like you, if they respected you, if you were in good standing, then other inmates would be much more happy to give you access to their resources, the support that you might need to protect yourself from victimization. And sort of abiding by that code would provide a way to limit the victimization that you might face in that environment. So, following the code is a way to be safe. And it was enforced in a very decentralized fashion. So, for those inmates who consistently lied, stole, didn't pay back debts, these were people who caused trouble. Right? It causes conflict with other inmates when an individual acts in these ways. So those people would be much more likely to be victimized by other inmates. Their low standing would mean that they couldn't have the support and protection that their peers provided. So, during this period, this norm-based governance or decentralized based governance, there wasn't someone in charge. There weren't even many inmate leaders in charge during this period. People could either abide by the code or not; and other inmates could either punish deviations from the code or not. And the way that they punished those, again, it wasn't very structured; it wasn't very systematized or organized today, like it is today. It was basically up to the discretion of other inmates. And they could decide to ostracize people, so that: You can't spend time with us, we're not going to share cigarettes with you. They [?] gossip about people, which as a result would make the person gossiped about be victimized, because it would send a signal that he didn't have the support of other inmates. And of course the norms could be enforced with violence, anything from a slap or punch up to a very serious or even deadly assault. So, prior to the formation of gangs, this convict code is the main way that order was established. It was the main way that property rights were defined and enforced. And in the underground economy it was the main way that conflicts were, first of all avoided, but second of all resolved when they did place. Russ: And talk about why that broke down, again, and what gangs replaced that with. Guest: What we see, in studies of norm-following behavior all over the place is that in small environments it's relatively more effective. If we have a small, homogenous environment, we all agree what the acceptable behavior is, what constitutes a deviation from that behavior, and what the appropriate punishment is given that deviation. And in small prison environments, we all agree on those things; and my standing, my reputation for following the norms or not is communicated to other people relatively easily. In small communities, my reputation is known by many or maybe even every other inmate in that community. Big prison populations undermine the effectiveness of norms, because in bigger populations it's much more difficult to keep track of everybody's behavior. It's more difficult to keep track of everyone's relative standing in the community, to know how they've acted in the past. And it's more difficult to know who else has taken it upon themselves to enforce the norms. So, starting in the late 1950s, into the 1960s, 1970s, and certainly later on today, we see dramatic increases in the size of the prison population, which undermines the effectiveness of these norms. We also see a much more diverse community, of younger inmates. And both of those things tend to undermine norms. Young people like to experiment with violations of norms, right? They want to see if there's some other norm that they should be following. So they are much more likely to break the norms that other inmates agreed on. And in more diverse communities there's more disagreement on what accepted behavior is and what constitutes a violation of those behaviors. So, when inmate demographics changed, it undermined the ability for this decentralized governance to maintain an orderly prison environment.

17:08 Russ: And the other part that you emphasize, which we should turn to now, is: There's a lot of money at stake. Which is just shocking. There's a lot of money at stake in the underground economy within a prison. And as a result there's an enormous financial incentive for some people who are profiting from that to maintain order, because a breakdown in order ruins that economy. So, explain why that is. And again, it's hard for me to understand. How could there be an underground economy? Where do they get money from? What are they selling and buying? But it's very active. So, describe it. Guest: The nature of prison is rules. Rules that prohibit things that inmates want. And there's a large number of goods and services that inmates would like to enjoy but aren't allowed to. And these may be very mundane things--certain meals, certain magazines, certain books that officials don't allow them to have. Or, they can have a more illicit nature. For many inmates the desire to use drugs and alcohol, to smoke tobacco in prison--they'd very much enjoy being able to do these things, but prisons don't let them do that. So, if inmates want to ease the pains of imprisonment by gaining access to this contraband, they basically have to rely on the underground economy to do it. But you can't buy heroin from the prison commissary. So, in order to gain those things inmates have to find a way to traffic them into the facility, and for those inmates who can do that, this can generate substantial profits. The underground economy in prisons in California is not as flourishing as it is out on the streets. So, the price of drugs in prison is typically 4-5 times higher than out on the streets. But a large number of inmates want those things, and if you can supply them--it's difficult-to-measure of course--but it appears to create some substantial profit opportunities for entrepreneurial inmates. Russ: Where do they get the money from? Guest: Well, money used to be allowed in some prisons. Recently in California inmates aren't allowed to hold money while they are incarcerated. But it turns out that paying for things in the underground economy is not too difficult to arrange for. You may be able to barter with some goods that you have. In California today, stamps are the medium of exchange. Right? They are a uniform, durable, transportable, standardized commodity. And inmates will purchase illicit goods through the use of stamps. And for larger purchases, ones that the stamps won't cover, it's actually relatively easy if you just have a friend or a family member on the outside send currency to a friend or a family member of another inmate on the outside. And so your relative who is not incarcerated can make the payment; and on the inside you get receipt of the goods. Russ: Now the next question is: How do drugs get into the prison? It seems, again, impossible. I'm going to stop saying 'again' pretty soon. But again, this book is full of surprises for me. It's very important. And how much? Guest: It gives some sense about just how much drugs can get into a prison. In California, in 2013, according to a report by the California Legislative Analyst's Office, there was a random sample of inmates in California, and 23% of those tested positive for drugs that they weren't allowed to have. And another 30% refused the test altogether. Presumably because they knew what the test result was going to say. So, anywhere from 23% to more than 50% of the inmates randomly selected have controlled substances in their system. So, the access to these things--they are certainly getting in there. And the way that inmates get them in are varied. They are sometimes very creative. And it depends on the particular situation. Sometimes staff members can be bribed to bring in drugs. Very often inmates will transfer drugs, will receive drugs from visitors during the visiting facility; they'll find kind of covert ways to transfer a bindle of heroin, for example, from a friend or a relative who is visiting him in prison, for example, and maybe through a kiss he'll smuggle the drugs back into the prison itself. So, any of these ways of corrupting staff, convincing visitors to bring drugs in, to something as simple as people will go buy and throw drugs over the prison wall, and an individual will know that it's coming and go out there and collect it. It's something-- Russ: And that person's been in prison, is familiar with the layout and knows where to throw it, etc. Right? Guest: Yeah. May be familiar with the layout--for inmates who have a lower security level who go out and do work during the day, someone might leave a bag, a McDonald's bag that has a burger and tobacco and heroin in it. And so if that worker knows where to look, he can find it, pick it up, and smuggle it in, in his pants, back into the prison. So, there's many, many ways that inmates get around this problem, and for people who have a strong desire to overcome this problem, it's apparently, you know, easy enough that they get access to these things.

22:34 Russ: And how do the prison gangs--let's move to their governance--there are some extraordinary--they don't just have informal rules. They have a lot of informal rules; they have formal rules, they have written constitutions. Talk about how gangs regulate life in the prison and how they compete with each other. Guest: Yeah. So, I describe the gangs in California State as operating in a community responsibility system. And the distinguishing characteristic of the system is that everybody within a gang is responsible for each of the other gang member's actions and obligations. So, if you are in a gang and you incur a debt, it's not just you who owes that debt. It's every other one of your gang members who owes that debt. And this extends not just to debts but to behaviors. If one of your gang members is insulting members of another group, is acting disruptively, keeping people up at night, it's not just you--not just that individual who is going to kind of have a diminished kind of reputation and kind of be pressed to fix that. Everyone in your group is responsible for that. And so, not everyone affiliates with a gang in California prisons. It may be a broader group affiliated with kind of a racial or ethnic background. It may be affiliated with the religious ties or an education emphasis for certain inmates. But the key actors in governing California prisons are groups, and gangs are an important type of group. So, when the community responsibility system works, basically interactions between different gangs are regulated by tremendous pressure within the gang. And so, maybe another way to say that is that when a member of a gang is involved in some sort of social or economic conflict with another gang, it's the gang leaders that get together from these rival groups. They discuss the situation and they say, you know, what are the facts, what's gone on, who has disrespected who, and how can we resolve it. And those gang leaders then go back to their own groups and they exert tremendous pressure to gain compliance from the individual that caused some trouble. So, if a member of one prison gang is insulting someone, he may be forced to apologize by his own members to the person he was insulting. So there's tremendous internal group pressure to facilitate inter-group cooperation. And the types of pressure that they can apply, I guess takes a lot of different forms. That problems, in the underground economy, are some of the most problematic and fairly common. And so an individual in a gang incurs a debt that he can't pay back, it may be that his gang forces him to have friends and family pay it back. The gang may pool its resources, its own resources, to pay off the debt for that individual. The individual who incurred the debt may have to work it off for the other gang. If he owes a debt to another gang, he may have to assault one of their enemies, maybe a guard who they don't like or another inmate, and work off that debt. Or it may be, what's unfortunately somewhat common in California, that when an individual gang can't pay a debt back, his own gang will assault him to the satisfaction of the rival gang leader. To the satisfaction that he's been assaulted to the extent that the message has been sent. So, in a lot of these different ways, some from just apologies, to assaults, these gangs are regulating their own members to make life a little bit easier when interacting with other people. Russ: And the gangs are racially divided--that's one way they are divided. Correct? Guest: They are overwhelmingly racially divided. And the inmates themselves refer to not just the gang actors but the race actors. Right? Everything is segregated along racial lines. And the groups themselves are segregated at least along racial lines. Sometimes geographic factors matter. So, in California, for example, Hispanic inmates will affiliate with one or another prison group based on whether they are from Northern or from Southern California. Russ: This group, community responsibility is a fascinating example of dealing with a free-rider problem. It reminds me of a story that I am told that when Walter Williams teaches at George Mason U., he tells students that if your cell phone goes off, the people on both sides of you will get a reduction in their grade, lose a certain number of points. When I tell that to people they always say, 'Well, that's so unfair.' Yes, it is. What it means is that people on both sides, around you, people are going to tell each other, to ask, 'Is your cellphone off?' And in the ideal system, the phone never goes off. There's never anything unfair because the punishment deters people from misbehavior and free riding on the group's identity, and degrading the group's brand name. And so that's just incredible. The prison, when you have violence as opposed to losing 5 points on your homework score, it's pretty effective. But one thing I noticed that runs through your book is the power of disrespect. I couldn't help but notice how often horrific things happened to people because somebody said something disrespectful--said something disrespectful. Not did something disrespectful. Said something. Or if they spat. And I'm just curious--this is an aside--I just thought in a place where you have so little pride, respect is very valuable. So, disrespect is very hated, I would guess. Guest: I think that's definitely an important part of it. Another part of it is that if you are disrespected in a public way, other people see that and they think you are someone who can be victimized and taken advantage of. So it's not just a matter of 'this guy insulted me' or spit in my direction. It's that other people saw him do that, and that puts me in a much more dangerous situation. So it's important that any little disrespect is responded to, so that when people are looking around for someone to come and get into trouble with, that they don't come looking for you about it.

28:55 Russ: So, just to get some numbers on the table, you say in your book that about 70% of prison gang members are in California and Texas. And you talked a lot about California so far because I assume that's where a lot of gangs are, and we have lots of--not lots, but different kinds of information about their activities. Guest: Yeah. Part of the book, in some sense the core of the book, is to try to explain why prison gangs exist when and where they do. So, California had prisons for 100 years with no prison gangs. Now prison gangs are very important. There are prison gangs that have a very important influence in California and in Texas but not in many other states. And so the goal is to try to understand why that's the case. And I guess something that I didn't make clear in the earlier discussion is that these community responsibility systems aren't just accidental. It's not an accident that they operate in this way. What it does is it puts the responsibility of monitoring inmates in the hands of those people who have low-cost ways of doing so, of monitoring people. It's very easy to look within your group and to watch your own members. In big prison populations, you can't watch everybody, so the gangs just force you to watch yourself. A community responsibility system facilitates interactions with strangers because you don't have to know every person's reputation. You just have to know the gang's reputation. And is it a gang whose reputation is in good standing because they are accountable for their members' actions or not. So, it's leveraging--it's a very effective, brutal but effective way for people to govern relations in large populations and that's why, for example, we see them playing a very important role in California and Texas. Russ: And it also helps, as you point out, to explain why race and tattoos are important ways that gangs identify. Guest: Yeah. There's no doubt that there are some, maybe many racist prison gang members. But there's lots of people who, when they are incarcerated, they say things like, 'I'm not a racist, but I live in a racist environment. I live in a segregated environment, and I don't have a choice to not follow the segregated rules.' And so--but there's a reason, I think, why segregation by race may actually help to govern or regulate social interactions. And it's that in these large environments, the easiest way to have some sense about which group a stranger associates with is the color of his skin. If you can look and have some sense and say, 'okay, I saw him; I don't know anything about him but because I saw him I have some sense about which group I need to go to, to complain about his behavior to.' A second feature of using a person's appearance in that way is that it's not easy to change the color of your skin. It's something that's very permanent. So in that way you can't kind of bounce from group to group, keeping some people accountable some times and other people accountable at others. The durability of that aspect and the low cost of observing it, make it much more than other possible ways, kind of a fine way, an effective way to carve out groups amongst each other. So, one comparison is that instead of breaking up groups based on racial lines, you could do it on religious lines. But it may not be as easy to look at someone and tell if they are a Baptist or a Catholic as quickly or as easily as whether someone's white or black. Russ: And it's much easier to deceive and fake it, masquerade as a member of a group when it's convenient. Guest: Yeah. Absolutely. And that relates to the point you make about the tattoos. Tattoos are just so prominent in many prison settings. And the reason for that, I argue, is that it's a very credible signal of information about who you affiliate with. Tattoos can provide information about certain acts that you've done, certain things that are deemed to be good amongst inmates. And if you get one of these tattoos, because they are permanent, because they are prominent, it's very credible that you are who you say you are through that tattoo.

33:06 Russ: So, let's talk about the actual rules that the gangs have. You've implied there's rules of loyalty and responsibility--you misbehave, you are subject to internal, not external, internal, not from another gang necessarily, not from the prison administrators, but from your own gang members. Sometimes you are going to be punished. But what are some of the rules and how detailed are they, to give people some of a feel for this world. Because it's very strange. Guest: Yeah. Well, many of the gangs have fairly extensive paperwork protocols, paperwork procedures. Gang members write lots of letters, and the letters are sent to inmates at other prisons; they are sent to lots of people on the street. And the purpose of this paperwork is to collect information about people. When someone arrives at a cellblock in California, very commonly, if a Hispanic inmate arrives, there's going to be a gang leader from the Hispanic gang and it's going to be his job basically to send a questionnaire to the new inmate. One group calls these new arrival questionnaires. So, when you first enter into one of these cells, the gang leader is going to send you a little paper questionnaire, and it's going to ask: Who are you? What neighborhood are you from? What gangs are you associated with? What crime did you commit? And they are going to try to collect information and basically certify who you are. And they are going to match that with formal paperwork to make sure that your name is the name that you say you are--so, they'll make sure the name that you give the gang is the same one that you gave prison staff. And then they'll check that information as well against their own lists. So these gangs have sometimes very extensive lists--they're called enemies lists or bad-news lists or no-good lists. They are lists of enemies, essentially. And so gangs are constantly using procedures and paperwork to get information about people to see if someone who needs to be punished should be punished when they show up at your prison. And people in these groups are punished for a variety of different reasons, maybe because they haven't paid back a debt, maybe because they haven't paid taxes to the gang members while they were on the street. Russ: Yeah. I'm going to read a quote here. I'm going to read two quotes. "Without order we have anarchy, and when we have anarchy people die here." That's an inmate at Corcoran State Prison. And here's a quote from you in the book: The chief psychologist in [the Federal Prison at] Leavenworth describes the uniqueness of the environment. He explains, "When you are small and need help, you run to your parents. When you get older, you run to a priest, a minister, a psychologist. When you have a legal problem, you hire an attorney. If someone threatens you, you call a cop. In prison there is no one to turn to, no one to solve your problems for you. If you go to the guards, you'll be known as a snitch and that can get you killed. So you are on your own perhaps for the first time in your life and you are forced to deal with your own problems...." How does the gang help that new inmate who is, let's say clean--isn't a liar, in debt, is who he says he is--how does the gang help that inmate thrive in prison? Guest: The gang is someone to turn to. Once an inmate has been cleared--they sometimes do background checks and letters to friends on the street to kind of confirm information that the new inmate gives--but when that person is cleared, he joins the program, or participates in the program, as they say. And that means that when somebody does cause trouble, when there is a conflict, he has someone to turn to--the other members of that group. And that group, because their reputation is on the line, are going to take steps to make sure that if some wrong has been done, that it's going to be righted. So, gangs are kind of a way to fill in for that vacuum of authority and stability that the quote you read indicates. Russ: But, they are also a thriving business. Some of them more than others. They are not just--you make them sound like they are a social services group. They are. To some extent. But-- Guest: There's some mutual support, mutual aid, provided. For inmates that go to prison with a desire to have a very minimal affiliation with them, a minimal affiliation is sufficient. As long as there is some group that inmates can identify as being responsible for your actions, that seems to be good enough most of the time. For those inmates who want to kind of step up their game, who want to become more involved in these, these groups aren't just mutual aid organizations. They are groups that have sometimes very fearsome reputations, and those reputations allow them to bring products into a dangerous environment and to some, for substantial profit. Russ: Give us some numbers on the--obviously it's not easily collected from the U.S. Census or the Bureau of Labor Statistics. But give us some idea of how much money some inmates are making while they are in prison. And how do we know? Given that it's hard to get at it. Guest: One way we get information on this is to look at government prosecution of prison gang members. And the State of California has very proactively prosecuted groups like the Mexican Mafia prison gang or Nuestra Familia. And we have access to a lot of the information that they collected. We also have access to Appeals Court rulings that examine the evidence and kind of confirm that their arguments and their information is credible. And what information like that says is that many of these inmates make tens of, or hundreds of thousands of dollars every year, while being incarcerated. They make that money from selling drugs in the prison; they make that money by--they call them 'taxes'--collecting taxes or tribute from some inmates in the prison. You want to sell drugs in prison, then you have to pay a certain portion to the gang leader who is in charge in that area. And some of these people make a tax on drugs that are sold out in the community, out in the street. Drug dealers out in the community will send a portion of their earnings to people who are locked up. Russ: Talk about how that communication takes place, how the gangs maintain incentives outside of prison. Somebody gets out of prison. In theory, they are out of prison; they are not in the gang any more, you would think. They can go out and try to find a job. It's hard. But they are not allowed to leave the gang, really, are they? Guest: So, for the most hardcore prison gang members, they are not allowed to leave the gang and they sometimes have to actively work for the gang. These people are very rational and they anticipate the fact that there's a very high likelihood that an individual who is released from prison is going to return to prison. And so they know that maybe a prison gang can't hurt them when they've left, but at some point if they find themselves back in prison again, the prison gang might remember that and they might be able to hurt them. So because people anticipate incarceration in the future, prison gangs can wield that knowledge and say, 'You're going to work for us. You're going to send us money. And if you don't, when you come back, we're going to hurt you. You are not going to have the protection and the mutual aid. You're going to be hurt in a serious way.' And they've invested, through some very brutal acts of violence, a willingness to do this.

40:31 Russ: How is it that gangs can compete peacefully with each other within the prison? Everybody wants money. Everybody would rather be the drug dealer. Why aren't they killing each other for the opportunity to make those profits? And how do the different gangs deal with the fact that there's different--out on the streets, there's territories that they fight over and they skirmish over. And they prefer to keep it peaceful, obviously, to make more money. But within that small world, that reduced physical space of the prison, why aren't they fighting all the time? Guest: Yeah. Well, they do fight sometimes. Sometimes there are murders; sometimes there are riots. But what's important to recognize is that they don't fight as often as you might think they would. For I guess a very simple reason, which is that, if there are large-scale acts of violence, there are large-scale disruptions or riots, prison officials will lock down a prison. Instead of being able to go out to the yard during the day, officials will put people on what they call modified programming, which means you don't get to leave your cell. And you may not get to leave your cell for weeks, or for months, or in some cases more than a year. So, if you can't ever leave, in addition to not enjoying them--that's a less enjoyable incarceration experience--but when you are locked down, it's very difficult to make money in the underground economy. So, large scale acts of violence undermine the ability for prison gangs to earn money in the underground economy. And that provides an incentive. Even though these gangs might like to use violence, it's that they have to constrain it. And they constrain it in a few ways. One is, they simply find ways to resolve disputes between gangs in a peaceful way. The second is that when violence needs to take place, they do it in a controlled and preferably concealed way. So, if two inmates from rival gangs don't like each other, instead of getting into a fight in the yard, which could either prompt a riot or a lockdown, is they'll schedule a time for these guys to go into one of their cells, and they'll be monitored, and they'll get into a fight. They call it a cell fight. And in that way, they use violence, but in a much more controlled fashion. So, the desire by prison gangs to make money selling drugs in prison means that they have an incentive to facilitate some level of stability. And even though they may dislike and have a substantial dislike for other gangs, they are going to find ways to reduce spontaneous and chaotic acts of violence. Russ: But do the leaders of the gangs that overlap within a prison communicate with each other about these kind of issues? Guest: They absolutely communicate with each other. As in any environment, you might expect that sometimes it's a more- or less-friendly working relationship with these people. But when conflicts happen, they recognize that it's going to hit them on the bottom line if there's not a way to find a solution to these problems. So they absolutely talk to each other. They often will bring in--outside consultants isn't quite the right way to think about it, but they'll contact gang leaders in other prisons or other areas of the prison to ask them to intercede and adjudicate some problem that takes place. So they very much recognize that it's in their interest to avoid serious, chaotic situations. Russ: But how do they deal with the market competition that would take place out on the streets: this neighborhood might be mine and that neighborhood over here might be yours? Does it work that way in the prison? Otherwise why doesn't the price just get bid down very low and the profits get dissipated? They're all competing with each other. Guest: Yeah. That's actually something that we have very little information on. A lot of the research that I've read found that inmates are allowed to buy and sell drugs from any other inmate. So, not just their own gang. And if that's the case--and I think it may be true because it's very difficult, as we've discussed, to watch everybody all of the time--and it might be that it's easy to covertly buy drugs from someone from a different group or not. So, even if gang leaders of the people who make the most money would like to prevent it, it's too difficult to monitor to prevent it, to segregate sales either geographically or within a certain community of inmates. Russ: I suppose the supply is somewhat erratic, as well, so you wouldn't always be guaranteed availability if you were stuck with your own gang. Guest: Yeah. I think that there are some people who are kind of active consumers of drugs, who very much, that's an important part of their prison experience. But there's also surely many inmates who aren't actively trying to do those things. So, when they affiliate with some group, they are affiliating for that mutual aid and protection more so than as a way to make money while incarcerated. So, they are just kind of on the sideline while the gangs are more actively involved in this more active business. Russ: And is there corruption? One of the--you give the hierarchy of some of these gangs; it's quite elaborate. They have a constitution; they have rules, literal rules, not just informal rules. Do we have any idea of how well those work? Guest: Yeah. These gangs--some gangs have very few formal rules. Others have very elaborate structures. One group that I talk about, they have literally a 10-page, single-spaced, typed, written constitution. And it tells basically what's the purpose of the group, what are the different positions that will be held. There's appeals processes; there's elections processes or checks and balances. There's very much a goal or an intention to create rules to make these groups work better. Despite their best efforts, I think it's fair to say that very often, those constitutions are not as effective as they would like. Within gangs there are disputes. There's back-dealing. There's people who are trying to take advantage of each other despite the fact that they're in the gang. And these constitutions are not effective enough, or maybe the environment is not conducive enough, to eliminate all of those things. So, what we do see, is lots of attempts to enforce prison gangs' written rules. We have lots of evidence of gang members assaulting other members who have violated their rules. So, it's providing some check, it has some teeth, in the ability to constrain or alter other prison gang members' behaviors. What's difficult, we don't observe as much, is situations where people break the rules and there's no punishment for that. That's less likely to come into the historical record or our evidentiary sources.

47:44 Russ: So, some of this is just a question of language, but you called the convict code the norm of certain rules of keeping your head down, paying your debts, etc., you called that 'decentralized'--in contrast to the gang system. I tend to save that word 'decentralized' for anything that isn't the power of the state. And yet, in some sense--and this is where it's a great area--and I say that because the gangs emerge. Their constitutions emerge. They are planned and executed to some extent, within each gang. But the whole environment is in many ways decentralized. And yet, you argue, to some extent--you can clarify now--that in some ways the gangs are like primitive states. They are primitive governments that regulate behavior. Guest: Yeah. So, the common[?] code, nobody came up with the rules, there's no one designated to enforce the rules. There's not some body to monitor enforcement of those rules. Those are kind of like hallmarks of very like much more centralized rule-making. The gangs are much more centralized. It's very much about designated power, top-down control within a gang. The community of prison gangs operates more along a polycentric line--there are these competing sources of authority and rule-making in the prison. In a sense, when we study early states, primitive states, what we see is that these groups come into power not because of social contracts but as a desire to extract resources from communities. And they are profit seeking. And sometimes that profit seeking creates incentives to formalize their organization, to legitimize their organization. And in a sort of Mancur Olson, stationary bandit style of argument, the desire to profit, through taxation, may lead in early states--or prison gangs--to provide that order and stability. Russ: Describe the stationary versus roving bandit, for people who aren't familiar with it. Guest: A roving bandit is a thought experiment of a bandit who, he's only going to be there one day. And there's someone, there's a town; and if he's only going to be there one day, he has an incentive to steal everything that they have. Everything that's of value. The stationary bandit also wants to maximize wealth, but he's going to be there for the indefinite future. And so, he recognizes: If I steal everything that they have of value today and every other day, then they are no longer going to produce anything of value. So, the stationary bandit, unlike the roving bandit, has an incentive to reduce how much he steals in the current period, so that he can maximize how much he steals over future periods. And one of the ways that he can maximize--at least in the story--the way that he can maximize his total earnings, is to not only not steal everything today, but to provide some protection from other bandits, provide some public goods, to provide some governance. To try to make the town more productive, so that in the future the stationary bandit has more to steal from. So, it's a nice sort of invisible hand explanation for how someone who is very much profit-seeking and self-interested could, through this profit incentive, have an incentive to create something that's good generally for people who live underneath it. Russ: So, this is kind of--that's a dark story. In a certain way. And in many ways the gang story is a dark story. It's--in the back of your mind, you do have to remember that these are not normal people. They are not a cross-section of your friends and family that you might know as the reader. They are highly selected to be violent; as you say, not tending to look to the future. They are risk takers. They have a whole bunch of characteristics which are why they are there. And do you argue--and you've argued in this conversation and you argued in the book--that gangs, in some dimension, are good? They are certainly good for prisoners. So, talk about how you think about that. Guest: I think that they are good in a limited way. They are good in the sense that, given large prison populations and given current levels of formal governance, then prison gangs increase access to contraband. And they increase stability and order amongst inmates. So, in that sense, gangs, they certainly play an important role and for many inmates a beneficial role in increasing access to these things. What's not good about gangs is a fairly long list. I mean, the first is that in increasing access to contraband that undermines the goals and intentions of prison staff. The lifetime affiliations that these gangs often require of their members undermines rehabilitation, so that people who leave prison with a gang affiliation are likely to come back sooner and more often. And then when we look at this polycentric system of governance--I mean, it is very impressive when you look at the characteristics of the individuals involved. These should be the least trustworthy, least cooperative individuals. But they are able to sustain a fairly high level of economic activity. And that's a very interesting, in a sense a very positive, story. But these systems of governance have very little accountability, very little equality, very little concern for the rule of law. And they are very much driven by either violence outright or the threat of violence. So, the system of governance that exists in many presents[?] and in particular in California today, they've accomplished something important. Which is that they have increased access to illicit goods and services, far more than a decentralized or convict-code kind of system could do. And in that way, I think it provides an important lesson that the type of people in a community doesn't necessarily dictate in a determinate way whether or not they are going to be able to flourish economically.

53:40 Russ: Yeah, um. There are other lessons, I hope we're going to get to as well. But I have to say, I feel a little bit like, for Monty Python fans, there's a skit where a person is interviewed talking about the Piranha Brothers. And he's very eager, despite the viciousness of the Piranha Brothers, he's very eager to sing their praises. And as I got further into your book, I found myself more alarmed about what gangs can do to people who don't play along. And, I don't really want to say anything bad about them. So, I think it's brave of you. I'm only half joking, by the way. There is a very depressing and terrifying aspect of the reach of gangs outside of the prison that comes through in the book. Guest: Absolutely. Russ: And the lives of these people. It's incredibly depressing. So, one of the questions I wanted to ask you is, have you received any feedback on your book from prisoners or gang members? Guest: Not since the book has come out. Partly because, being in London, I don't have access to the same networks and the same people who served as subjects to interview during the process. A variety in the book. The feedback I got when I was writing the book, though: people in California prisons, this is the least interesting part of their day. So when gangs decide who goes to the cafeteria first or who uses the basketball court, these are like the most mundane situations to them. But they are fascinating to those of us who don't know that experience. So, in a sense, when I've gotten feedback from them, it's almost like: 'Why are you writing a boring book? I couple tell you some interesting stories.' Russ: Yeah. What are you interested in these pieces of paper we write these notes down on? These are not where the action is. Yeah, I get that. Guest: It's with the presumption that--we use paperwork in every other facet of our life, our churches, our schools, our businesses. So it shouldn't be surprising that these inmates kind of bring those things about. And maybe I can just say kind of one other point: I'm glad in a sense that you found it disturbing. Because it is really disturbing. And I want to shine a light that there's a whole world going on here. And there's a whole lot of people in prisons, in California, and look what they have to deal with. And as a social scientist, to look at and say, well, look, we do not think--maybe we would have guessed that they wouldn't have been able to overcome all of the problems of the incarceration experience--and they've done that--isn't to diminish the fact that nobody thinks that this is an ideal situation. Far, far from it.

56:45 Russ: So, when I read a book like this, I'm an economist. I go, 'This all makes sense.' But I suspect your approach is quite controversial among other academics who take a different approach. What are some of those approaches and what kind of response have you gotten from that other part of the academic world? Guest: Well, some of the other approaches that they use--in sociology and criminology, the two main approaches to understanding prison life--have been, on the one hand, the importation theory, which is basically an argument that to understand life in prison, we have to understand the communities, the culture, and the life outside of prison. And people will study how values, I guess, translate, into the prison setting. A second way that people study prisons is, by understanding the deprivation that exists in prison. And they say, prisons are, they are full of the pains of imprisonment. To understand why life in prison looks the way it does, we need to understand what life in prison is like, why it's so painful to be there. So, for the first, it's very much about a value driven or culture driven or it's trying to explain things that happen in prison by the values that happen on the outside. What I'm trying to do is say that you may have values out there, but the way that you are going to respond, given those values, is very much dependent on what the prison itself looks like. So, it's much closer to this pains-of-imprisonment [?] model. So, the research on prisons has looked at how things like values of hyper-masculinity drive the formation of gangs, for example. The idea that, when inmates are in prison, they value male dominance. There's no females to dominate. So they form gangs to dominate other males. And, there's something that may be, kind of descriptively useful or accurate about thinking about the issue like that. But that framework doesn't allow us to explain men in California prisons didn't form gangs to dominate. So, what I'm trying to do is kind of be able to explain both where the gangs exist and where they don't. And so some of the appeals that other people make to male dominance or just a preference for racism, I think can't provide that explanation of the variation very well. Russ: There's about a half a page, I think, in the book about women. So, explain why--you know, it could just be you were interested in male gangs. But that's not the reason there's so little coverage of women in here. Right? Guest: There's traditionally much less study of female prisons than male prisons. That may be partly because there are so many more male prisons and prisoners than females. Females are maybe 10% of the total prison population. And so what I do very briefly in the book, as you know, is I try to understand what's life like, what are the governance institutions like, in female prisons. And in female prisons, they are not at all like the male prisons in California. They are not these organized large groups that have lifetime commitments. They are not racially segregated in the same way. They don't have the paperwork. They are not as violent. The illicit markets are not as flourishing. And, one possible reason for that may be that women are more sensible than men. Or something like that. Russ: Which is no doubt true, of course. Guest: Which is no doubt true. But in addition to that it may be that women's prisons, the demographics, look very much like the demographics looked in male prisons before gangs formed. So, female prisons today are very small. And they are much more stable populations. And we should expect in these small populations that individuals' reputations would be able to permeate. They would provide a check on bad behavior. And what we see is these formations of, they call them families. So, groups of two or three or four women who will kind of group together. It's not permanent. It's much more fleeting. It's not racially segregated. So it doesn't have any of the hallmarks of prison gang activity. And in a sense it looks a lot like what male prisons looked like when they had small prison populations. So it may be that they are more sensible; and/or it may also be that, given the small prison populations, the sort of more casual level of governance is as effective as it needs to be.

1:01:09 Russ: So, some people--again, you've painted a picture that's descriptive but there's something both positive and negative about it. Most prison officials, most policy makers, would like to see less gang activity and less illicit commercial activity. What do they do now to reduce the power of gangs and prisons? And what would you suggest they do instead? Since they are not doing a very good job. Guest: The most common way that they try to control gangs is through suppression strategies, or what I like to think of as supply-side strategies. Which is that they identify who are the most active gang members and they remove these people from the general population and they put them into more isolated, segregated, controlled living areas. And that's failed. The gangs are still very important and active. And I think it's failed because this isn't a supply-side problem. Gangs don't exist because there are angry, violent people who are in prison. Gangs exist because there's inmates generally who have a demand for what gangs provide. So, in the same way that if we were to remove all the restaurants today but allowed restaurants to open tomorrow, because people have a demand for restaurants, you're going to see people coming in to fill that market. So when gang leaders are taken out of the general population of prisons, new leaders come into place very, very quickly. And that's because there are people who want security and order, and it's very profitable to provide those things. So that's why I think the suppression or supply side approaches have failed. And in a very speculative sense, since we don't have the experiences--people haven't tried enough alternatives, but if we wanted to speculate, one way that we might try to reduce the influence of gangs is to address that demand side. So, if inmates turn to gangs for order and stability, maybe prison officials can provide more order and more stability for them. Russ: Crowding out the supply of gang action. Guest: Ideally making it so that people then have a demand for [?supply of--Econlib Ed.] these things. The prison economy itself, as I mentioned, is very restricted. And I think it was 2005, California prohibited tobacco. I think as a public health concern. And one of the most important sources of illicit profits to gangs now is smuggling in tobacco. Russ: How surprising. Guest: As we reduce the formal, acceptable way to gain access to goods, if people demand those things, inmates want those things. Maybe to give another example, it's notoriously costly to make a phone call in prison. It costs something like $1/minute in California. Not surprisingly, there's now a huge demand for mobile phones amongst inmates. Russ: Which are against the rules. Guest: It's totally against the rules to have a cellphone in a California prison. Russ: So, there aren't any. Guest: So the people who bring them in profit a lot from doing so. In 2011 they confiscated 15,000 cellphones from inmates. Fifteen thousand cellphones. This is a huge number of phones. And if the phones they are allowed to use weren't so expensive, then maybe there would be less demand for illicit phones. Or if we could find a way technologically to provide them cellphones that limited their access in certain ways but made acceptable uses available. Then there would be less profit opportunities for people that maybe we don't want to have more control of resources. Russ: I guess the other question would be: I wonder what the political incentives are to make prisons better than they actually are. There are horrible places that are terrifying. People get hurt there, they die there. They don't learn a lot of skills. They are forced through these incentives we are talking about when they leave prison to remain connected to the people still in the prison. Somebody would say, 'That's good. These are horrible people; they deserve this. They did bad things and the fact that their lives stink while they are in prison is too bad. And we should just let them rot there.' You can't help but feel while you are reading the book that that's not the ideal. You don't preach about it at all, but as you read these stories, people get caught up in this system in a very overpowering and dramatic way, and it's not good for other people outside the prison when they come back, when the folks come out of the prison and continue to do things that are not so healthy, like say shoot people in drive-by shootings and gang wars over drugs. Guest: Yeah. Russ: So there's a big incentive it seems to me, policy-wise, even though they don't have a big political pull, to try to make this better. And, as I was reading your book, I thought inevitably of the following: Let's make tobacco legal; give them a chance to give themselves cancer if they want. Give them that freedom. And if drugs were legal, there wouldn't be as much profit from selling them in prison. I'm not saying they should be legal maybe in [?]--I guess if they are legal outside, they should be legal inside: they'd be cheap. And a lot of this would go away. It seems like. There'd still be markets for sexual activity; I don't know what else--contraband or stamps, cellphones. But isn't a huge portion of this driven by the profit of dealing drugs? Guest: It's definitely a part of it. This is such a complex issue that I'm very hesitant to speculate about what would happen if you legalize drugs. What I do think is true is that bigger prisons cultivate prison gangs. The drug war contributes about 20% to the nation's prison population. Twenty percent is a lot, but we still incarcerate far more people than everyone else. So, it's not just a drug issue. So if we assumed, best-case scenario, legalizing drugs, everyone that was in prison for drug offenses doesn't go there--which isn't true, which wouldn't happen. But if we assumed that, we'd still have massively huge prison populations, large enough that I think inmates would still need or want to form gangs. If prison officials I guess made heroin and marijuana available to inmates-- Russ: That's not going to sell. Never mind. Sorry I even mentioned it, actually. Guest: Okay. I don't see that happening. Russ: The governor of California that proposes that--it's a liberal state, but probably not that liberal.