​Where entrepreneurship is thriving: prison

The issue of consumer choice inside a maximum-security prison may seem like a non-issue. After all, the prisoners are there to pay for their crimes in a stripped-down environment that eschews personal choice.

Yet even in such a rigidly controlled environment, from what types of clothes prisoners wear to when they wake up in the morning, inmates are finding ways to meet their needs through entrepreneurial ventures, according to a new study from Ronald Paul Hill and Michael Capella of the Villanova School of Business and Justine Rapp at the University of San Diego and published in the Journal of Public Policy & Marketing.

Not all of these ventures are healthy or legal, with some prisoners resorting to supplying drugs, alcohol or even junk food to other inmates. But others are providing essential services ranging from haircutting and writing letters to providing simple medical care, the authors found.

The prison system strips away inmates' identities and choices for a number of reasons, such as removing traces of their pre-prison lives and ensuring safety for both those inside and outside the prison, Hill told CBS MoneyWatch. That the inmates respond by creating entrepreneurial businesses raises questions about prison reform, what it means to be human, as well as marketing practices in general, he said.

"It's a real testament to the human will," Hill said. "There are a couple of reasons [prisoners] go to the jailhouse merchants. One, it's to get things they couldn't get, and there are products they would consider contraband, but it's interesting that it doesn't dominate it. What dominates it more are simple things like the ability to have a calzone or a cheesesteak, to have some food when you want it rather than when someone tells you to eat it. To be treated like a customer."

He added, "It's an exertion of your humanness."

Hill spent about four years working with inmates at one maximum security prison, which he's given the pseudonym Gramercy in order to protect the identities of the prisoners. The research furthered his interest in studying issues related to consumer choice in restricted environments and among poor populations.

For this particular study, Hill worked with inmates over an 18-month period on learning about "participatory action" research, an approach that involves community participation in data collection and analysis. Thirty-five inmates recorded their own impressions of the market system within the prison, and then interviewed 350 of their fellow inmates about living in a system with severely restricted consumption.

"The goal of these efforts was to develop a comprehensive understanding of restrictions experienced by the inmates, with a deeper level analysis on consequences across the incarcerated population," the study noted. "It is important to recognize that the men did not discount their crimes or society's right to seek retribution."

The maximum-security prison houses about 4,000 men with an average age of 47. About half are black, 38 percent are white and 11 percent are Hispanic, with the remainder listed as other. The mean reading level is below the 8th grade, and more than 40 percent lack a high school degree or a GED. Most of the participants in Hill's study were sentenced to life terms between their 14th to 19th birthdays, with many of the sentences due to murder convictions.

The participants in Hill's study were enrolled in an on-site degree-granting program offered by a local private university. (He noted that some academic reviewers for the paper expressed doubt that the prisoners, whose comments are quoted in the research paper, could be so well-spoken, but Hill noted wryly that one thing prison provides is time to stop and think.)

While prisoners have a commissary where they can buy food and other supplies, Hill notes that the commissary system is created by prison administrators and may not meet the needs of the inmates. About half of the commissaries in U.S. prisons are operated by a private contractor, with the prison staff deciding which company will provide the products and which products are offered to inmates.

That type of third-party set-up may feel familiar to corporate workers, whose 401(k) plans and health insurance policies are picked by their company's administrators, rather than by the employees themselves. Within the system, the consumer (or prisoner) has some choice, but the overall framework is set up by a third party who may or may not be listening to complaints about prices, lack of choice, or other issues.

The prisoners' frustration leads to a rejection of the formal exchange system, and the creation of an underground economy, the paper noted.

"An additional difficulty is the inability to earn sufficient incomes at formal jobs that pay between 19 and 42 cents an hour for five hours a day, five days a week employment," the paper said. "A well-known outcome is an underground, thriving marketplace that yields a wide range of informal jobs and accommodates needs that include services like hair-cutting and basic medical care, and goods such as unavailable foods or larger quantities of items for storage that are disallowed by the prison system."

While that might seem positive, there is also a negative side to the entrepreneurial system, with inmates resorting to drugs and junk food to cope with boredom and stress, which may leave them in worse mental and physical health by the time they leave prison. And prison work does "little more than use their raw skills," the paper noted.

"One of the central findings of this research is that the men are eager to find ways to enrich their lives that go beyond accumulation of material items," it noted.

Given that $50 billion a year is spent on the American prison system, investment in supporting skill development, as well as providing the basic needs of food and health care, might better serve society at large by preparing prisoners for reentering society, the authors note.

So what about the study's implication for marketers as a whole? Like prisons, marketers sometimes depersonalize consumers and view them as commodities, the study noted. Marketing terminology such as "targeting" and "exploiting" underscores this point of view, which has the end result of creating a psychological gap between corporations and the consumers they are serving.

"Look at some of the services that dehumanize us the most: airlines and gas stations and banks," Hill said. On airlines, "most of us are considered terrorists. There's not much customer service involved. When you devalue me, as the airlines have done, why wouldn't I move to another airline if they give me a quarter-cent more?"

Such depersonalization isn't a long-term key to corporate success, especially with the cause-focused millennial generation on the rise, he added. Even in the prison system, inmates are finding ways to reject a system that's not fulfilling their needs. In the wider world, that might also happen to companies that treat their customers like cogs.