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Private Prisons: Is Contracting Inappropriate?

Private Prisons: Is Contracting Inappropriate?

One interesting topic that intersects law and economics is the controversial idea of private prisons. Private prisons push the boundaries of American comfort with the scope of government. There are many pros and cons to privatizing parts of the prison system, along with many fallacies, opinions, and arguments on the subject. “Private Prisons Cons and Pros” by criminologist Charles Logan outlines arguments for and against commercial operation of prisons and jails as an alternative to the government’s current control. His book emphasizes the fact that using historical tests to determine which responsibilities belong to the government is a “one-way ratchet” for government and, according to Ronald Cass, the contraction of the scope of government becomes impossible (Logan, 4). This means that it becomes impossible, even when economically justified, to pull back and limit government’s powers. This inefficiency is due to the fact that we become reliant on the government to take care of things it has historically taken care of. Simply because prisons have been built and managed by the government in the past doesn’t mean privatizing some aspects of the system would create corruption. In fact, private contracting rather than strict government operation may be more efficient financially, a better way of shifting liability, and better for prisoners’ quality of life. Going into both benefits and costs of private prisons, literary review on the economic forces at play is very encompassing and thorough.

In economics the “invisible hand” of the market is the force that responds to supply and demand and provides goods optimally to their most valued uses. This mechanism sometimes fails to provide goods and services optimally, which is when the iron fist: government intervention, steps in to assure the market maintains efficient allocation of resources. In Logan’s book, he describes imprisonment as a public good for which quality is low, prices are high, and supply doesn’t meet demand. These are characteristics of a good controlled by a monopoly, in this case the monopoly is the government. To clarify, prison capacity is not enough to keep up with the increasing population. This is a serious problem because, for the public, imprisoning people who commit crimes can be seen as a public good; something beneficial for the entire society. Not only are prisons filled to overcapacity, but they are deteriorating with age. "Overall, state prisons in 1987 were filled to somewhere between 105 and 120 percent of capacity,… federal prisons held between 37 percent to 73 percent more than the maximum number of prisoners that they were meant to house. Over 12,000 state prisoners had to be held in local jails because other facilities were overflowing." (Logan, 8). Overcrowding does not only create difficulty for management, one consequence is more violence among inmates and to staff, it is unfair to prisoners to keep them in cramped living conditions like animals. In more recent literature from 2006, Michael A. Hallett states that “According to [a survey by] Abt Associates, Inc, reducing overcrowding has been, and remains, in fact, the primary crisis faced by administrators adopting privatization. Without question, private contractors are consistently able to build large prisons more quickly than any state or the federal government. The report ranks the objectives of prison administrators in regards to privatization in the following order: 1. Reducing overcrowding [86 percent] 2. Speed of acquiring additional beds [75 percent] 3. Gaining operation flexibility [61 percent] 4. Construction cost savings [57 percent] 5. Improving caliber of services [43 percent] 6. Reducing legal liability exposure [39 percent] 7. Other [21 percent]” (Hallett, 125). Historically, the first privatization of the prison system was done, in fact, out of necessity. Government needed help with these very problems. “As overcrowding-related problems increased, the option of trying to relieve pressures through the use of private prison facilities became even more attractive. “Indeed… the world’s largest [ever] private prison corporation, Corrections Corporation of America, was for all intents and purposes founded during a forced special session of the Tennessee legislature called to cope with a prison crisis.” (Hallett, 126). The very founding of private contracting was due to the fact that government couldn’t keep up with the number of the prisoners coming in. Contracting would mean that although there would be no arrests or imprisonment done by the private company, construction and upkeep costs to be kept to a minimum, and overcrowding would no longer be an issue. As demand for prisons rises, so would supply. This elasticity is something the private sector can achieve at least cost, and society benefits. People who commit crimes are in secure prisons, and there’s no danger to the public due to prison riots or escapes, which come with an unmanageable prison population.

Another benefit of privatizing is that government would be able to get to a safe level of prisoners per facility and release itself from the liability cost that comes from keeping overcrowded prisons. According to Hallett, prisons since the 1990’s have become dangerous with roughly two-thirds of US correctional facilities being placed under federal court orders to reduce overcrowding, as it can be seen as a violation of inmates’ Eighth Amendment protection against cruel and unusual punishment. This liability could potentially cost the government a lot and passing it on to the industry is something that, Hallett points out, is a way of saving the public sector from even further costs. This is a benefit that has a positive effect on prisoners as well. The volatile conditions of overcrowded prisons create a cesspool of criminals who construct a hierarchy within prison. This is not a method of rehabilitation, but rather promotes a life of crime even after getting out of prison. Criminals hurt the economy by engaging in theft, black market transactions, illegal sale of drugs, and various other activities. “About two-thirds (67.8%) of released prisoners were arrested for a new crime within 3 years, and three-quarters (76.6%) were arrested within 5 years” (Durose, Cooper, Ph.D., Snyder, Ph.D., Bureau of Justice Statistics). These activities are a huge cost to society. For example, theft is not socially optimal at all because it transfers a good to the thief, who doesn’t value it as much as the seller or any other buyer; because if they did, they would simply buy it. Reducing the danger that comes with overcrowding in prisons could possibly help change the mentality of criminals and prevent relapse into a life of crime post-prison. This is much more ideal than a dangerous facility where they have to focus on surviving rather than on improving themselves and rehabilitating.

One of the Hallett’s discussed cons of private prisons is one from many minorities in modern day America; private prisons encourage more incarceration, of minorities in particular, in order to profit. His book, written in 2006, recognizes the cultural racism that extends onto incarceration rates that show African Americans being targeted disproportionately more than other races. In 2018, this is still a hot button issue, as many African Americans are protesting the targeting and police brutality that they are victim to. This, however, is a problem with police force training that targets minorities, not with the idea of a private prison system. As mentioned in “Private Prisons Cons and Pros”, if we look at privatization economically, contracting makes prison supply more responsive to changes in demand, whether that be up or down, and allows government and society to benefit and have lower costs. In essence, if incarceration rates went down private prisons would be able to lower costs and supply so that they’d be fine regardless of rate of incarceration. This elasticity and ability to easily change isn’t apparent in governmental facilities, which are known to be slower to adapt. If we keep the government solely responsible for prisons there may be more bias and incentive to increase incarceration if the rate falls, in order to cover the costs of operating. Especially since the government has a direct say in how the police force is trained and private prison companies do not, this could cause bias leading to discrimination and much more incarceration of minorities.

The majority of arguments against private prisons are summarized into arguments that have a principle or moral base. While this is not a bad base for an argument, many of these objections to privatization aren’t critically examined, or backed with good arguments. John Dilulio, a political scientist at Princeton University is one of the only people to clarify the argument that power can’t be given to private institutions. He is a critic who carries the argument against private prisons to encompass all government functions. He insists that even if private prisons could do everything that government can do, disregarding the issues of motive (profit, etc.), and issue of scope, he claims "…private prisons would still be undesirable, as a matter of principle… Why not turn over to private contractors the process of selecting a president, supposing that professionals can do a much more competent job of it than the general electorate" (Logan, 50). He extends his argument to other aspects of law and government regulation by following that we should privatize the police and other functions of government simply because it is more efficient and allow private companies to take over. This argument expresses the concern that privatization may get completely out of hand. While this is an interesting take, we have to realize one thing: “Contractually managed prisons are still government prisons. They do not exist on their own authority. A case might be made for truly private prisons independent of government authority, but no one arguing for prison contracting is attempting to make that case” (Logan, 51). We are not talking about an entirely privately run prison with no government intervention, or corporations imprisoning people of their own authority. The choice is between direct government provision through employees, or government procurement through contract. Logan further speaks on the fact that, if we think critically, administrators and correctional officers are not elected, they get their authority and legitimacy through being hired for the job. The public doesn’t have an input on who gets hired. Our elected leaders actually have very little direct power, as everything is carried out by others. We can think of this as a chain of authority: the first link is elected, then all of the following are hired by the previous and exercise their power, not through being elected for the government position, but by being hired. The more centralized the government, the longer these chains get, and the people at the bottom of the chains have a lot of power; not the government elected individuals. Logan argues that this is not very different from being a contractual worker for the government. Both are hired and managed by higher-ups, with an elected official at the top. And a point from a 2007 book Prison Profiteers mentions a similar point on the efficiency of hired workers, “Since private firms are not encumbered with civil service and union contract requirements, proponents argue, they will assign staff more efficiently, make promotions solely on the basis of merit, and fire those who fail to perform well or abuse the human rights of the prisoners in their charge” (5, Herival & Wright). Furthermore, Dulilio’s argument that the government’s responsibility would “end at the prison gate” is completely invalid, no contract would cause that transfer of responsibility, the choice isn’t between contracting and justice as Dilulio’s rhetoric suggests. Contracting isn’t the first step to privatization of all government functions and roles, it is simply a solution to an inefficiency.

What do these contracts entail? “…the archetypal contract has been one to design, construct, finance and manage new prisons. These ‘DCFM contracts’ leave the private contractor with the onus of putting together a business consortium to cover the whole range of activities which go into turning a green-fields site into an operational prison.” (Harding, 20). Contracting allows government to give these responsibilities to the highest bidder, which will end up being the person with the lowest cost. Government will pay a set amount and the only way for the company to profit will be by reducing costs. There are strict timetables with completion dates and financial penalties in order to ensure each stage of development is productive. “The available evidence on the cost effectiveness of privatized construction of prison facilities strongly suggests that there are indeed significant cost savings produced when private companies contract with jurisdictional entities to build a prison facility. The reasons for this are numerous: First, private corporations are not bound by existing state contracts with suppliers and can “shop around” in their acquisition of building materials. Second, private companies are able to avoid the need to comply with governmental oversight in contract allocation and decision making, thus saving time. Third, private contracts are free from the sometimes-lengthy approval process in procurement, enabling private corporations to more efficiently purchase and deliver necessary materials to remote prison construction sites” (Hallett,140). Even Hallett, although the majority of his text is against the idea of private prisons, has to concede to the fact that there are clear benefits in the cost-benefit analysis of private prisons. Government is bound by many contracts, quotas, and requirements which prevent them from looking for better and cheaper alternatives. This drawback is very costly when we’re talking about buying materials and labor in bulk to build an institution.

Prison Profiteers, published in 2007, brings to attention another very disturbing con of the private prison system; discussing interests of the corporations that run these prisons. The corporations that run private prisons have an interest in keeping people in prison for as long as possible, and bringing in as many people as possible. This leads to expansion, so there is a direct interest in adding more prisoners, giving less parole time, and having an overall bigger prison population because this gets them profit. Although corporations have no say in parole time and arrests, as mentioned earlier, they do have political power in the fact that they can fund politicians who will keep strict crime control laws in place. “When [Governor] Keating took office the state had no private prison contracts, but by the end of his first term the state had contracted private beds costing more than $66 million a year. Governor Keating campaigned for a second term in 1998. He received $12,500 from the private prison industry for his campaign, $10,000 of which came from CCA executives” (16, Herivel & Wright). This disturbing statistic shows that corporations can lobby and indirectly impose laws that help them profit. “Faced with another prison population emergency that would trigger issuance of cap credits to nonviolent prisoners within sixty days of their release date, Governor Keating refused to allow releases, saying, ‘We have the option of leasing more private prison beds’. The decision to contract for up to 720 additional beds at CCA’s Diamondback Correctional Facility threw the state’s prison budget $20 million in the red…” (17, Herival & Wright). Cap credits are used in situations of overcrowding, and consist of an emergency release of carefully selected nonviolent prisoners when prison population exceeds 95 percent of prison capacity for thirty consecutive days. Those who are within 60 days of their release date could be released early. Governor Keating, funded by the private corporations that run private prisons, was not allowing this to happen. By instead leasing even more beds, he didn’t have to. So the question here becomes, which is worse: a politician funneling money into private prisons and keeping strict crime control or releasing prisoners early due to overcrowding? The problem is not with strict crime control, it is more with the moral uneasiness with bribery, which comes to mind from the fact that so much of politicians’ funding is from these corporations. Leading to the question on whether or not the decisions being made are actually the socially optimal choices.

In my opinion, although there may be a certain degree of uneasiness with the idea of privatization of prisons, because it’s traditionally thought of as a government function, there is potential. There are many benefits that outweigh the costs when we do a thorough analysis. As mentioned, the main cohesive argument against privatization is that of Dilulio which illustrates the common moral problem with the idea of private interests holding power outside of the market. This uneasiness is especially apparent when it comes to people’s freedom, as in the case of imprisonment. Dilulio’s argument extends the idea of privatization to the police force and juries to show how unfair this sounds. However, one could argue that public control of prisons should then extend to production of the food, clothes, hygiene, and all other needs provided to prisoners, but this is not realistic at all. This is far too broad of a spectrum of production to be efficient, and most would agree this level of government control is impractical. Contracting for these necessities is efficient, just private contracting for construction and facilitation is. This idea that everything needs to remain a public-sector responsibility is something that could be the root of serious inefficiency and huge costs in the range of billions of dollars. Furthermore, public goods with positive externalities are regularly encouraged, government increases these externalities by subsidizing. For example, electric cars that have positive externalities compared with standard fuel cars receive tax breaks among other benefits. Sentencing people to go to prison is a punitive measure and has many preventative effects, meaning positive externalities, to the rest of society. Incarceration can in this way be seen as a public good, which should be flexible to the supply and demand forces of the market. If prisons can’t keep up with the supply of prisoners some outside assistance would be very cost efficient and justified. The paradoxical nature of the market helping government with an inefficiency isn’t seen often; usually it is the other way around. A lot of the reason for government inefficiency is the requirements process it has to go through and the cost of maneuvering around many responsibilities and commitments. It’s difficult to shop around for the cheapest options and minimize costs with such a large project and so many people involved. A corporation can simply put all of their efforts into minimizing cost, which would even possibly allow them to profit. Privatizing allows costs to be passed on to the industry while government still manages everything that goes on.

In conclusion, although Logan has an excellent argument for private prisons in 1990, there are many recent pieces of literature that argue whether or not cost-efficiency is enough of a reason to use private prisons. The cons range from many opinions on political corruption to targeted incarceration of minorities. However, the case of incarceration of minorities should be made against the police force, not against the market. Supply and demand becomes more flexible when private prisons come into play, and they can theoretically contract supply as easily as expand. If we keep on giving government the same responsibilities its historically had with no adaptation to change, we are not going to be able to contract the scope of government even though it is socially efficient to do so. The market would correct the inefficiency the government has, there are bound to be some cons of doing so. Foremost, the political impact of private prisons is the largest negative associated with private prisons, since this influences the supply of prisoners, creating an unneeded demand of private prisons. This interferes with the natural balance of the market, and the strategy of enforcing stricter crime control in order to keep funding does not result in a socially optimal outcome. This is truly a problem since we depend on politicians to do what is socially optimal. This could be prevented by limiting the amount of campaign donations corporations make to politicians, and through this complicated process, the market would truly represent the ideal amount of incarceration and funding for prisons. There would be no incentive to keep as many people in prison as possible, and therefore no targeted bias against minorities, as well. The root of private prisons stems from a need to take care of the problem of overcrowding, and to blame private prisons for increasing rates of incarceration is very backwards. There were issues of having too many prisoners to handle before private prisons even came about.