Sorry, this is just a general comment. And it is only an opinion. I don‘t like the idea of profit-orientated prisons. The aim of a reform might be „good prisons“, „good treatment“, but that‘s not where the money is/get‘s generated? Low reoffending rates, espacially for crimes like murder, sexual assault, etc. are „producing“ the profit. I am afraid, people will find cheaper (but not necessarily better ways) to make the profit.
For example: if some of my clients ever stands in court again: I will pay them a really good lawyer: I loose money, if they get convicted… / I will make a really good group-therapy, on how not to get caught and how to act with the police. I‘d have an incentive to work (bribe) the police/ the jury … I‘d have an incentive to kill my high-risk-people shortly after releasing them, espacially, if their situation worsens… („incentive“ might easily mean millions).
I‘m sure one could get past some of those objections… but not past all of them.
I‘d rather like a public prison system, good statistics and a competition for being a good prison, without going to those extremes. That would mean less competition, sure.
Still, thx for your post, I am extremely interested to more comments and your replies.
Yep, those perverse incentives that you identified are all good criticisms. If there’s a theoretical model that says why a system will work, the real-world failure points of that system will be the assumptions of its model. The assumptions can be made to be true with the right regulations. My model assumes that prisons will act lawfully, which I think they will under the right punishments (since there’s always a possibility of being caught).
I knew about the prison’s incentive to murder high-risk inmates, but I didn’t consider the others you mentioned. Maybe some activities should be illegal, such as providing inmates with lawyers, but I’d wait and see how that plays out in the real world before banning it. There’s one big problem that you missed: under-reporting of crime (e.g. drug use, rape) within prison (remember prisons have to pay the government for each crime after the auction). To prevent under-reporting, I’d consider mandating that each prison puts microphones and cameras in every room. The recordings could be accessed by government auditors at any time.
I think you’d agree that the main dangers lie with high-risk inmates. To avoid that issue (at least until you have more data on how the system actually functions), you could prevent negative bids from going over a certain size (i.e. you can’t bid less than −x dollars). The remaining inmates, whose contracts aren’t bid on, would go to public prisons. The bid restrictions could be loosened as we gain a better understanding of the system and impose better regulations.
Public systems have common problems. It’s hard to overthrow poorly performing incumbents: If I think I can run prisons better than the existing government, I have to overthrow the entire government in an election. The people in charge of prisons don’t have the right incentives: If they could prevent a murder for 2 million dollars, they don’t have access to that capital. And sure, they could run tests to see which rehabilitation measures work best, but can they make good decisions on which rehabilitation theories to test, especially when the payoffs for the prison don’t exist?
The payoffs for the prison don’t exist, but that might be fixed—at least to some extent—by introducing premiums and there are payoffs for the state. Although states are not as constrainted for funding as private companies, the costs of imprisonments have not gone unnoticed.
No, I don’t think this is a problem. The prisons are competing against each other, not acting as a single, unified block. Why would a prison spend money on making something illegal (through lobbying) when they still have to outbid their opponents? Not only that, prisons would also have an additional liability to pay for their existing prisoners who might commit these new crimes after their release.
This will predict that organized corporate lobbying efforts to a first approximation do not exist, except for entrenching intrasector monopolies against direct competitors.
You mean the first part? (I.e. Why pay for lobbying when you share the “benefits” with your competitors and still have to compete?) Yeah, when a company becomes large enough, the benefits of a rule change can outweigh the cost of lobbying.
But, for this particular system, if a prison is large enough to lobby, then they’re going to have a lot of liabilities from all of their former and current inmates. If they lobby for longer sentences or try to make more behaviours illegal, and one of their former inmates is caught doing one of these new crimes, the prison has to pay.
One way prisons could avoid this is by paying someone else to take on these liabilities. But, in the contract, this person could ensure the prison pays for compensation for any lobbying that damages them.
So a lobbying prison (1) benefits from more inmates in the future, (2) has to pay the cost of lobbying, and (3) has to pay more for the additional liabilities of their past and current inmates (not for their future inmates though, because the liabilities will be offset by a lower initial price for those inmate contracts). Points 1 and 2 are the same under the current prison system. Point 3 is new, and it should push in the direction of less lobbying, at least once the system has existed for a while.
I would assume that for a private prison that has become good at its business the benefits of more inmates would outweigh the liabilities and that at some point it would (in principle, ignoring the free rider problem for a moment) become easier to increase the profits by increasing the revenue by making more things illegal than trying to reduce the reoffending rate. Also do administrators profit from more crimes in a public system? It of course increases the demand for administrators, but I don’t see how it would increase the salary of a significant number of them.
But, in the contract, this person could ensure the prison pays for compensation for any lobbying that damages them.
Does insurance contracts typically contain clauses for future “products”? I would have assumed that the insurance of the prison would only cover the damage of the point in time the contract was firmed.
I would assume that for a private prison that has become good at its business the benefits of more inmates would outweigh the liabilities and that at some point it would (in principle, ignoring the free rider problem for a moment) become easier to increase the profits by increasing the revenue by making more things illegal than trying to reduce the reoffending rate.
Ignoring the free-rider problem (“problem” being from the perspective of the prison), as the prison gets more and more current/former inmates, it becomes harder for that cost-benefit calculation to make sense. With no change in the law or the performance of the prison, the prison’s liabilities will grow until the point at which the current/former inmates who die are are as numerous incoming inmates. So for lobbying to make financial sense, it would probably have to occur soon after the prison is started or soon after the system is implemented. But that time is also when the prison has the least information about their own competence (in terms of rehabilitation and auction pricing).
Also do administrators profit from more crimes in a public system? It of course increases the demand for administrators, but I don’t see how it would increase the salary of a significant number of them.
Not really, but that’s besides the point. The point is that they don’t benefit from rehabilitating their inmates. They don’t benefit from firing abusive guards. They don’t benefit from reading the latest literate on inmate rehabilitation and creating policies that reduce the chance of their inmates re-offending.
Does insurance contracts typically contain clauses for future “products”? I would have assumed that the insurance of the prison would only cover the damage of the point in time the contract was firmed.
I don’t know much about insurance, but I think you can write pretty much whatever contract you like, as long as no laws are broken.
Also do administrators profit from more crimes in a public system? It of course increases the demand for administrators, but I don’t see how it would increase the salary of a significant number of them.
Not really, but that’s besides the point.
Actually, I was referring to a point you made in an earlier comment:
So a lobbying prison (1) benefits from more inmates in the future, [...]. Points 1 and 2 are the same under the current prison system.
So do we both agree that (1) does not hold in the current system?
Sorry, this is just a general comment. And it is only an opinion. I don‘t like the idea of profit-orientated prisons. The aim of a reform might be „good prisons“, „good treatment“, but that‘s not where the money is/get‘s generated? Low reoffending rates, espacially for crimes like murder, sexual assault, etc. are „producing“ the profit. I am afraid, people will find cheaper (but not necessarily better ways) to make the profit. For example: if some of my clients ever stands in court again: I will pay them a really good lawyer: I loose money, if they get convicted… / I will make a really good group-therapy, on how not to get caught and how to act with the police. I‘d have an incentive to work (bribe) the police/ the jury … I‘d have an incentive to kill my high-risk-people shortly after releasing them, espacially, if their situation worsens… („incentive“ might easily mean millions).
I‘m sure one could get past some of those objections… but not past all of them.
I‘d rather like a public prison system, good statistics and a competition for being a good prison, without going to those extremes. That would mean less competition, sure.
Still, thx for your post, I am extremely interested to more comments and your replies.
Yep, those perverse incentives that you identified are all good criticisms. If there’s a theoretical model that says why a system will work, the real-world failure points of that system will be the assumptions of its model. The assumptions can be made to be true with the right regulations. My model assumes that prisons will act lawfully, which I think they will under the right punishments (since there’s always a possibility of being caught).
I knew about the prison’s incentive to murder high-risk inmates, but I didn’t consider the others you mentioned. Maybe some activities should be illegal, such as providing inmates with lawyers, but I’d wait and see how that plays out in the real world before banning it. There’s one big problem that you missed: under-reporting of crime (e.g. drug use, rape) within prison (remember prisons have to pay the government for each crime after the auction). To prevent under-reporting, I’d consider mandating that each prison puts microphones and cameras in every room. The recordings could be accessed by government auditors at any time.
I think you’d agree that the main dangers lie with high-risk inmates. To avoid that issue (at least until you have more data on how the system actually functions), you could prevent negative bids from going over a certain size (i.e. you can’t bid less than −x dollars). The remaining inmates, whose contracts aren’t bid on, would go to public prisons. The bid restrictions could be loosened as we gain a better understanding of the system and impose better regulations.
Public systems have common problems. It’s hard to overthrow poorly performing incumbents: If I think I can run prisons better than the existing government, I have to overthrow the entire government in an election. The people in charge of prisons don’t have the right incentives: If they could prevent a murder for 2 million dollars, they don’t have access to that capital. And sure, they could run tests to see which rehabilitation measures work best, but can they make good decisions on which rehabilitation theories to test, especially when the payoffs for the prison don’t exist?
The payoffs for the prison don’t exist, but that might be fixed—at least to some extent—by introducing premiums and there are payoffs for the state. Although states are not as constrainted for funding as private companies, the costs of imprisonments have not gone unnoticed.
Another perverse incentive: campaign for making more offenses punishable by prison sentences.
No, I don’t think this is a problem. The prisons are competing against each other, not acting as a single, unified block. Why would a prison spend money on making something illegal (through lobbying) when they still have to outbid their opponents? Not only that, prisons would also have an additional liability to pay for their existing prisoners who might commit these new crimes after their release.
This will predict that organized corporate lobbying efforts to a first approximation do not exist, except for entrenching intrasector monopolies against direct competitors.
I think this is sometimes untrue in practice.
You mean the first part? (I.e. Why pay for lobbying when you share the “benefits” with your competitors and still have to compete?) Yeah, when a company becomes large enough, the benefits of a rule change can outweigh the cost of lobbying.
But, for this particular system, if a prison is large enough to lobby, then they’re going to have a lot of liabilities from all of their former and current inmates. If they lobby for longer sentences or try to make more behaviours illegal, and one of their former inmates is caught doing one of these new crimes, the prison has to pay.
One way prisons could avoid this is by paying someone else to take on these liabilities. But, in the contract, this person could ensure the prison pays for compensation for any lobbying that damages them.
So a lobbying prison (1) benefits from more inmates in the future, (2) has to pay the cost of lobbying, and (3) has to pay more for the additional liabilities of their past and current inmates (not for their future inmates though, because the liabilities will be offset by a lower initial price for those inmate contracts). Points 1 and 2 are the same under the current prison system. Point 3 is new, and it should push in the direction of less lobbying, at least once the system has existed for a while.
I would assume that for a private prison that has become good at its business the benefits of more inmates would outweigh the liabilities and that at some point it would (in principle, ignoring the free rider problem for a moment) become easier to increase the profits by increasing the revenue by making more things illegal than trying to reduce the reoffending rate. Also do administrators profit from more crimes in a public system? It of course increases the demand for administrators, but I don’t see how it would increase the salary of a significant number of them.
Does insurance contracts typically contain clauses for future “products”? I would have assumed that the insurance of the prison would only cover the damage of the point in time the contract was firmed.
Ignoring the free-rider problem (“problem” being from the perspective of the prison), as the prison gets more and more current/former inmates, it becomes harder for that cost-benefit calculation to make sense. With no change in the law or the performance of the prison, the prison’s liabilities will grow until the point at which the current/former inmates who die are are as numerous incoming inmates. So for lobbying to make financial sense, it would probably have to occur soon after the prison is started or soon after the system is implemented. But that time is also when the prison has the least information about their own competence (in terms of rehabilitation and auction pricing).
Not really, but that’s besides the point. The point is that they don’t benefit from rehabilitating their inmates. They don’t benefit from firing abusive guards. They don’t benefit from reading the latest literate on inmate rehabilitation and creating policies that reduce the chance of their inmates re-offending.
I don’t know much about insurance, but I think you can write pretty much whatever contract you like, as long as no laws are broken.
Actually, I was referring to a point you made in an earlier comment:
So do we both agree that (1) does not hold in the current system?
Good point.