Privatization of Prisons

1
Privatization of Prisons

• By
• Viral Patel

2
Private Prisons

• First established in the 1840s under the convict
  lease program (officially ended in 1923)
• States made a substantial amount of money from
  the lease program
• The more recent private prisons came about in
  1980s
• There are two major companies and several minor
  ones
• Wackenhut Corrections Corp.
• Corrections Corp. of America

3
Private Prisons

• The number of private prisons have been growing
  at a great rate
• gt155 private in the U.S. prisons holding gt150,000
  inmates
• Hold approximately 5.3 of adult prisoners
• They range from minimum to maximum security
• Cost over 50,000 per bed to construct facilities
• Cost over 20,000 per inmate per year to operate

4
Private Prisons

• Governments see private prisons as a easy way to
  boost prison capacity without the state having to
  build new prisons
• They are seen as more cost effective
• They are seen as a tool of flexibility
• They are seen as offering high quality
• Privatization itself is an ideological goal for
  politicians

5
Current Winners Losers

• Winners
• Private entities
• In part, the government by contracting
• Losers
• Tax payers
• The society

6
Are They Cheaper ?

• The efficiency claim is at best inconclusive
• Factors affecting overall cost per prisoners
• Scale
• Age
• Security level
• Externalization of cost (medical, schooling,
  utilities)
• Most private prisons are new and most are not
  super-maximum

7
Are They Cheaper?

• Proponents claim that by simple cost comparisons
  private prisons are cheaper
• Cost reduction of 20(fiscial savings)
• This claim disappears when looking at known
  factors
• Age (the older the facility the more costly)
• Security level (higher security is costly)
• Scale (more inmates reduce marginal cost)
• Therefore, statistically no significant
  difference in cost

8
Private Prisons--Higher Quality?

• ? rate of staff turnover
• Due in part to ? wages and ? benefits that make
  them cheaper to run
• Separation rate is employee turnover which
  includes how recently guards were trained
• Federal Prisons --- 7.5/6 months
• Private Prisons --- gt50
• Indicates difficulties
• Escapes
• Drug abuse

9
Diminishing Return

• private facilities appear to perform at the same
  level of efficiency as public facilities. (Avg.
  saving from privatization was 1)
• Although they tend to house a higher proportion
  of minimum-custody inmates in relatively new
  facilities, private facilities tend to have..
• the same staffing patterns
• provide the same levels of work, education, and
  counseling programs for inmates
• and have the same rates of serious inmate
  misconduct as public facilities.
• The growing number of well-publicized stories of
  poor performance in private prisons is growing
  (e.g., Co, LA, OR, SC, TX).

10
Assessing Private Prisons

• In all, privatization is
• No cheaper
• No safer
• More dangerous
• Less secure
• They do offer some flexibility in terms of
  massive prison population increase
• They do not have a logical emphasis on
  rehabilitation

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Cost of Externality

• Safety of society is an issue costs are not
  internalized (MSCgtMPC)
• Private firms seek to maximize profit (MRMC)
• Private firms might engage in harmful activity
  to ? revenue or ? cost

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Cost of Externality

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Cost of Externality
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13
Public Good- Profit Motive, Rent Seeking

• Public safety in general is at stake
• Profit motive for private entities
• Operate on per dime rate of each bed filled
• Incentive to detain more inmates and for a
  longer period of time
• Incentive to offer lower level of safety

14
Why Monopoly.

• Few private companies are available from which to
  choose
• Private operators may be inexperienced with key
  corrections issues.
• Operator may become a monopoly through political
  ingratiation, favoritism, etc.

15
Monopoly
Monopoly Rent
Efficiency loss
16
Ways to Reduce Externality

• Maximize public safety through appropriate
  correctional custodial and supervisory programs
• Provide for the safety of correctional staff and
  inmates by maintaining an organized and
  disciplined system
• Provide an environment which enables behavior
  change by making rehabilitative opportunities
  available for inmates

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Ways to Reduce Rent Seeking

• Contracting
• Gives managers more of a vested interest in the
  reputation of their institution.
• Can increase the number of suppliers, thus
  reducing dependence and vulnerability to
• strikes
• Slowdowns
• Bad management.

18
References

• Emerging Issues on Privatized Prisons Monograph
  February 2001 NCJ 181249 By James Austin, Ph.D.
  Garry Coventry, Ph.D. http//www.ncjrs.org/pdffile
  s1/bja/181249.pdf
• Charles H Logan, Private Prisons Cons and Pros
  New York Oxford University Press 1900
• Federal Government Saves Private Prisons As
  State Convict Population levels off by Joseph T
  Hallinan, Wall street Journal, November 2001
• White paper on privatized prisons by Elizabeth
  Joblin, Cindy Taylor, Lisa Luna
  http//www.aclutx.org/legislature/privateprisonwhi
  tepaperfamilyofinmates.htm
• Cost effective comparison of private versus
  public prison by William G Archambeult, and
  Donald R Deis Jr, December 1996 Crime and
  Delinquency Review of Regional Studies
  archive volume 45, issue 3
• http//garnet.acns.fsu.edu/7Eholcombe/