Don't Confuse "Private" Prisons with Free-Market Prisons

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Mises: Don't Confuse "Private" Prisons with Free-Market Prisons

11 HOURS AGO Brittany Hunter

Earlier this month, the Justice Department announced that it plans to stop using privately run prisons after a report found that they were often less safe for inmates than federally run facilities. While it is admirable for the federal government to finally start taking an interest in the well-being of its incarcerated population, referring to these facilities as “private” can be grossly misleading.

 

A truly private organization is characterized by competition in a free marketplace. A private organization does not enjoy any monopoly powers conferred by the state. Nor are the taxpayers forced to pay for the services of any private organization through their tax dollars. “Private” prisons, on the other hand, are nothing like a truly private organization.

 

Specifically, these privately run prisons contract with the federal government to act as agents for the state, paid to create more space for our already massive prison population.

 

While these prisons have had an awful reputation of prisoner abuse and poor living conditions, including reports of contaminated food, it is important to remember that the problem exists not because the prisons are privately owned. The problem stems from the fact that the state is the entity responsible for propping up these facilities and creating the demand for more prisons in the first place.

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Privatized Immigration Detention Centers to be Focus of Federal Review

by Julián Aguilar Aug. 29, 2016 5Comments

 

The U.S. Department of Homeland Security on Monday called for a review of its current policy of detaining undocumented immigrants in private, for-profit facilities — several of which are in Texas.

 

The announcement comes after the U.S. Department of Justice called for a phasing out of its contracts with private facilities this month.

 

In a statement, DHS Secretary Jeh Johnson said Homeland Security Advisory Council Chairman Judge William Webster will spearhead the review and form a committee to look into whether the current system should be abolished. https://www.texastribune.org/2016/08/29/privatized-immigration-detention-centers-be-focus-/

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From Corporate Pay to Private Prisons—Lessons From the Nobelists

What’s the best way to reward managers? Are contract jails a good idea? Professors at Harvard and MIT win for their insights.

 

David R. Henderson

Updated Oct. 11, 2016 7:50 a.m. ET

29 COMMENTS

 

This year’s Nobel Prize in economics, the Royal Swedish Academy of Sciences announced Monday, will go to Oliver Hart and Bengt Holmstrom for “their contributions to contract theory.” Mr. Hart, born in Britain, is a professor at Harvard. Mr. Holmstrom, born in Finland, is a professor at MIT.

 

To understand their work, start with a pillar of economics that I teach on the first day of class: Incentives matter. Mr. Hart and Mr. Holmstrom take that principle and run with it, seeking to understand incentives within both individual companies and the larger market structure.

 

Implicit in all of their work is the idea that if it’s difficult to design optimal incentives within a single firm, it’s well-nigh impossible for central planners to do it for the entire economy. It’s telling that much of Mr. Holmstrom’s work began when he was a professor at Northwestern’s Kellogg Graduate School of Management.

 

Mr. Holmstrom examines how corporate boards should structure managers’ pay to generate the appropriate incentives. The company’s owners, the shareholders, want to maximize the value of the firm, but the manager could have other motives. You might think that the solution is to pay the manager according to the firm’s profits. But the bottom line doesn’t depend solely on the manager’s actions. Take the oil business: If a manager’s compensation is based on the company’s profits, then the pay is great when oil prices rise and lousy when prices fall. He is compensated, or not, for things he can’t control.

http://www.wsj.com/articles/from-corporate-pay-to-private-prisonslessons-from-the-nobelists-1476142136