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Wednesday, November 30, 2005

Efficiency in Prisons

Tatem asked an interesting question the other day in Public Finance about whether or not there was an efficient amount of crime. And then in Economic Freedom we briefly discussed prisons from a liberty perspective, but we didn’t mention it from an efficiency perspective. So, that led me to wonder if there is an efficient amount of prisons? There is certainly a supply and a demand for them, so there must be an efficient amount, right?

The first question I wondered was what good is it that prisons provide. Are they providing housing, food, clothes, education, and other goods for prisoners? Are they providing protection for citizens outside of the prisons? Are they providing “punishment” to the prisoners? Do they provide retribution for those who have been harmed by the prisoners? Are they providing rehabilitation? Maybe to some extend they provide all of these things. So, then a better question would be, what is the efficient amount of protection, punishment, retribution, or rehabilitation rather than what is the efficient amount of prisons.

The efficient amount of any good is found when marginal cost equals marginal benefit. And when government becomes involved it’s when marginal social cost equals marginal social benefit. So, marginal social cost and marginal social benefit would have to be calculated and weighed to find out if prisons were providing the efficient amount of the goods they provide. However, this would be very difficult to find because it’s hard to get any real measure of how people benefit from prisons. The cost would be easier to find because we pay for prisons though taxes. But measuring benefits and costs of any good the government provides is difficult, which is one of the downfalls of using efficiency as a framework for government policy.

While I can see that taxpayers receive benefit from the protection and retribution prisons provide for locking up certain individuals (like rapists or murders), I fail to see any benefit citizens receive from locking up a large part of the people that get sent to prison. What benefit do I receive from a drug user, or a probation violator, or a habitual drunk driver being locked up? (Assuming the drunk driver hasn’t hurt anyone) I as a taxpayer bare the costs and receive none of the benefits. I don’t even see that society as a whole receives enough benefits to equal the costs. Let me stress that I do believe society receives the full benefit from keeping certain criminals off the streets, but not all of them, in fact not most of them. Perhaps the costs and benefits have to be weighed on each individual prisoner.

And what about the other goods prisons provide, food, clothes, shelter, education, and rehabilitation? Who bares the costs and who receives the benefits from these goods? Financially taxpayers bare the costs and receive the benefit of protection, but what about from the prisoner’s perspective? They are certainly receiving the benefits from these goods, but do they bare any cost? I suppose their lack of freedom could be seen as the cost, but I wonder if it equals the benefit. Perhaps it’s not such a bad idea to put prisoners to work to help increase their costs. Or maybe not, maybe the freedom they are denied is payment enough. But, it seems to me that they are receiving a lot of benefits without fully paying the costs.

I believe prisons are necessary and an efficient amount of them could be found by finding the efficient amount of the goods they provide. However, I believe the “overcrowded” prisons we have now are highly inefficient for two main reasons. The first reason is because too many people are being put into prisons causing citizens to bare high costs and receive little benefit. The second reason is because I believe prisoners receive a lot of benefits without paying the full costs. However, to change either of these things laws would have to be changed and that may be difficult to accomplish.

On another note, I didn’t really discussed market failures and whether or not prisons should be provided by the government or by private citizens. I think government owned prisons could be easily justified by using a positive externality model. Citizens receive benefits that they do not pay for unless they are government owned and taxpayers are forced to pay for them.

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