Introduction

Alexander Tabarrok

We now have several decades of experience with prison privatization. Judging from the continued controversy, we have learned little from this experience. Yet if we look behind the controversy and evaluate the accumulated evidence, it becomes clear that we have learned a great deal.

We now know that private prisons can be built more quickly, operated at lower cost, and maintained at a quality level at least as high as government-run prisons. To be sure, some private prisons are better than others, and the worst-run private prisons are not as good as the best-run government prisons. But as Samuel Jan Brakel and Kimberly Gaylord demonstrate in chapter 4, we now have ample evidence to say that on average private prisons offer substantial cost savings with no loss in quality. (All the authors in this volume discuss the cost issue but, in particular, see chapters 2 [Avio], 3 [Thomas], and 4 [Brakel and Gaylord].)

You Get What You Contract For

What we have learned from prison and other types of privatization is that you get what you contract for. The early critics of prison privatization were correct that if governments were to write prison contracts solely based on price, then they would get cheap prisons of low quality. What the critics didn't understand, however, was that with experience it has become possible to write effective multidimensional contracts that include procedures for the careful monitoring of prison output. Such contracts provide incentives to produce high-quality prisons that are nevertheless considerably less expensive to run than their government counterparts.

The argument that privatization works when governments write multidimensional contracts with procedures for the careful monitoring of output does contain a hint of inconsistency. One of the arguments for privatization is that owing to a lack of incentives, government tends to be inefficient. But if government is inefficient at producing the output of prisons, why should we expect it to be any more efficient at producing prison contracts? This point surely has merit, which is one reason to maintain a distinction between the terms contracting out (in which the government remains as buyer of privately produced goods and services) and privatization (in which the government exits the industry as both buyer and seller).

The inefficiency of government as a contract writer is a real problem. In his chapter, Charles Thomas points out that in many cases privatization has turned into "governmentalization" because contracts with private suppliers are made so detailed that the private suppliers in essence are required to duplicate public facilities down even to the prisoner meal plan (see also Benson's chapter). It is a tribute to private industry or perhaps an indictment of government production tha