As I noted in a recent post, I'm delighted to be publishing my article, Privatization and the Law and Economics of Political Advocacy, with the Stanford Law Review. (Those of you who want to read something more technical can check out my economics paper on the subject, Privatization, Free-Riding, and Industry-Expanding Lobbying.) This will be the first of a series of blog posts summarizing the paper. Comments are welcome, as the paper won't be published until next year.
* * *
Over 90 years ago, opponents of World War I alleged that “munitions manufacturers frighten the popular mind with the fear of imaginary external enemies and inflame it with murderous patriotism.” According to Stefan Zweig, the war began only when “newspapers in the pay of the arms manufacturers began to whip up sentiment against Serbia.” After the war, that accusation morphed into the charge that arms makers were self-interestedly obstructing peace efforts. Today, an opponent of U.S. military policy characterizes defense contractor CACI International Inc, whose chairman speaks publicly of the “heinous[ness],” “fanatical horror,” and “barbarism” of terrorism, as “one of the most unabashed corporate backers of Bush’s foreign policy and a key supporter of the military campaigns in Iraq and Afghanistan.” Critics also charge that private military interests affect what weapons systems we rely on and what alliances we enter into, and that, in some countries, those interests may even take over the government.
This theme—that private contractors use their influence to advocate not just privatization but also, insidiously, changes in substantive policy—sweeps more broadly than just defense contractors. The following list gives a sense of the generality of the accusation; the last few items illustrate that the critique comes from “the right” as well as from “the left.”
- Private prison firms are often accused of lobbying for incarceration because, like a hotel, they have “a strong economic incentive to book every available room and encourage every guest to stay as long as possible.”
- Business improvement districts—coalitions of business and property owners, many of which have their own private security forces—have lobbied municipalities for, among other things, aggressive panhandling ordinances.
- A toll road developer in Colorado has lobbied for statutory changes to preempt county authority to set toll rates, and a private road construction firm has been accused of contributing to Texas Supreme Court justices’ campaign chests to influence a potential eminent domain suit related to a toll road in the state.
- Private landfill companies have been accused of “shap[ing] landfill laws” to keep them “weak” so they can “compete with and undercut valuable recycling programs.”
- Private water supply owners have been accused of “lobbying to weaken water quality standards[] and pushing for trade agreements that hand over the U.S. water resources to foreign corporations,” and private water utilities have been accused of fighting conservation efforts.
- Private redevelopment corporations, which have the power to condemn private property for purposes of “urban renewal,” have opposed reform of eminent domain laws in the wake of the Supreme Court’s decision in Kelo v. New London.
- And “private attorneys general,” for instance environmental groups that benefit from fines available under environmental citizen suit provisions, or members of the securities plaintiffs’ bar who benefit from the availability of securities fraud class actions, fight for the continued vitality or even strengthening of the statutes under which they litigate.
In this Article, I examine this “political influence” challenge to privatization using the case study of private prisons. I conclude that, in the prison context, there is at present no reason to credit the argument. At worst, the political influence argument is exactly backwards, by which I mean that privatization will in fact decrease prison providers’ pro-incarceration influence; at best, the argument is dubious, by which I mean that whether it is true or false depends on facts that proponents of the argument have not developed.
All Related Posts (on one page) | Some Related Posts:
- My paper on The Conglomerate:
- Privatization and the Law and Economics of Political Advocacy, Part 9 -- Conclusion:
- Privatization and the Law and Economics of Political Advocacy, Part 8:...
- Privatization and the Law and Economics of Political Advocacy, Part 2:
- Privatization and the Law and Economics of Political Advocacy:
- Volume-mates with Orin:
Do you mean the facts are undeveloped in this specific instance, or in claims of undue political influence of privatized industries generally? If the former, are there any instances in which you have been persuaded that privatized industries do have undue political influence, or believe that it is likely?
The second might be dubious. The first seems kind of obvious.
I don't see the difference between private and government self-interest in making too much of an issue.
I eagerly await your exposition on this point. Just reading that sentence causes me to have a host of questions, foremost among them whether private prison providers are paid by the inmate or a flat rate per prison. If it is the former case, then they would have an incentive to lobby for incarceration measures like three strikes and would want to promote prison overcrowding as that would increase their net profit. If it the later case, then shouldn't you be focusing on prison building to test their political influence instead of pro-incarceration policies?
For that matter, wouldn't the private prison lobby be more interested in devoting their efforts to lobbying for prison construction, thus increasing their revenue sources, than to lobbying for incarceration? After all, a major argument for prison construction is that there is not enough space to incarcerate the people we want to incarcerate now. If the demand for incarceration is not met by the available prison space, then the proper strategy for private prison contractors is to focus on demanding more prison space not more incarceration. Of course, the effect of more prison space will be more incarceration as pressures to parole decrease.
I am not at all sure your how privatization could decrease pro-incarceration political influence under any theory of political influence. If prisons are publicly run, then the people interested in building new prisons will be the prison contractors and tough on crime lobbies, etc. Opposing them will be proponents of rehabilitation and NIMBY forces, etc. But if prisons are privately run, new actors join the forces lobbying for prisons: The private prison companies. Obviously, the more parties there are who want prisons, the more lobbiests and money they will throw around, and the more political influence they will have. At least that's my common sense take. Money is speech after all. The more money you have in play, the more influence.
I will look forward to seeing if you base your article on an empiracle analysis or on an abstract theoretical approach. Personally, I'd be interested in a case study on the funders of California's pro-incarceration ballot measures over the years. I'd also be interested in an analysis of the amount of contributions by the private prison lobby to legislators and correllations to their votes on prison building. My guess would be that the growth of private prison contracting as an industry and the general surge in prison building tend to support the conclusion that private companies are successfully getting legislators to build more prisons.
By which I mean that the War on Drugs is sufficiently robust that even if they actively wanted it to continue, which is not in evidence, they wouldn't need to lobby in support of it; the mere fear of being painted "soft on drugs" - especially during "The Meth Crisis!" - is sufficient to keep politicians solidly in favor of the War on Drugs as such.
Common sense so seldom is either.
A lobbyist or other interested party won't throw around an infinite amount of money. They'll only throw in money if they expect the benefits to themselves to exceed the money they're spending.
If you privatize the prisons, you've increased the number of people who benefit from prisons, but they each have a smaller piece of the pie. Since they have a smaller piece of the pie, each dollar spent by them produces fewer benefits to themselves (rather, some of the benefits accrue to others), so they'll stop spending money earlier. It turns out less money will be spent than in the situation where there is just one state owner.
One could also mention the role of labor unions in opposing free trade.
There is also the gigantic effort of the NEA to defeat any and all school choice measures.
Spanish-language media companies have opposed measures to end "bilingual" education and just teach kids English.
A few years back, Enron lobbied for U.S. adherence to the Kyoto Accord, because the cap-and-trade mechanism proposed for enforcement would create a market-making opportunity for them.
Yep. But different groups of people lobby for the same outcome for different reasons. And the benefits sought by those groups differ. Some groups will lobby for what they perceive as a compelling non-economic benefit (controlling crime), some for a direct contractual benefit (the construction contracts and operations contracts), and some for a chance at an economic benefit (job opportunities). They each have different, independent, calculations of the cost/benefit equation. And some of those lobbyiests are not constrained in their spending by an economic calculus, but by a political one (advocacy groups can spend as much as they can raise on the lobbying and will do so if they think the cause is worth it).
This is wholly false. All privatizing a prison does is shift a public function (run by an agency which doesn't make campaign contributions or seek to make money) to the private sector (thereby creating a new pie for private exploitation). This means that a new category of potential lobbyiests is introduced into the equation - those representing the private corporations who want the brand new revenue producing pie of the private prisons. The pie isn't shrunk, it is expanded (or more accurately, a new pie is created).
Again this is false. First, the pie isn't smaller. Second, you are analyzing the term "benefit" only in terms of a profit/loss calculation not in terms of issue advocacy and speech. Anti-crime issue advocacy groups exist to lobby, that is what they raise money for, their contributions are limited by their ability to raise money, not by a profit/loss calculation. Issue groups don't fall into your economic analysis. You need to do a political analysis.
That is empiracle research I'd like to see. Still, I'd like to know what these companies real incentive is: To lobby for prison building or to lobby for more incarceration. Given the prison crowding problem, I tend to think that lobbying for incarceration has probably slackened for reasons that have nothing to do with your economic analysis.
If you're going to correct my spelling, at least provide me with a spell checker! Or a clerk! As an anonymous blogger my motto is: Type fast, shoot from the hip and run from the grammar police.
I'm much more interested in seeing you correct my lousy grasp of economics. I'm open to being educated.
Speaking of gambling, another example that might have made Sasha's list would be any manner of legalized gambling outlets, who frequently tag-team with gambling opponents to lobby against allowing any would-be competition, such as from, say, online casinos and poker rooms.
I think Heinlein's stance on matters such as these is rather conservative and truthful...
"It is a truism that almost any sect, cult, or religion will legislate its creed into law if it acquires the political power to do so, and will follow it by suppressing opposition, subverting all education to seize early the minds of the young, and by killing, locking up, or driving underground all heretics."
If I were to translate this quote to be more digestible in the setting of the current political climate in the U.S. it would be:
It is a truism that almost any business or industry cartel will legislate more profit into law if it acquires the lobbying power to do so, and will follow it by attempting to keep influence over the politicians that passed it, attacking those against it, and attempting to improve upon the previous legislation with even more profitable laws.
-Riskable
http://riskable.com
"In the heart of great injustice lies a popular belief and a sacred text backing it up."
Assuming, of course, that the lesser desires of deprecated government agencies are as influential as lobbyists and campaign contributions. I think it is safe to assume this is not the case.
Also, legislating more profit for a special interest does not necessarily indicate the displacement of government services. Heck, it doesn't even have to be a bad thing. It is only a bad thing when its societal impact is negative. Or rather; when the change in law benefits a special interest at the expense of the people.
We kicked out the British and formed this country because King George III (a special interest) was taxing Americans (legislating more profit) to fund an unpopular war which did not benefit Americans in any way (negative impact). Current politicians would do well to remember this.
-Riskable
http://riskable.com
"One is not burned by belief. One is burned by believers."