Privatization and the Law and Economics of Political Advocacy:

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.

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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.”

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.