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Privatization and the Law and Economics of Political Advocacy, Part 6:

This post continues my series on my upcoming Stanford Law Review paper on Privatization and the Law and Economics of Political Advocacy (see here for the technical paper). In my last post, I wrote:

In brief, there is a lot of hard evidence of pro-incarceration advocacy by public corrections officers' unions (though a small part of union advocacy also cuts the other way). (There is also hard evidence that most Departments of Corrections advocate the other way—in favor of alternatives to incarceration.) But there is virtually no hard evidence of private-sector pro-incarceration advocacy. This may simply mean that the private sector advocates secretly. But, in light of the theory, it is more plausible that the private sector simply free-rides, saving its political advocacy for policy areas where the public good aspect is less severe—pro-privatization advocacy.

This post documents that assertion. For a more footnoted version—there's a limit to how much I can link to here—consult the paper.

* * *

In 1987, E.S. Savas, a supporter of privatization, dismissed the claim that private firms advocate incarceration by noting that "[i]f this argument was sound . . . prison officials, guards, and their unions presumably would act in the same manner for the same reasons. This, however, is not the case."

Whether this was true even back then is questionable. At one time, corrections officials were politically aligned with liberal groups, but by the 1970s correctional unions were already advocating incarceration.

This activism continues today. The most active public corrections officers' union in advocating incarceration is the California Correctional Peace Officers Association (CCPOA). It gives twice as much in political contributions as the California Teachers Association, though it's only one-tenth the size; only the California Medical Association gives more in the state. CCPOA spends over $7.5 million per year on political activities. It contributes to political parties, political events, and debates; it gives money directly to candidates; it hires lobbyists, public relations firms, and polling groups.

Many of its contributions are impossible to trace back to any particular agenda item: Since the union also opposes privatization, favors higher wages, and has positions on other issues, it's just as plausible that the contributions were made for those other purposes.

But many of its contributions are directly pro-incarceration. It gave over $100,000 to California's Three Strikes initiative, Proposition 184 in 1994, making it the second-largest contributor. It gave at least $75,000 to the opponents of Proposition 36, the 2000 initiative that replaced incarceration with substance abuse treatment for certain nonviolent offenders. From 1998 to 2000 it gave over $120,000 to crime victims' groups, who present a more sympathetic face to the public in their pro-incarceration advocacy. It spent over $1 million to help defeat Proposition 66, the 2004 initiative that would have limited the crimes that triggered a life sentence under the Three Strikes law. And in 2005, it killed Gov. Schwarzenegger's plan to "reduce the prison population by as much as 20,000, mainly through a program that diverted parole violators into rehabilitation efforts: drug programs, halfway houses and home detention."

CCPOA doesn't always favor increasing incarceration, but the bulk of its advocacy has been in this direction. Dan Pens has quoted CCPOA member Lt. Kevin Peters as saying:

You can get a job anywhere. This is a career. And with the upward mobility and rapid expansion of the department, there are opportunities for the people who are [already] correction staff, and opportunities for the general public to become correctional officers. We've gone from 12 institutions to 28 in 12 years, and with "Three Strikes" and the overcrowding we're going to experience with that, we're going to need to build at least three prisons a year for the next five years. Each one of those institutions will take approximately 1,000 employees.

This isn't just a story about California. Though corrections officers' unions outside of California are nowhere near as active as the CCPOA, many of them do advocate incarceration. (As I note below, everything is bigger in California: While private prison firms make political contributions nationwide, they, too, spend more in California.) The correctional wing of Florida's police-and-corrections union has endorsed candidates for being tough on crime. The Michigan corrections officers' union has opposed boot camp proposals. The New York City corrections officers' union endorsed Gov. Pataki because he ended parole for violent felons. The New York State corrections officers' union is said to have stymied efforts to overhaul mandatory minimum sentences. And the Rhode Island corrections officers' union endorsed a candidate for his prosecutorial record and position in favor of tougher criminal penalties. (I am not considering the more usual demands for tougher penalties for criminals who commit crimes while in prison—a particularly salient issue for corrections officers, who are often victims of such crimes.)

Some corrections officers' unions are combined with police unions, for instance in Florida or New Jersey. So except where (as in Florida) the corrections officers' wing has been independently politically involved, any of these unions' advocacy can't be traced directly to corrections officers.

In some states, corrections officers are also affiliated with AFSCME, the general public employees' union; AFSCME Corrections United represents 60,000 corrections officers and 23,000 corrections employees nationwide. It's plausible that corrections officers' concerns would be swamped by the potentially contrary concerns of public employees as a whole (who tend to be fairly liberal). And, indeed, the evidence that AFSCME has advocated incarceration is weak. AFSCME has advocated alternatives to incarceration, and the national organization has advocated legalizing medical marijuana (though of course this would only account for a tiny proportion of crime). The Oklahoma public employees' union—also a general union—has also advocated alternatives to incarceration.

So much for public corrections officers' unions. Now let's go on to private prison firms.

Justin (mail):
The theoretical question is why would a shift of the pecuniary interest in from one "actor" to another "actor" decrease the interest and therefore the corrupting influence?

Your only response is that: "But, in light of the theory, it is more plausible that the private sector simply free-rides, saving its political advocacy for policy areas where the public good aspect is less severe—pro-privatization advocacy."

Sure. But if we follow your prescription, then the prison-privitization people don't need to spend their money on that advocacy, freeing up political capital for other things - such as pro-incarceration advocacy. Furthermore, as their per-share capture of the benefits of incarceration increase,

1) they will obtain more direct benefits from pro-incarceration advocacy, increasing the value of such actions to the firms;

and

2) they will no longer be able to freeride due to the loss of others' actions, increasing the value of such actions to the firms;

At best, what you seem to be stating is that its a wash - that the pro-advocacy field is sufficiently saturated that the private firms are sitting this one out. But if you desaturate the pro-advocacy market, then there's absolutely no reason to expect the firms not to resaturate it. So your argument seems more fitted as a counterargument to calls by anti-privitization people that privitization will lead to higher rates of incarceration through advocacy. But taking it further, to an affirmative argument for privitization, seems suspect - unless you can provide a better explanation as to why firms will not replace the monies cut by weakening the union.
4.10.2007 7:30pm
Sasha Volokh (mail) (www):
Justin: Yes, this is primarily a "counterargument to calls by anti-priv[a]tization people that priv[a]tization will lead to higher rates of incarceration through advocacy" -- I make that clear in the introduction and again in the conclusion.

As far as the affirmative point -- the simplest form of the model (which I presented in post 3 of this series) says that the "dominant" actor does all the pro-incarceration advocacy and the other actors free-ride, and (also a few posts ago) I argue that at current levels of privatization, the private sector is smaller than the public sector. (You might want to read parts 3 and 4 of this series of posts, if you haven't done so already, to get that theory.)

And as I've written in the paper, if privatization gets large enough, then the private sector can become the dominant sector. (Though there may be quite a ways to go -- what makes you "dominant" is not just your percentage of the industry but also how profitable you are, and if private prison firms keep making low profits, it'll take quite a market share before their share of total benefits gets to be larger than the public sector's.)

And, of course, if the more complicated forms of the model are true (I'll get into that two posts from now), then it's always a wash; privatization increases private advocacy but decreases public advocacy, so the direction of change is always unknown without empirical evidence.

One extra note -- I'm not sure what you mean by "if we follow your prescription, then the prison-priv[a]tization people don't need to spend their money on that advocacy" -- are you suggesting that my prescription is to privatize prisons? This paper is explicitly not an argument for private prisons.

Finally, nothing in the theory relies on the being able to "free up" some funds by not spending funds on something else. I understand how, if all advocacy must be funded from current revenues, then yes, if you stop spending on pro-privatization advocacy, you've "freed up" money to spend, potentially, on other forms of advocacy.

But my theory says that even if you had unlimited money available -- say if you could borrow as much as you wanted to invest in profit-increasing ventures, like advocacy of one form ore another (so you're never concerned about some money crowding out other money) -- you would still want to free-ride off of the dominant actor in the industry.
4.10.2007 7:43pm
Justin (mail):
I apologize that I've only read this post, and haven't focused much on the other posts. I'll get to them.

I'll only address one part:

"Finally, nothing in the theory relies on the being able to "free up" some funds by not spending funds on something else. I understand how, if all advocacy must be funded from current revenues, then yes, if you stop spending on pro-privatization advocacy, you've "freed up" money to spend, potentially, on other forms of advocacy.

But my theory says that even if you had unlimited money available -- say if you could borrow as much as you wanted to invest in profit-increasing ventures, like advocacy of one form ore another (so you're never concerned about some money crowding out other money) -- you would still want to free-ride off of the dominant actor in the industry."

I don't agree with this. The rate of return on political expenditures is phenomenal. If you are at all concerned that the expected value of a donation is positive, then you take it. That's what I meant when I discussed saturation. That is, if there is ever a concern that money which could be used to influence decisionmaking wasn't being spent, it will be spent, so long it *can* be spent - that is, so long as a person's political capital is for all intents and purposes infinite. In a world with no limits on campaign finance, and where political capital is defined only in terms of $, then it already *is* infinite, for all practical purposes.


But what I meant by "free up" is that not all political capital can be defined by money. Even someone with unlimited funds can only pick and choose how they may influence government. Sometimes this is played out by having a limited number of "favors" one can get a particular state actor to achieve. Sometimes this is played out by trying to resolve how to curry favor with both a state actor and their political opponent, when each side may support part of your agenda. And sometimes this is played out over simple enough campaign finance laws.

Please also excuse my terrible spelling in grammar in these stream-of-consciousness posts.
4.10.2007 7:56pm
Justin (mail):
Having scanned through the other posts, I think you've made an effective point that its a wash - but thats as far as I am willing to assert at this point. The "wash," however, is only shown by the empirics - that despite the opportunity to invest in pro-incarceration, private firms have not done that. Why not?

One argument is that the pro-incarceration market is saturated. If so, that's a defined wash. Once a market is saturated, you simply cannot increase the effectiveness by increasing supply. Supply hits its maximum, and though reducing supply can and will be easily be replaced, there's no benefit - and thus no attempt to - increase supply.

Another possibility, which is somewhat different than your point, is that political capital *is* limited, either legally or practically, *and* that in this instance, prison firms (who are fighting a hard battle to increase their market share) simply lack the resources to fight both battles. That may indeeed be a benefit for weakening the union at the expense of the firm (providing you can do so without ceding the firms that battle which they are currently entrenched in). But if the point is broader than just prisons and incarcerations, you're back to an empirics question, of which the particular facts of this example fail to provide substantial insight into other questions.

I think there are a lot of interesting points - including bringing up points as to how non-private actors often can cause the same concrete problems typically assigned to private actors (another obvious example is the UAW and emissions restrictions). But I don't know if I can buy the whole free-riding problem to the conclusion you seem to at least consider - that there can be some way to desaturate the market, even if you allow everyone to have (at cost) infinite political capital. The rate of return is just too high, in my opinion.
4.10.2007 8:09pm
Justin (mail):
Last note: The above posts assume that the empirics are correct. I have no reason to believe they are not, but did not personally verify.
4.10.2007 8:10pm
Sasha Volokh (mail) (www):
I'll just note that, in the theoretical model of post 3, I don't use the concept of "saturation." It's not that the political market has taken all that it can get. Rather, each actor has its own threshold -- the amount that the total pot can grow to before that actor stops being willing to contribute. And only the actor with the largest threshold contributes; the rest free-ride.

This is not a statement that firms leave positive profit opportunities untouched. Rather, it's a statement that, because pro-incarceration advocacy is a public good -- that is, because an actor pays for all the advocacy it pays for, but has to share the resulting benefit with the other actors in the industry -- contributing after the total money in the pot has exceeded one's threshold is not a profitable opportunity, even though it may seem otherwise to someone who isn't aware of the public-goods point.

Anyway, as is clear from the paper as a whole, especially from the introduction and conclusion, all I argue is that there's no reason to believe the critics' point that privatization increases pro-incarceration advocacy. Either -- if my simple model is true -- privatization decreases it (at current levels of privatization), or whether it increases or decreases it is unknown without further empirics.
4.10.2007 9:26pm
Justin (mail):
I don't think we're that far apart. But if, as I posit, the return on investment is extremely high, it wouldn't matter that incarceration policy is a public good - even if you share all the benefits 5 ways, if you get back 10 times any particular person's investment, its worth your own personal interest to invest.

The amount of money that each of these public interest groups get by the difference in incarceration rates between the US and Denmark is worth it at any price - and any risk that the US will begin to look more like Denmark is not worth taking no matter how slight. So before saturation, I'm quite skeptical that the collective action problem can limit this kind of advocacy, and at the point of saturation, I'm skeptical that it matters.
4.11.2007 12:10am
Sasha Volokh (mail) (www):
That's fine: That tells me that, because the return on investment is extremely high, the baseline level of pro-incarceration advocacy is extremely high. I'm not quite sure what you mean by saturation, but if you mean what I mean -- the level of advocacy that's profit-maximizing for the industry, meaning that it's the level of e that maximizes B(e) - e (in the terms of the first picture in post #3) -- then O.K., that saturation level is high. I call it "$1 million" for illustrative purposes, but it could be far higher.

Nonetheless, if my simple model is right, some level of privatization reduces that advocacy because of the collective action problem, because the individual actors pay the entire amount of their advocacy but only receive some percentage of the benefit. (And if one of my more complicated models is right, then the effect is ambiguous.)

It sounds like what you're saying and what I'm saying is therefore consistent, except insofar as you really mean expressions like "worth it at any price." As should be clear from my first paragraph above, I interpret that to mean "they're willing to spend a very large, but finite, amount" -- an amount that can therefore fall if you introduce a collective-action problem.
4.11.2007 12:34am
Justin (mail):
By saturation level, I mean the area where the expected value of any additional investment would be zero.
4.11.2007 9:58am
markm (mail):
APCTO frequently endorses alternatives to incarceration, treatment programs, and other measures to reduce recidivism.

There are far more private-enterprise treatment programs than prisons, so for enough corporations to make the decision, this may just be trying to switch business from one branch to another - and possibly treatment programs are more profitable than prisons.

OTOH, businesses often do things that seem to be against their short term interests in order to maintain a good reputation and please current and potential customers. If a store is out of something, it will often direct you to a competitor who stocks it, but what really builds return customers is to suggest a lower-priced alternative. A corporation that is trying to build a reputation as the best correctional professionals available may well think that this is served by sometimes telling the public, "You shouldn't send these kids to our prison. Here's a church-run residential treatment program that can't rehabilitate them all, but it will rehabilitate half of them in a few months, and that's more than years of prison ever accomplished." It gives the corporation a reputation for detached professional judgment, which might tip the balance when the other half of those kids grow up and it's bidding on another prison to hold them. Of course, that reputation is even more useful if the corporation does go into the treatment business...
4.11.2007 1:24pm