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Volume-mates with Orin:

Orin recently announced that his article on Four Models of Fourth Amendment Protection is forthcoming in the Stanford Law Review.

I'm delighted to report that I, too, have accepted a publication offer with Stanford — in my case, for my article on Privatization and the Law and Economics of Political Advocacy. (The link in the previous sentence will take you to the very latest version on SSRN — exactly 25,000 words!) Here, again (for those of you who didn't pay attention when I've posted this before), is the abstract:

A common argument against privatization is that private providers will self-interestedly lobby to increase the size of their market. In this Article, I evaluate this argument, using, as a case study, the argument against prison privatization based on the possibility that the private prison industry will distort the criminal law by advocating for incarceration.

I conclude that there is at present no particular reason to credit this argument. Even without privatization, government agents already lobby for changes in substantive law — in the prison context, for example, public corrections officer unions are active advocates of pro-incarceration policy. Against this background, adding the “extra voice” of the private sector will not necessarily increase either the amount of industry-increasing advocacy or its effectiveness. In fact, privatization may well reduce the industry’s political power: Because advocacy is a “public good” for the industry, as the number of independent actors increases, the dominant actor’s advocacy decreases (since it no longer captures the full benefit of its advocacy) and the other actors free-ride off the dominant actor’s contribution. Under some plausible assumptions, therefore, privatization may actually decrease advocacy, and under different plausible assumptions, the net effect of privatization on advocacy is ambiguous.

The argument that privatization distorts policy by encouraging lobbying is thus unconvincing without a fuller explanation of the mechanics of advocacy.

Those of you who want a technical, economicsy, paper on the topic can check out this one. In the near future, I'll have a series of posts summarizing the argument of this paper.

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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.

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Privatization and the Law and Economics of Political Advocacy, Part 2:

In my previous post, I introduced my forthcoming Stanford Law Review article, Privatization and the Law and Economics of Political Advocacy. (Again, for those who are interested in a more technical exposition, you can also check out my related economics paper.) I explained the nature of the political-influence argument against privatization, and quoted from recent writers who have applied this critique to prison privatization. This post gives a brief outline of my argument, which I will develop further in later posts.

* * *

I assume, for purposes of this Article, that the concern underlying this critique is reasonable—that is, that economically self-interested pro-incarceration advocacy is undesirable. (Though in fact, this is not at all clear; I'll return to this point later.) This concern, however, fails to support the argument against privatization for several reasons.

First, the public sector—chiefly public corrections officers’ unions—is already a major self-interested pro-incarceration political force. For instance, the most active corrections officers’ union, the California Correctional Peace Officers Association, has contributed massively in support of tough-on-crime positions on voter initiatives and has given money to crime victims’ groups, and public corrections officers’ unions in other states have endorsed candidates for their tough-on-crime positions. Private firms would thus enter, and partly displace some of the actors in, a heavily populated field.

Second, there is little reason to believe that increasing privatization would increase the amount of self-interested pro-incarceration advocacy. In fact, it is even possible that increasing privatization would reduce such advocacy. The intuition for this perhaps surprising result comes from the economic theory of public goods and collective action.

The political benefits that flow from prison providers’ pro-incarceration advocacy are what economists call a “public good,” because any prison provider’s advocacy, to the extent it is effective, helps every other prison provider. (We call it a public good even if it is bad for the public: The relevant “public” here is the universe of prison providers.) When individual actors capture less of the benefit of their expenditures on a public good, they spend less on that good; and the “smaller” actors, who benefit the least from the public good, free-ride off the expenditures of the “largest” actor.

In today’s world, the largest actor—that is, the actor that profits the most from the system—tends to be the public-sector union, which still provides the lion’s share of prison services and whose members benefit from wages significantly higher than those of their private-sector counterparts; the smaller actor is the private prison industry, which not only has a small proportion of the industry but also does not make particularly high profits.

By breaking up the government’s monopoly of prison provision and awarding part of the industry to private firms, therefore, privatization can reduce the industry’s advocacy by introducing a collective action problem. The public-sector unions will spend less because under privatization they experience less of the benefit of their advocacy, while the private firms will tend to free-ride off the public sector’s advocacy. This collective action problem is fortunate for the critics of pro-incarceration advocacy—a happy, usually unintended side effect of privatization. One might even say that prison providers under privatization are led by an invisible hand to promote an end which was no part of their intention.

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Privatization and the Law and Economics of Political Advocacy, Part 3 -- The Model:

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). This installment is not connected to privatization specifically at all, much less prisons, but gives (in plain English) the basic economic theory behind public goods and free riding.

* * *

I now present the main model I use to predict how industry actors will react to privatization. The central feature of the model is that industry-increasing advocacy is a public good. Privatizing part of the industry therefore introduces a collective action problem: Unless everyone in the industry cooperates with each other, they will together spend less on industry-increasing advocacy than a single firm would if it covered the whole industry, because a portion of their expenditures will benefit their competitors.

This intuition should not be surprising, as it is standard in the literature on public goods. When a good is private, everyone pays for, and enjoys, only his own consumption. By contrast, when a good is public, in the classic model, everyone benefits from the total amount, and this amount is determined by the total amount of contribution.

If we benefit from our national defense, we benefit from the full amount, not from the chunk we paid for; we cannot be excluded from the full benefit, no matter how little we paid; and the total amount of national defense is just determined by how much money Congress allocated to national defense from the Treasury. A tax-funded program that improves air quality benefits everyone who breathes the relevant air, whether or not they contributed to the program; and the total improvement is just determined by the amount of resources directed toward that goal.

Similarly, contributing to a candidate’s campaign benefits all of his supporters; and it is not too implausible to say, as an approximation, that to the extent the money he raises and spends affects his probability of winning, it is only the total amount of money that matters.

In all these cases, the temptation to free ride off one’s fellows’ contributions is strong—so strong that the category of “public goods” is standard among economists as a case of “market failure.”

To explore the basic model, consider a monopolist, who's willing to invest some amount of money in lobbying to increase the size of his industry. To determine that amount, he weighs the benefit that his money can buy—the expansion of the industry is worth something to him, and money can help his policy pass—against the cost of the lobbying.

If that firm is broken up into two smaller firms—say a 90% incumbent firm and a 10% splinter firm—the larger incumbent isn’t willing to spend as much as it used to be, because the costs of lobbying are the same while the benefits are 10% less than they used to be. And the smaller splinter firm won’t be willing to spend anything, because it will be satisfied free-riding off the larger incumbent’s lobbying. Thus, splitting up an industry tends to decrease industry-expanding lobbying.

The rest of this post will illustrate this intuition graphically.

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Privatization and the Law and Economics of Political Advocacy, Part 4 -- Miscellaneous Points on the Model:

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). The last post set out the basic economic model -- read that post, if you haven't already and if you want to understand this post. This post just elaborates a bit on the basic model -- and applies it to prisons -- before we go on to apply the model to the real world and prisons.

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If one accepts the fundamental assumption of this Part—that the probability of success only depends on the total amount of money in the pot—this simple model is flexible enough to accommodate many institutional details of privatization. The total free-riding result happens whenever one sector has a lower threshold than the other, for whatever reason. In this story, you and your competitor are identical except that you have 90% of the industry and he has 10%. But one’s threshold could be lower for other reasons as well.

For instance, suppose that, to add insult to injury, the government not only breaks you up but also subjects your revenues to a high (50%) tax rate. The breakup already altered your spending threshold by making all your curves shift down to 90% of their previous level (see the figures in the previous post). Now, with the 50% tax, your revenue and marginal revenue curves shift further down—to 45% of their original levels. (If your 10% competitor is subject to the same tax, his curves are 5% of the original industry curves.)

So the combination of the breakup and the tax makes you act like a 45% firm. These new percentages—call them “real” shares—no longer need to add up to 100% (in fact, with the 50% tax, they add up to 50%), but they convey the economic intuition that your spending threshold is lower when, for whatever reason, your benefits decrease.

After we determine everyone’s “real” shares, the same analysis applies as before: The “biggest” firm does all the advocacy, and the “smaller” firm free rides. The only difference is that we learn who is “biggest” not just by looking at proportions of the market but at shares of total industry revenue. Instead of calling this firm “biggest,” we’ll call it the “dominant” firm. Thus, if the tax rate on your revenues is 90%, you will act as though your share is 9%; and if your 10% competitor is exempt from the tax, then he, with his 10% share, is actually the dominant actor. Now you will free-ride off him.

In short, anything that affects your revenues affects your “real” share. Suppose, for instance, that your competitor is less profitable than you are: Your 90% share is a monopoly share in a 90% geographic area, while the remaining 10% is divided among 100 competitors who act according to the textbook perfect competition model, where everyone makes zero economic profits. Then those competitors—and thus that entire 10% sector—act as though they had a 0% share.

Or, as a final example, suppose that your competitor is better at advocacy. Perhaps, for whatever reason (maybe he is a slicker lobbyist), each dollar of his is twice as persuasive as a dollar of yours. Then, he acts as though his share is 20%, and his threshold goes up accordingly. All these considerations affect your “real” shares for purposes of choosing how much to spend on advocacy. (In this example, he still won’t do anything because 20% is still less than your 90% share.)

This model applies straightforwardly to privatization, which splits up an industry between public and private much as the Antitrust Division could split up a monopolistic firm. To be sure, the public sector is not a “profit maximizer” like a private firm. But the concept of profit maximization needn’t be interpreted in a narrow financial sense. Government agencies—or, more precisely, people who work at the agencies and who have some control over what the agencies do—pursue goals of some sort. Whether it is the Pentagon or a state Department of Corrections, a government agency does obtain some benefit from its service provision.

Moreover, agencies are not the only actors; the employees of the agencies, through their unions, also enjoy some benefit from public provision of the service, and they can also participate in political advocacy. The challenge is to determine who the relevant actors are and what benefits they might plausibly seek to maximize. This is what I will try to do in later posts for corrections agencies and corrections officers’ unions.

The model implies, at a minimum, that some amount of privatization will decrease advocacy, for two reasons. The first reason is that, as long as the level of privatization does not exceed a certain critical threshold, the public sector will dominate (in terms of “real” share) the whole private sector combined, so the model predicts that whole private sector’s advocacy would be zero. The second reason is that as privatization increases, the benefits of service provision to the public sector fall; because the public sector is smaller than it would be without privatization, its advocacy falls.

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Privatization and the Law and Economics of Political Advocacy, Part 5:

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). Two posts ago, I set out the basic economic theory—be sure to read that post if you're having trouble following (or if you're disagreeing with) the discussion of free-riding. And in the last post, I discussed various miscellaneous points about the theory and how it applies to privatization. Now, on to the primary case study in the paper: prisons.

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Now let us apply the theory to a real-world industry subject to the “political influence” critique of privatization: prisons. When I speak of “pro-incarceration advocacy,” I use the term “advocacy” broadly to include any use of political influence, licit or illicit, including endorsements, political contributions, lobbying, and bribes. And I use the term “incarceration” as a shorthand to include the criminalization of a greater range of behavior, more active enforcement, greater reliance on imprisonment, longer sentences, and less parole; thus, endorsing a politician for being “tough on crime,” donating money to a “Three Strikes” initiative, or testifying in favor of a “truth in sentencing” law all count as advocating incarceration.

Consider the main political actors in the prison industry: the private prison firms and the public corrections officers’ union. Without privatization, the public sector is the monopoly provider of prison services, and the corrections officers’ union enjoys the benefits that flow from serving the whole system. Now suppose that part of the system is privatized. At first, the public sector is clearly the dominant sector, that is, the sector with the largest proportion of total benefits from provision of the service—from 100% of the industry, it has gone down slightly, and the private sector is not big enough to even come close. Because it has shrunk, it is less willing than it used to be to spend money on reforms that would increase the size of the prison pie. And because the private sector is tiny, it free-rides. Provided the public sector stays the dominant sector, privatization will always have this effect—because, in terms of the model presented above, any reform that shrinks the dominant sector will reduce industry-expanding advocacy. As it happens, this proviso is true in the case of prisons. At current levels of privatization, the public sector both has a larger industry share and extracts more benefit from the system than does the private sector.

We can easily perform some rough estimates to verify this (I provide the detailed derivations of the numbers elsewhere):

  • Industry share. The private sector has a smaller share of the industry. Of the 1.5 million prisoners under the jurisdiction of federal or state adult correctional authorities in 2004, 7% were held in private facilities; this includes 14% of federal prisoners and 6% of state prisoners. Among the 34 states with at least some privatization, the median private percentage was 8–9%. If we are interested in the private share of marginal prisoners—i.e., how likely a prisoner is to go to a private prison if he is convicted today—the private share becomes larger, mainly because private firms have absorbed much of the recent growth in federal incarceration. A reasonable estimate of the private share of marginal prisoners over the period 2000–2005 yields 6% for state systems, 54% for the federal system, and 22% overall.

  • Private-sector profitability. The profits of the private sector are low. If the industry were perfectly competitive—like in textbook models of perfect competition—every firm would make zero economic profit. “Economic profits” measures how profitable a company is relative to other ways of investing one’s money; thus, “zero economic profits” means not that firms are making no money but rather that all firms are doing as well as the rest of the market. In such a (hypothetical!) world, firms wouldn’t care whether their market were growing or shrinking, because they would be indifferent between running prisons and putting their money into the stock market. This is, of course, unrealistic—the prison industry is oligopolistic, so prison firms do make some profit. But not much: 10% would be a generous estimate of prison firms’ profitability.

  • Public-sector rents. Public-sector correctional officers, on the other hand, benefit substantially from public provision of prisons, because their wages are quite a bit above what they would be making in the private sector—by about 30–65%. This is a lot of money, because wages are about 60–80% of most prisons’ operating expenses.

I make the assumptions—oversimplified but common in the economic literature on firms and unions—that firms maximize profits and that unions maximize total “union rents” (that is, the difference between public-sector and private-sector wages, times the size of the public sector). Trying to put these numbers together rigorously requires a fair amount of algebra, which I provide elsewhere. But it should be intuitively clear that the public sector extracts substantially more benefit from any given prison than does the private sector; and it is likewise clear that the public sector has a greater share of the industry than the private sector.

Thus, the public sector enjoys a greater benefit from prison provision than the private sector does, perhaps by an order of magnitude. This model predicts that the public sector should be doing all the pro-incarceration advocacy, and the private sector should be entirely free-riding. Moreover, privatization reduces the public sector’s share of total benefits. So, at current levels, privatization should cause total pro-incarceration advocacy to decrease.

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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.

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Privatization and the Law and Economics of Political Advocacy, Part 7:

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 the last post, I documented how there's a lot of hard evidence that public-sector corrections officers' unions advocate incarceration, and virtually no hard evidence that private firms do the same.

In this post, I consider what lessons we might draw from that. Then (below the fold), I elaborate on two curlicues of the theory (which you can skip if you're so inclined) -- first, why focus on public-sector unions and private firms only, and second, whether the public and private sectors really act strategically against each other.

* * *

As noted above, there is little hard evidence that private firms advocate stricter criminal law at all. Perhaps they do so secretly, in which case this simple model may be entirely unrealistic. Or perhaps this simple model is basically right, and the private firms are actually spending their money on a form of advocacy where the public good aspect isn’t important—pro-privatization advocacy.

Pro-privatization advocacy is an area where, obviously, the private sector can’t free-ride off the public sector, since the public sector is their enemy on that issue. If the private firms cooperate with each other, they reap all the benefits of their pro-privatization advocacy; and even if they don’t cooperate with each other, an individual firm’s pro-privatization contribution may benefit it directly to the extent that it (perhaps improperly) increases the likelihood that it will obtain a particular contract.

In real life, of course, money may be multi-purpose. I have treated “mute” campaign expenditures as though they were for some purpose—either privatization or incarceration—that was known to the donor but unknown to us. In fact, they could be for “access” to the candidate, which can be used at any time after the candidate prevails. But the model is general enough to accommodate this framework. At some point, donors will try to call in a favor. Favors cost something in terms of “political capital,” and political capital is scarce: Calling in one favor makes it harder to call in another favor. At the point where donors have to determine what to ask for, we are back in the previous model.

The “access” framework has thus only postponed the applicability of the model until after the election. One would still predict, under this model, that the smaller donors would prefer to spend their capital supporting something with more of a private-good component, like privatization, and leave the pro-incarceration advocacy to the dominant actor. And this may in fact be what happens.

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Privatization and the Law and Economics of Political Advocacy, Part 8:

This post is the second to last in 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). The next post will be my conclusion (where we'll be back to nontechnical talk), so the end is in sight!

In the last post, I explained two features of the theory: Why I concentrated on private firms and public-sector unions, and why I talked as if the private sector firms colluded with each other but didn't collude with the public sector (and to what extent this matters).

The previous posts have all elaborated on the simple model I put forth in the third post of this series. That model was characterized by a severe free-riding problem: The "dominant" actor (as defined in the fourth post — basically measured by that actor's proportion of total industry benefits) does all the industry-increasing lobbying, and the lesser actors free-ride off him. Because the public-sector union seems to be the dominant actor (I explained this in the fifth post), some amount of privatization — greater than zero, but not enough to change who's dominant — would always reduce industry-increasing lobbying, because the public sector would lobby less, while the private sector would continue to free-ride.

But there are more complicated possible models. In this post, I'll explain what happens when we relax various strong assumptions from the simple model. Sometimes, relaxing an assumption doesn't change the basic qualitative result. And sometimes, instead of unambiguously predicting that lobbying would fall, it predicts that the effect of privatization on lobbying is ambiguous — lobbying could go up or go down, depending on various empirical facts. Either way, this conflicts with the critics' view that privatization would affirmatively make lobbying worse.

First, I drop the assumption that money only buys victory for a given reform or candidate, and introduce the possibility that money can also change the substance of the reform or the candidate’s position. This does not significantly alter the conclusion. Second, I drop the assumption that anti-incarceration political advocacy is fixed. I find that the effect of privatization on anti-incarceration advocacy is ambiguous (though pro-incarceration advocacy still falls with privatization).

The third and fourth sections show how privatization may have an ambiguous effect even on pro-incarceration advocacy. In the third section, I relax the assumption that all money is fungible and that all that matters is the total amount of money in the pot. Once we allow public-sector money and private-sector money to have independent effects, privatization has an ambiguous effect on pro-incarceration advocacy: Private advocacy rises, but public advocacy falls. In the fourth section, I introduce the possibility that the pattern of privatization, as we observe it today, is already the result of a political process where strong unions have successfully opposed privatization while weak unions have not. I find that exogenously increasing privatization in such an environment would likewise have an ambiguous effect on pro-incarceration advocacy, as it depends on the correlation between actors’ influence in privatization politics and their influence in incarceration politics.

The bottom line is that, if one wants to argue that privatization will increase pro-incarceration advocacy, one must argue either, from outside the model, that the model is wrong, or, from inside the model, why privatization would increase private-sector advocacy more than it would decrease public-sector advocacy.

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Privatization and the Law and Economics of Political Advocacy, Part 9 -- Conclusion:

This is the concluding post in 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). (See here and here for the introduction.)

We're back to talking non-technically, so you may want to tune back in if you tuned out when I started explaining the technical curlicues of the model. If you find yourself questioning some of the results, you may want to refer back to previous posts, in particular the third post, which describes the basic model.

* * *

I have explored how privatization affects the amount, or effectiveness, of economically self-interested pro-incarceration advocacy. For purposes of this Article, I have so far assumed, with the critics of prison privatization, that such advocacy is undesirable. But this assumption is highly questionable.

For one thing, members of an industry, whether public or private, who advocate a policy that benefits them are not necessarily motivated by self-interest, even unconsciously. When Don Novey, the president of CCPOA, says he just wants to lock up scumbags, perhaps we should take him at his word. The same goes when a DOJ official speaks of the need to fight “the scourge of child pornography,” when CACI says terrorism is “heinous,” when a leading environmental citizen-suit litigator argues against weakening the environmental laws whose monetary penalties fund its operations, or when doctors who perform abortions oppose abortion restrictions.

People who advocate a policy that benefits them or their industry may be acting out of naked self-interest; they may be deluded into believing their particular interest is the general interest; their participation in an industry may lead them to rightly appreciate their industry’s contribution to the public interest; they may have joined the industry because they were sympathetic to its interests; or maybe they just coincidentally believe that the policy is right.

Nor is even nakedly self-interested advocacy an obvious evil, even when prison policy is at stake. From a procedural perspective, some argue that optimal criminal law should reflect all interests, including the benefit to the criminal of committing the crime; and if this is right, prison providers’ self-interest is also relevant. Moreover, some see lobbying as a means by which groups provide their views to decisionmakers and the public and thus enrich democratic debate. Others may find it illegitimate, on democratic grounds, to even consider the substance of people’s future political advocacy in deciding whether to privatize.

And from a substantive perspective, if criminal policy should be judged by a substantive external standard—for instance, whether sentences are too long in an objective sense—one cannot object to pro-incarceration advocacy on criminal-law-specific grounds without first establishing that such advocacy would move criminal law in a substantively undesirable direction.

Nonetheless, if one believes that the effect of privatization on pro-incarceration advocacy is relevant, this Article has pointed out the inadequacies in the current formulation of the political influence challenge to privatization. My opinion, based on the above theory and evidence, is that privatization will probably not worsen any political influence problem, and may alleviate it. The public goods model seems to describe many situations of political advocacy fairly well. The assumption of the principal model—that the probability of getting a policy change only depends on the total amount spent—likewise seems to describe many situations, like initiative or election campaigns.

There’s always room for more realistic theories—for instance, my analysis of what motivated public-sector unions, while common in the labor economics literature, is highly simplified; in assuming that private prison firms were profit-maximizing, I suppressed any analysis of agency costs within the firm; and my back-of-the-envelope estimate of the benefit of incarceration to the different sectors was just that—an estimate. Nor have I entertained the possibility that, when privatization is on the agenda, prison system actors spend more resources fighting over that, which might crowd out pro-incarceration advocacy. So my specific conclusions here are tentative.

But what is not tentative is that this sort of analysis is necessary if one is to make the political influence argument properly, whether in the prison context or more generally. General assumptions will not do. As Mancur Olson (somewhat hyperbolically) observed, “the customary view that groups of individuals with common interests tend to further those common interests appears to have little if any merit.” Critics of privatization who have charged that privatization has increased (or will increase, or runs a substantial risk of increasing) industry-expanding advocacy have not explained what it is about the lobbying world that would make this happen. Either they are unambiguously wrong, or they are only right under a particular set of empirical assumptions that they must spell out.

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My paper on The Conglomerate:

Check out The Conglomerate ("The Glom" for the cool kids), where, as part of their Junior Scholars Workshop, today they're commenting on my paper, Privatization and the Law and Economics of Political Advocacy (forthcoming in the Stanford Law Review).

There are comments up by Tom Ulen, Paul Rubin, and Brian Galle. Comments on the paper and the comments should be posted in the comments section of the main post.

UPDATE: Just to remind you all, here's my abstract:

A common argument against privatization is that private providers will self-interestedly lobby to increase the size of their market. In this Article, I evaluate this argument, using, as a case study, the argument against prison privatization based on the possibility that the private prison industry will distort the criminal law by advocating for incarceration.

I conclude that there is at present no particular reason to credit this argument. Even without privatization, government agents already lobby for changes in substantive law—in the prison context, for example, public corrections officer unions are active advocates of pro-incarceration policy. Against this background, adding the “extra voice” of the private sector will not necessarily increase either the amount of industry-increasing advocacy or its effectiveness. In fact, privatization may well reduce the industry’s political power: Because advocacy is a “public good” for the industry, as the number of independent actors increases, the dominant actor’s advocacy decreases (since it no longer captures the full benefit of its advocacy) and the other actors free-ride off the dominant actor’s contribution. Under some plausible assumptions, therefore, privatization may actually decrease advocacy, and under different plausible assumptions, the net effect of privatization on advocacy is ambiguous.

The argument that privatization distorts policy by encouraging lobbying is thus unconvincing without a fuller explanation of the mechanics of advocacy.

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