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

Allowing Money to Change Candidates’ Positions.

So far, I have taken the political agenda as given: I didn’t explain where the proposed reform came from. Thus, I’ve assumed that money is important because it buys victory—for instance, by persuading voters of the benefits of the policy or the merit of the candidate. But money can also affect the agenda—by changing candidates’ positions, by inducing the sponsors of voter initiatives to propose a different initiative, and so on.

When money can affect the agenda (but the other assumptions are unchanged), the analysis is essentially the same. Suppose you are considering whether to contribute to place an initiative on the ballot. The initiative is supported by some group or other, but for specificity, let’s say it’s being sponsored by a politician. This politician may be fairly pro-incarceration himself, but he’s limited in how strict an initiative he can propose: He won’t prevail unless the median voter, whose views control the outcome of the election, prefers his proposal over the status quo. However, before the substance of the initiative is set in stone, you can move him in a more pro-incarceration direction if—by offering him money to pay for persuasive advertising—you offer him the possibility to also move the median voter.

A monetary contribution has the following effects:

1. Electoral influence.

   • As before, you benefit because, by paying for persuasion, your contribution directly increases the probability that the initiative prevails.

   • But the contribution also moves the initiative in a more pro-incarceration direction, which cuts against the effect above.

2. Substantive influence. Finally, you benefit if the initiative prevails, because the policy is better for you than it would have been if you hadn’t contributed.

It turns out that this complication to the model doesn’t change the underlying result. As a prison provider thinking about how much to contribute, you follow the same framework as before: You contribute until the benefit of an extra dollar is worth $1 to you. The benefit of an extra dollar is more complicated than it was in the earlier model—in addition to encompassing the positive electoral influence effects, it now adds the negative electoral influence effect, as well as the benefit of substantive influence—but the basic idea is the same.

Now suppose, again, that the industry is split up into a 90% sector (you) and a 10% sector (them). As before, your benefits go down to 90% of their previous level, so you now want to contribute until the benefit of an extra dollar to the industry is worth $1.11. As before, you contribute less than before the split, because having only 90% of the industry is like facing a 10% tax on benefits. And as before, your competitor free-rides off you, because when he takes your contribution level into account, an extra dollar in the pot is no longer worthwhile to him.

* * *

Anti-Incarceration Advocacy.

This model focused only on the pro-incarceration side’s advocacy, taking the anti-incarceration side’s advocacy as given. But clearly anti-incarceration advocacy exists, and it is plausible that the pro- and anti-incarceration forces respond strategically to each other’s expenditures. This suggests two questions.

First, one might wonder whether the existence of anti-incarceration advocacy changes what we have already said about the effect of privatization on pro-incarceration advocacy. It turns out that it does not: Just as in the simple case, privatization makes pro-incarceration advocacy go down, even when we consider interactions with anti-incarceration advocacy.

Second, one might wonder how privatization changes anti-incarceration advocacy. After all, some anti-incarceration advocacy is as plausibly self-interested as the prison providers’ pro-incarceration advocacy. For instance, Proposition 66, which would have limited California’s Three Strikes Law, was partly funded by “Sacramento businessman Jerry Keenan whose son Richard is serving time for manslaughter after crashing his car while driving drunk and killing two passengers.” Proposition 36, the drug treatment diversion initiative, was supported by dozens of drug treatment providers and 16 medical and public health organizations, including the California Association of Alcoholism and Drug Abuse Counselors and the County Alcohol and Drug Program Administrators Association of California. And, as I showed above, state DOCs generally advocate against incarceration. If there exists all this self-interested anti-incarceration advocacy, perhaps those who are concerned about self-interest coloring people’s positions on criminal justice should be concerned about this as well.

It turns out that the privatization-induced decrease in pro-incarceration advocacy has an indirect effect on anti-incarceration advocacy. Unfortunately, we cannot say anything a priori about the direction of this effect. On the one hand, pro-incarceration advocacy decreases the effectiveness of anti-incarceration advocacy by counteracting it. So a decrease in pro-incarceration advocacy makes anti-incarceration advocacy more effective, which would tend to increase it. On the other hand, a decrease in pro-incarceration advocacy also makes anti-incarceration advocacy less necessary, which would tend to decrease it. There is no theoretical way to know how these conflicting effects would balance out; but in principle future research could answer the question empirically.

What this means normatively depends on one’s attitude toward anti-incarceration advocacy. If one opposes pro-incarceration advocacy because there’s already too much incarceration, then there’s nothing wrong, and perhaps everything right, with advocacy the other way.

On the other hand, if one opposes pro-incarceration advocacy because it is assumed to be self-interested, then perhaps anti-incarceration advocacy is just as bad if it comes from boot camps, halfway houses, drug treatment providers, and other presumptively self-interested parties. This model, which says nothing specific about total advocacy (either its amount or its effect), is thus normatively ambiguous.

* * *

Relaxing the Assumption of Fungible Money.

Recall the main model presented in the third post, in particular the last two pictures. A monopoly provider would have spent $1 million on advocacy, but under a 90–10 split, the 90% provider is unwilling to spend beyond the 900,000th dollar and the 10% provider is unwilling to spend beyond the 300,000th dollar; and so total advocacy falls to $900,000, with the dominant provider spending everything and the other one spending nothing.

The result that the smaller-share-of-total-benefit sector totally free-rides off the efforts of the dominant sector was driven by the assumption that the probability of getting the change in policy only depended on the total amount of money in the pot. All advocacy was fungible. A dollar from a public actor had the same effect as a dollar from a private firm. This is not an implausible assumption. For instance, dollars are fungible in buying advertising, which increases the probability of a change. A politician may adopt the view of whatever “policy position” contributed the most to his war chest.

On the other hand, some alternate assumptions may also be plausible. For example, one group might be attractive only to Democrats, while another might be attractive only to Republicans. More generally, perhaps politicians are just sensitive to the variety of voices in a coalition, feeling (rightly or wrongly) that having a wide variety of groups shows that a policy has wide support. Then neither group’s contributions totally “crowd out” the other’s. Your 500,001st dollar still has less benefit than your 500,000th dollar—there are still decreasing marginal returns—but (unlike in the previous model) it does not have the same benefit as your first dollar added on to your competitor’s 500,000th. Therefore, the total free-riding effect from the simple model above no longer occurs.

In this context, privatization has two effects. First, it increases the private-sector share, so private-sector advocacy goes up. Second, it decreases the share of the public sector, so public-sector advocacy goes down. We can’t say anything a priori about whether the first effect outweighs the second. If we know some facts about public- or private-sector advocacy—for instance, if one sector is completely unpersuasive, while the other sector is slick and sympathetic—then we can hazard some predictions, but we can’t say anything without such empirical facts. Because the empirical effect of privatization is ambiguous, the normative effect of privatization is also ambiguous if one opposes pro-incarceration advocacy. Unless we can be specific about how different groups’ advocacy has different effects and how effective the groups are, it is impossible to say whether prison privatization increases or decreases self-interested pro-incarceration advocacy.

* * *

Strong and Weak Unions and Industries.

Let us return to the point I made above that an industry’s effectiveness at advocacy is relevant to its “real” share for purposes of this analysis. For instance, if your competitor, with a 10% share, is twice as slick a lobbyist as you, meaning that his marginal dollars produce twice the benefit of yours, he will act as though his share is 20%.

Which way this cuts isn’t clear, as we don’t know which sector is more effective at lobbying in favor of incarceration. The CCPOA, as we’ve seen, is highly effective, but corrections officers’ unions are much less active outside of California, and perhaps this is because they are less effective. It’s hard to say how effective private prison firms would be at lobbying in favor of incarceration, since, as we’ve seen, there’s little evidence that they do this at all; and if they do it secretly, it’s likewise hard to gauge how effective they are.

But let us suppose that one’s effectiveness at lobbying for incarceration is correlated with one’s effectiveness at lobbying for (or against) privatization. For simplicity’s sake, let us suppose that they are perfectly correlated. Consider the states with high levels of privatization. We may conclude that those states have high privatization because their corrections officers’ unions were not effective at opposing privatization; the private industry was just too strong for them. When that relatively “weak” public sector was partly displaced by a relatively “strong” private sector, a weak pro-incarceration voice was similarly displaced by a strong pro-incarceration voice. Pro-incarceration advocacy, then, may plausibly have increased.

Similarly, consider the states with low levels of prison privatization, like California (1.8% private in 2004), or no privatization at all, like New York or Rhode Island. The unions in those states, on this view, must have been stronger than the industry, or else we would see privatization there now. If privatization were introduced, total advocacy would go down; but privatization is unlikely to be introduced there, so we won’t see that happen.

This is a story where—contrary to my implicit assumption so far—privatization is endogenous: The states where privatization has gained a foothold aren’t randomly chosen; rather, privatization emerges where corrections officers’ unions are weak and fails to emerge where the unions are strong. Thus, past privatization may have, on balance, increased pro-incarceration advocacy. If one could somehow eliminate prison privatization (despite the confluence of powerful political forces that established it to begin with), one would reestablish the rule of the ineffective corrections officers’ unions in those states where they were ineffective—to the benefit of those who oppose pro-incarceration advocacy. By a similar logic, one should introduce privatization where it is currently absent: If it is currently absent, it is because it wasn’t a powerful enough political force to win on its own, which means it will also be an ineffective political force in fighting for incarceration.

In fact, the assumption here—that the effectiveness of pro-incarceration advocacy is perfectly correlated with the effectiveness of pro- or anti-privatization advocacy—implies that pro-incarceration advocacy is already as high as it can get, because the slick advocates, who were already slick enough to establish themselves in the industry, are now plying their slickness in the incarceration policy field. Adding a thumb to the privatization scales in either direction would tend to support the victory of the less persuasive party and would therefore reduce the total amount of pro-incarceration advocacy.

This story may be plausible, but it requires more fleshing out. For one thing, the assumption may not be right. Low-privatization states need not be high-union-strength states. While antipathy to privatization and the strength of public-sector unions are probably correlated, a very Democratic state may plausibly oppose privatization even if, for whatever reason, its unions are weak. Actors in the prison industry may not be similarly effective in the privatization debate as in the incarceration debate.

While one’s effectiveness at advocacy probably depends on one’s general characteristics, like goodwill, persuasiveness, and slickness, the specific subject matter of the advocacy the correlation also plays a big role. The incarceration debate is peopled by different interest groups than the privatization debate. For instance, prosecutors, police officers, victims’ rights groups, and rural communities are interested in incarceration policy but not so much in privatization policy. Conversely, prison privatization is a matter of interest even to interest groups without a direct interest in prisons, like, on one side, generalized public employee unions, and, on the other side, small-government advocates, who assume (probably sensibly enough) that a victory for privatization in any field is a victory for the general privatization movement. Moreover, the appeal of incarceration arguments, which connect to fears of drugs and crime and concerns over civil liberties, seems to have a very different source than the appeal of privatization arguments, which relate to taxes, spending, and the effectiveness of government services.

We are back, then, to a general state-by-state analysis. In the first set of models—where the effectiveness of advocacy only depended on the total amount of money in the pot—everything was driven by the dominant actor, where “dominant” also takes effectiveness into account. I have given arguments above as to why the private sector is currently probably the smaller actor. The “slickness adjustment” described here might change that in some places, but it is an empirical question. As is by now familiar, privatization still increases the private-sector share but decreases the public-sector share. This “slickness adjustment” may change the de facto shares of the different sectors, but it doesn’t change the qualitative result. The effect of privatization is theoretically ambiguous.