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

By Sasha Volokh on April 17, 2007 10:03 am

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.

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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.

(click here to read the rest of the post)

One further note. If one opposes self-interested pro-incarceration advocacy, one may object at this point that I have not exonerated private prisons with my economistic legerdemain. Rather, I have only shown that the entire system is corrupt, and perhaps I have unwittingly demonstrated that the only way out of this mess is to reject the “interest group model of politics” entirely as it applies to criminal justice policy.

Fair enough. If self-interested pro-incarceration lobbying is indeed undesirable, then perhaps the system is corrupt. But how does this translate into an argument against prison privatization? It’s not enough to show that private prisons are part of the problem: Removing one problem isn’t guaranteed to make things better when there are other problems around. As the models above have suggested, even if all this political advocacy is illegitimate, the existence of the private sector reduces public-sector advocacy and may reduce total advocacy; eliminating the private sector may thus exacerbate the problem.

Nor is it just economists who oppose making the best the enemy of the good: As Rawls (no economist he) teaches, the analyst who makes specific policy recommendations in our fallen world—not in the idealized world of “strict compliance” with the principles of justice that characterizes a “well-ordered society”—is acting in the realm of “nonideal theory,” which asks how the “long-term goal” dictated by ideal theory “might be achieved, or worked toward, usually in gradual steps. It looks for policies and courses of action that are morally permissible and politically possible as well as likely to be effective.”

Because nonideal theory requires that we ask about the real-world effectiveness of any reform, merely observing undesirable lobbying by the private sector will not support an argument against prison privatization unless, say, privatization actually increases “the danger of . . . corrupting influence” or “compromise[s] further the possibility of legitimate punishment.”

If it turns out that privatization actually reduces pro-incarceration lobbying—if, with privatization, prisoners’ sentences are less influenced by improper factors than they otherwise would be—it is unclear that there is any “tension between the state’s use of private prisons and the demands of” liberal legitimacy. If “private prisons are by no means unique,” and if any prison provider, public or private, will lobby for incarceration, any “tension” has nothing to do with private prisons and everything to do with the crooked timber of humanity.

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The same sort of analysis that I have conducted here on the prison industry can also be used to evaluate the claim that, say, buying weapons from defense contractors (rather than having the military make them in-house) will exacerbate pro-war lobbying. Since governmental providers of defense services—i.e., the military leadership—have, on some accounts, been notorious pro-war lobbyists throughout history, such a claim is not credible unless one can tell a plausible story about why any defense contractor lobbying won’t crowd out some lobbying by the military itself; and doing this requires taking a position on what motivates the people at the Pentagon.

The same goes for private attorneys general, private redevelopment corporations, private landfill operators, and the like. The result won’t always be the same, and the political influence argument may turn out to be correct in some of these cases and incorrect in others. But this should be the structure of the argument.

The surprising moral of this story should not be that surprising. Indeed, the central insight here was also an important argument in favor of the antitrust laws. William Howard Taft wrote, shortly after the enactment of those laws, that “business methods and plans . . . directed to . . . suppressing competition . . . had resulted in the building of great and powerful corporations which had, many of them, intervened in politics and through use of corrupt machines and bosses threatened us with a plutocracy.” The argument is plausible, and it is likewise plausible that privatization, by fragmenting an industry into at least two chunks (and more if private firms don’t cooperate on advocacy), may similarly reduce that industry’s political power.

In a roundabout way, then, privatization is a form of antitrust, and antitrust is a form of campaign finance regulation. It may not be worthwhile to privatize industries—or break up large corporations—merely to reduce their political advocacy, but at the very least this may count as an unintended—and possibly happy—side effect of privatization that, if real, should be taken into account in future analysis.

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