The Volokh Conspiracy - 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.

* * *

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."

Private prison firms are often accused of lobbying for incarceration because, like a hotel, they have "a strong economic incentive to book every available room and encourage every guest to stay as long as possible."
Business improvement districts—coalitions of business and property owners, many of which have their own private security forces—have lobbied municipalities for, among other things, aggressive panhandling ordinances.
A toll road developer in Colorado has lobbied for statutory changes to preempt county authority to set toll rates, and a private road construction firm has been accused of contributing to Texas Supreme Court justices' campaign chests to influence a potential eminent domain suit related to a toll road in the state.
Private landfill companies have been accused of "shap[ing] landfill laws" to keep them "weak" so they can "compete with and undercut valuable recycling programs."
Private water supply owners have been accused of "lobbying to weaken water quality standards[] and pushing for trade agreements that hand over the U.S. water resources to foreign corporations," and private water utilities have been accused of fighting conservation efforts.
Private redevelopment corporations, which have the power to condemn private property for purposes of "urban renewal," have opposed reform of eminent domain laws in the wake of the Supreme Court's decision in Kelo v. New London.
And "private attorneys general," for instance environmental groups that benefit from fines available under environmental citizen suit provisions, or members of the securities plaintiffs' bar who benefit from the availability of securities fraud class actions, fight for the continued vitality or even strengthening of the statutes under which they litigate.

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.

(click here to read the rest of the post)

Private prisons are a useful case study. First, they are a growth industry, having progressed from humble beginnings in the late '70s and early '80s to now house about one in sixteen prison inmates nationwide. Second, the opponents of private prisons commonly make the political influence argument.

For example, in a recent Duke Law Journal article, Sharon Dolovich writes that "the legitimacy of punishment" is threatened "whenever parties with a financial interest in increased incarceration are in a position to exert influence over the nature and extent of criminal sentencing. If this concern is real"—and she suggests that it may well be—prisons should not be privatized because "the state ought not to foster yet another potentially influential industry that could seek to compromise further the possibility of legitimate punishment to promote that industry's own financial interests."

David Shichor, a prominent contributor to the prison privatization literature, opposes prison privatization in part because:

Through political lobbying, PACs, campaign contributions, and the provision of perks to politicians (as industrial and business corporations do), corporations are likely to continue to support and even accelerate incapacitation-oriented legislation and policies by which more people will spend longer periods of time in correctional institutions. Conversely, this trend may diminish the emphasis on alternative programs and will result in the pursuance of the "Hilton Inn mentality," that is, trying to maintain high occupancy rates for profit purposes.

And Brigette Sarabi and Edwin Bender's thesis is clear from the title of their report, The Prison Payoff: The Role of Politics and Private Prisons in the Incarceration Boom, in which they argue that prison privatization should be resisted in part because private prison firms have a "vested financial interest[] in increasing rates of imprisonment." This is only a small sample of the literature. Click here (mw112) for a sample of the art.

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This is just some set-up for the question. In later posts, I'll discuss my actual thesis, lay out my economic model, and discuss evidence.

(hide)

All Related Posts (on one page) | Some Related Posts:

My paper on The Conglomerate:
Privatization and the Law and Economics of Political Advocacy, Part 9 -- Conclusion:
Privatization and the Law and Economics of Political Advocacy, Part 8:...
Privatization and the Law and Economics of Political Advocacy, Part 2:
Privatization and the Law and Economics of Political Advocacy:
Volume-mates with Orin:

	[Sasha Volokh, April 3, 2007 at 11:00am] Trackbacks 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. * * * 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." Private prison firms are often accused of lobbying for incarceration because, like a hotel, they have "a strong economic incentive to book every available room and encourage every guest to stay as long as possible." Business improvement districts—coalitions of business and property owners, many of which have their own private security forces—have lobbied municipalities for, among other things, aggressive panhandling ordinances. A toll road developer in Colorado has lobbied for statutory changes to preempt county authority to set toll rates, and a private road construction firm has been accused of contributing to Texas Supreme Court justices' campaign chests to influence a potential eminent domain suit related to a toll road in the state. Private landfill companies have been accused of "shap[ing] landfill laws" to keep them "weak" so they can "compete with and undercut valuable recycling programs." Private water supply owners have been accused of "lobbying to weaken water quality standards[] and pushing for trade agreements that hand over the U.S. water resources to foreign corporations," and private water utilities have been accused of fighting conservation efforts. Private redevelopment corporations, which have the power to condemn private property for purposes of "urban renewal," have opposed reform of eminent domain laws in the wake of the Supreme Court's decision in Kelo v. New London. And "private attorneys general," for instance environmental groups that benefit from fines available under environmental citizen suit provisions, or members of the securities plaintiffs' bar who benefit from the availability of securities fraud class actions, fight for the continued vitality or even strengthening of the statutes under which they litigate. 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. (click here to read the rest of the post) Private prisons are a useful case study. First, they are a growth industry, having progressed from humble beginnings in the late '70s and early '80s to now house about one in sixteen prison inmates nationwide. Second, the opponents of private prisons commonly make the political influence argument. For example, in a recent Duke Law Journal article, Sharon Dolovich writes that "the legitimacy of punishment" is threatened "whenever parties with a financial interest in increased incarceration are in a position to exert influence over the nature and extent of criminal sentencing. If this concern is real"—and she suggests that it may well be—prisons should not be privatized because "the state ought not to foster yet another potentially influential industry that could seek to compromise further the possibility of legitimate punishment to promote that industry's own financial interests." David Shichor, a prominent contributor to the prison privatization literature, opposes prison privatization in part because: Through political lobbying, PACs, campaign contributions, and the provision of perks to politicians (as industrial and business corporations do), corporations are likely to continue to support and even accelerate incapacitation-oriented legislation and policies by which more people will spend longer periods of time in correctional institutions. Conversely, this trend may diminish the emphasis on alternative programs and will result in the pursuance of the "Hilton Inn mentality," that is, trying to maintain high occupancy rates for profit purposes. And Brigette Sarabi and Edwin Bender's thesis is clear from the title of their report, The Prison Payoff: The Role of Politics and Private Prisons in the Incarceration Boom, in which they argue that prison privatization should be resisted in part because private prison firms have a "vested financial interest[] in increasing rates of imprisonment." This is only a small sample of the literature. Click here (mw112) for a sample of the art. * * * This is just some set-up for the question. In later posts, I'll discuss my actual thesis, lay out my economic model, and discuss evidence. (hide) All Related Posts (on one page) \| Some Related Posts: My paper on The Conglomerate: Privatization and the Law and Economics of Political Advocacy, Part 9 -- Conclusion: Privatization and the Law and Economics of Political Advocacy, Part 8:... Privatization and the Law and Economics of Political Advocacy, Part 2: Privatization and the Law and Economics of Political Advocacy: Volume-mates with Orin: