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.

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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.