The modes of provision of prison services in a comparative perspective.
| Autor | Cabral, Sandro |
INTRODUCTION
Public or private? Although this is an essential question for policy makers, there are few studies that compare the relative performance of public and private modes for the provision of prison services. In addition, the majority of these studies focus only on the description of performance indicators without exploring the underlying reasons for performance differentials.
Furthermore, the prolific literature concerning the provision of public utilities focuses on sectors such as telecommunications, electricity and transport. Little is known about public and private modes for the provision of prison services in a comparative perspective.
Prisons are not influenced by network externalities nor by the existence of natural monopoly in some of the production phases, as other public utilities are. In addition, the correctional sector presents some features that deeply affect the design of public and private modes of organization, such as: a) the informal social norms that influence inmates' behavior, which might conflict with the formal rules; b) the risk of corruption of employees, as the occasional exchanges between inmates and custody agents can put the sector's performance indicators (riots, escapes, recidivism rates etc.) at risk; c) the influence of several social actors and formal institutions such as the judiciary, NGO's, politicians and civilian society, which can sometimes be contradictory. For these reasons monitoring and incentive schemes are particularly important in prison management--whether public or private--which requires an understanding of the above characteristics.
Although there are some studies that address the subject of private participation in prison management, they have basically been restricted to the areas of law (Affonso, 2002; D'Urso, 1996; Viggiano, 2002); philosophy (Minhoto, 2000) and sociology (Wacquant, 2001). Few studies focus on the economic aspects of the private provision of prison services, such as Dilulio (1988, 1996)--a critic of private participation--, Archeoembeault and Deis (1996) and Mitchell (2003)--who compare the two modes of coordination in a cost-benefit analysis--, and the seminal work of Hart et al. (1997), who analyze the subject under the Incomplete Contract Theory, although without an empirical analysis.
In an attempt to tackle this subject, we compare two different modes of the provision of prison service by using the cases of two similar facilities--one publicly managed and the other partially privately managed (hybrid mode of provision)(1). Within the limits imposed by case studies, the paper also attempts to investigate the implications of the distinctive features of the prison service on the performance of public and hybrid management thereof. More abstractly, this work also analyzes the conflicts between the formal and informal norms prevailing in such institutions and their consequences on regulatory design.
The paper is organized as follows: the next section describes the main topics of the economic literature concerning the public versus private debate in the correctional sector. It also shows the possible modes of private participation in the prison service. The third section presents the case studies of two similar correctional facilities, one fully managed by the local government (publicly operated prison) and the other outsourced to a private company (privately operated prison), both located in the State of Bahia, Brazil. Some peculiarities of the correctional sector in Brazil are also presented. It must be added that the hybrid mode of provision adopted in Brazil differs from the U.S. model, where full privatization of prison services is permitted in some states. The fourth section briefly presents the comparative empirical evidence, while in the fifth section we try to understand and explain the differences observed between the two modes. The sixth section concludes the paper.
THE PRISON SERVICE AND THE PUBLIC VERSUS PRIVATE DILEMMA: THE CONTRACTUAL LENS
Private participation in prison services has been adopted in several countries along the reforms of public service widely known as New Public Management [NPM]. Basically, NPM focuses on efficiency matters in the public sector. In this vein, the managerial and economical literature can be useful in analyzing the modes of provision of correctional services. However, inasmuch as prisons services have distinctive features when compared to other public utilities, evaluation of their management mechanisms should take into account these distinctive characteristics.
The correctional sector presents some characteristics--highlighted by the New Institutional Economics literature--which have a great impact on regulatory design and on public and private performance. These include the presence of specific and non-deployable assets (2) and the elevated number of beneficiaries of having dangerous criminals behind bars--which may be superior to the region's electorate (Levy & Spiller, 1996). In addition, as in other public utilities, in correctional segment institutions, both formal and informal matter, and can influence the regulatory design and the sector's performance indicators. Particularly informal institutions within correctional facilities--i.e. the rules established by the inmates themselves--have an impact on prison performance and include the various modes of association among inmates, potential corruption of correctional agents and society's beliefs with regard to the treatment to be provided to condemned individuals, among others.
For these reasons, monitoring and incentive schemes are extremely important in the prison service. In this way, the three components for designing mechanisms of governance in public utilities--mentioned by Shirley and Menard (2002) in their analysis of water privatization in developing countries--can be applied to prisons: a) information asymmetry; b) structures of rewards and punishments; and, c) credible commitment.
In general, prison services are usually provided by the government, which implies hierarchical public provision or public governance. When comparing public and private modes of organization, Williamson (1999, p. 313) sustains that the main attributes of private governance are related to the intensity of incentives, lower levels of administrative controls and the use of the courts to solve occasional conflicts. On the other hand, in public modes of provision the incentives are weaker, the controls more rigid and the organization serves as its own court and last instance for appeal.
The residual control rights conferred to the agents, which depend on the formal allocation of rights and information asymmetry also shapes their incentives (Hart, 1995). Since it is very difficult to monitor all actions implemented by the agents, the delegation sometimes results in losses of control by the principal. In these cases, it is likely that imbalance between the formal and the real authority will occur, to use terminology of Aghion and Tirole (1997). These kinds of problems happen when the agents' pay-offs for implementing government policies are less than the pay-offs received for the implementation of alternative programs, and the possibilities of monitoring and enforcement are weak. Thus, incentives are required to reduce the harmful effects of information asymmetries.
In the past two decades private agents have entered the segment in response to an increase in the prison population and the increased expense thereof and the deterioration of prison housing and custody conditions as well as to social pressure to toughen the penal system at lower costs (Minhoto, 2000).
Despite the fact that the privatization or outsourcing of prison services has been spreading throughout the world, there are surprisingly few studies concerning private participation in the prison service in economics literature. Most work has focused on the cost and benefit analysis of the two different modes of governance (Archeoembeault & Deis, 1996; Guppy, 2003; Mitchell, 2003). All of these works--built on quantitative data--confirm the superiority of private modes of governance in terms of cost effectiveness. However, these studies do not explain properly the reasons for such differences. In addition, Guppy (2003) and Mitchell (2003) demonstrate in their assumptions and conclusions a bias toward private participation.
With different conclusions and even without presenting empirical evidence, the seminal paper of Hart et al. (1997) is probably the most recognized work in economics literature that mentions the public versus private dilemma in prisons.
The authors adopt an incomplete contract view, where the private operator's residual control rights would contribute to reducing costs at the expense of quality. In order to improve quality, the private operator must incur both the costs of quality provision and the costs of influencing the government to accept changes (the government must agree to pay for improvements). Consequently, the private operator would have incentives to under-provide quality, which is socially inefficient. In addition, the benefits of managerial improvements in some cases may be inferior to the costs of reducing quality.
Another concern about private management expressed in Hart et al. (1997) is related to the fact that it would be very difficult to delineate contractually the level of force to be employed by a private operator. According to the authors, if corruption issues (mainly when choosing the company that will run the facility) appear to be a more severe problem than patronage, privatization should be carefully studied. For all these reasons the authors are skeptical about privately run prisons.
In the same light, Williamson (1999, p. 339) asserts that specialized physical assets and probity--herein related to honesty and loyalty to government principles--would signal precaution even when the government retains ownership of the asset (the...
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