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Markets in Everything: Pay to Stay
A small number of California jails have begun to offer pay to stay programs. These programs allow inmates in for minor crimes to "upgrade" to a private or public jail with better facilities. Evidently the fees are profitable to the jails. Take a look at how Santa Ana county advertises it's hotel jail.
The Santa Ana Jail is pleased to host a full range of alternatives to traditional incarceration. Our offerings include weekends in jail, non-linear jail sentences, and a variety of work release options. Our philosophy is designed to allow our clients (!, AT) to serve their obligations to the court in a manner that respects them as human beings and permits them to continue to provide for themselves and their families....
- Programs that include 2-day or 3-day weekends with minimal impact on the client’s professional life. Work on Saturday and Sunday? No problem...
- Programs that permit jail sentences to be served in multiple parts. Perfect for clients that live out of the area or clients with frequent business travel.
- Programs that permit the client to leave jail for work everyday. We have helped everyone from 9 to 5 business people to oil-rig workers, so no work schedule is out of the question.
The Santa Ana Jail is the most modern and comfortable facility in the region. Our housing areas are a world away from cement and steel bars....
Most clients can be approved immediately, over the phone. We can also provide same-day acceptance letters for the court.
I have mixed feelings about these programs. On the one hand, someone has to pay for the jails and who better than the inmates? And note that to make an inmate-pays program effective you have to give them an incentive to pay.
But on the other hand the profit-maximizing strategy for a monopolist with different quality levels of service is pretty scary in this context. A profit maximizer will reduce the quality level of the lowest class service - perhaps even spending money (!) to make the quality level lower - in order to push people to pay for the higher quality. (For more on the theory, see Hal Varian's elegant explanation.)
On the other hand (I know, I know, three hands) California's prison system is already so overcrowded, violent and dysfunctional that one federal judge referred to medical care in the CA system as "outright depravity," thus we may already be close to the lowest quality level. See this classic MR post for an expert's take on the incentives of private and public prisons.
More on pay-to-stay at a Michigan Law Review Symposium. Hat tip to Timothy Taylor at the Journal of Economic Perspectives.
Posted by Alex Tabarrok on June 5, 2008 at 07:30 AM in Economics, Law | Permalink
Comments
If it's profitable ... isn't there an incentive to make the 'free' accommodations as unpleasant as possible?
Posted by: Speedmaster at Jun 5, 2008 7:58:30 AM
I thought your third hand would raise the issue that pleasenter jails would be less of a crime deterrent. After all, inmates choosing the nicer jails value the extra freedom more than the extra payments for them, thus jail is less of a deterrent.
Posted by: Craig at Jun 5, 2008 8:12:22 AM
Governments are always looking for ways to maximize revenues, and this seems like a real winner. It could start out with the lowest level being something like the Black Hole of Calcutta and move all the way up to a suite at the Four Seasons, with the guards dressed as butlers and maids. Of course, the inmates would pay plenty for this level of incarceration, but, if they can afford it, who cares?
Posted by: Ned at Jun 5, 2008 8:22:51 AM
I like the upfront confession that current jails do no respect inmates as "human beings," nor allow inmates any chance of taking care of themselves or their families.
Posted by: Sheepfugue at Jun 5, 2008 8:38:21 AM
Question for Prof. Tabarrok: Do you think the marginal prisoner is someone who ought to be incarcerated?
I suspect that the marginal prisoner is a minor drug offender, not a violent criminal. Since minor drug offenders shouldn't be incarcerated, it follows that the price to the state of incarcerating the marginal offender isn't high enough. So lowering that marginal price is nothing to be happy about.
Posted by: Brock at Jun 5, 2008 8:50:28 AM
When men who aren't criminal types make a big mistake and get sent to jail, they have one particular fear that's first and foremost. I wonder if these pay-to-stay jails are able to prevent that specific "activity" from occurring.
Posted by: Peter at Jun 5, 2008 9:16:48 AM
"one federal judge referred to medical care in the CA system as 'outright depravity,' thus we may already be close to the lowest quality level."
It in no way follows from 'medical services are an outright depravity' that we are "close to the lowest quality level." Of course there is tons of room for things to get worse, and the statement fails the #1 rule of analysis 'try not to say things that are obviously wrong.'
Posted by: aaron_m at Jun 5, 2008 9:23:36 AM
Taking this idea to its logical conclusion, could a rich enough convict simply pay to have a prison constructed that is just like his house?
Also, the idea that inmates should pay for their own incarceration sounds a bit like slavery to me, I don't see how any libertarian could be in favor of such an idea.
Posted by: Dan T. at Jun 5, 2008 9:24:08 AM
Alex,
You are at least a 3 handed economist (you use the phrase "on the other hand", again and again. . . )
Posted by: indiana jim at Jun 5, 2008 9:52:15 AM
"the profit-maximizing strategy for a monopolist with different quality levels of service is pretty scary in this context"
But since this is a government-chartered monopoly (or, if you prefer, since the government is a monopsonist), surely the government has the authority and the moral sanction to rate-regulate and standardize it (i.e., making the concern about "reducing the quality level of the lowest class service" something of a red herring).
Posted by: KipEsquire at Jun 5, 2008 10:02:09 AM
Seems like kind of a Rube Goldberg scheme as compared to electronic monitoring. If these are non-violent minor criminals who can be released for work, then why not save the cost of the jails entirely and go with the ankle bracelets?
Posted by: Slocum at Jun 5, 2008 10:13:04 AM
I think this is a terrible idea, a regression of civilisation. Isn't the cost of feeding them a good incentive for the government not to lock up everyone they feel like indefinitely?
I'd propose the opposite move: pass legislation demanding much better treatment for prisoners, in the name of human rights. As the cost of providing this soars, then decide whether those drug laws are worth enforcing or if there are better ways.
Posted by: improbable at Jun 5, 2008 10:18:01 AM
If prisons need more money, why doesn't the legislature just impose much heavier mandatory fines on all sorts of criminal behavior? Sure, higher fines hurt the poor more than the rich, but Santa Ana's system does as well.
Posted by: Sticky at Jun 5, 2008 10:27:40 AM
since this discussion is completely devoid of any moral consideration, why not allow able offenders to pay money instead of spending time in jail? just think of all the money that would be generated by rich rapists and murderers. such a measure isn't likely to significantly increase crime if priced at the margin. its just a brilliant!
Posted by: camello at Jun 5, 2008 10:33:18 AM
Wasn't prison about punishment? Reading the passage above I somehow had the feeling that they might write about their whirlpool, tennis court and sauna in the very next sentence.
Posted by: Chris at Jun 5, 2008 10:44:35 AM
I believe that to a subset of inmates, the deterrent effect is achieved through the cost of the upgrade. Which says to me, "why not have the option to any non-dangerous offender simply to pay restitution as opposed to jail time for all?" This would provide deterrent that the courts wouldn't be obliged to spend on providing these ridiculous amenities.
Posted by: Nate at Jun 5, 2008 10:54:33 AM
I guess the same reason that we've not yet figured out that if we want to deter drug use the "cost" of jail time, court time, and a criminal record could be replaced with another cost, high taxes on drugs. Guess I'm expecting too much.
Posted by: Nate at Jun 5, 2008 11:01:22 AM
This sure seems like it should be against public policy. What I want to see is a "client" sue the jail for false advertising when the stay turns out to not be very pleasant. Surely the guards are not going to be calling the inmates "sir"?
Posted by: bruce at Jun 5, 2008 11:19:31 AM
a) What KipEsquire said. All the prisons are operating under contract on behalf of the state. The state can therefore insert minimum service quality clauses with (effectively) infinite penalty rates.
b) I guess it all depends on what you're seeking to achieve with the incarceration. Once the state decides that somebody has broken a law, it can seek to i) punish them; ii) offer a deterrence to other would-be criminals; iii) protect society from them if they are deemed to be dangerous; or iv) attempt to rehabilitate them.
While many people - and, in particular, the victims - would probably rank the options in that order, there's nothing to say that the ordering presented is the social optimum.
Personally, I'd be more interested to see something mandating that that a high-school diploma (or equivalent) be obtained before anybody is allowed off parole and incentives be put in place for prisoners to work towards it while still incarcerated.
Posted by: Oh, Billy! at Jun 5, 2008 11:36:18 AM
This is where I get off the market bus. This paragraph reads like self-parody:
The Santa Ana Jail is pleased to host a full range of alternatives to traditional incarceration. Our offerings include weekends in jail, non-linear jail sentences, and a variety of work release options. Our philosophy is designed to allow our clients (!, AT) to serve their obligations to the court in a manner that respects them as human beings and permits them to continue to provide for themselves and their families....
This sounds way too much like a Jennifer Government type world for my taste.
Posted by: TW Andrews at Jun 5, 2008 11:48:50 AM
What Peter said. Those few middle-class citizens who find themselves imprisoned are likely to be perceived as soft and find themselves specially targeted for physical violation. This is a way to avoid that. Of course, a well-run prison system wouldn't have the gangs and other security problems that lead to such behavior in the first place, but apparently California isn't willing to pay that kind of money.
Posted by: Thelonious_Nick at Jun 5, 2008 11:54:12 AM
With current trends in incarceration in the U.S., and the increasing criminalization of things that used to be misdemeanors, and increasing willingness to put ordinary people in jail for things like not returning their library books - jail time is likely something that most Americans will face in their lifetime, if not you then probably your children or loved one. Traditionally it used to only be minorities and low income people that were thrown into jail on a whim, but middle class and wealthy white people are being imprisoned at record rates now.
While I think programs like this are generally bad as it creates incentives for the state to jail people, I know that one day I will forget to pay a parking ticket (or it will blow off the car into the wind), or forget to return a library book, or some sort of trivial offense that will get me jail time, or it will happen to someone that I love, and that I will be grateful not to serve it in the general population. Jail time seems to be the preferred method of problem solving in the U.S., with or without incentives for the state to jail people, so we should find ways to make it safer and more comfortable.
Posted by: Rex Rhino at Jun 5, 2008 12:02:40 PM
Re: the incentives of private vs. public prisons, wouldn't it be harder for interest groups representing public prison workers, builders, etc, to organize and lobby government than private prisons? It seems to me that private prisons would have an easier time getting their interests represented in government, due to lower organization costs.
Posted by: Grant at Jun 5, 2008 12:53:37 PM
This isn't nearly as problematic as you seem to think.
First, this is jail, not prison. You're talking misdemeanors, unless the recent lawsuit forces some jails to take felons (who will be non-violent, largely, in any event). Not the same thing as a prison system, w/ long-term residents. Also run by the sheriff, not by corrections. There's already massive issues with resource allocation you apparently don't begin to understand.
Second, the way jails actually work in Southern California is that you get sentenced to a term, and you serve somewhere between 1% and 15% of your term because of overcrowding (in OC, you spend closer to 50%). It's not uncommon to be sentenced to, say, 5 days, and to have your entire jail term consist of being processed and released. If, instead, you choose a private jail, you generally serve 100% of your term.
Third, there's a minimum standard beyond which care can't fall. It can get really sucky, but eventually it reaches a floor and can't get worse. OC jails are probably there already, as a cursory reading of the news can show you, so there's little chance private jails are going to make much difference.
So you pay to get a cushy jail that you somewhat control access to, but generally you have to serve a longer term.
Posted by: L2P at Jun 5, 2008 1:18:56 PM
This will only encourage white collar crime.
Posted by: at Jun 5, 2008 1:29:16 PM
Why not cut to the chase and just say "if you are rich enough, just send us some money".
Posted by: zbicyclist at Jun 5, 2008 1:48:53 PM
Grant, the union of public prisons guards in CA is one of the strongest interest group in the state and one of the biggest sources of campaign funds. The prison guard union sets up and funds groups of crime victims to lobby for harsher prison sentences, like three strikes, and against things like rehabilitation for drug users instead of prison time.
Posted by: Alex Tabarrok at Jun 5, 2008 1:51:34 PM
If the present legal system were replaced with an actual justice system -- a system based on the payment of restitution to the actual victims of crime, and a system wherein the settlement of such disputes is arbitrated by third parties whose profitability is based on their objectivity and fairness, as opposed to being settled by state monopoly courts with little or no incentive to decide honestly or fairly and whose interests conflict with those of defendants -- we wouldn't have to worry about paying for prisons, or worry about people being kidnapped and turned into slaves for crimes they didn't commit or for activities which are not crimes (victimless "crime"). The expense of real crime would be paid by those who actually commit it and the victims of real crime would be restored as best as possible to an unharmed state. Poor criminals could make use of repayment plans to work off their debts to their victims, or face complete ostracism from the community (they'd be "outlaws", outside all civil protections), while poor victims could sell off their claims to restitution for immediate gain in a manner similar to the way people sell off their claims on future civil settlements now, giving profitable incentives towards investigations of and convictions for crimes against the poor, and so the poor would be as well protected against crime as the wealthy. This is much like the system adopted by the Icelandic people in their anarchic "Commonwealth" period of the 10th to 13th centuries, and they enjoyed a per capita violent crime rate well below what we presently endure in the corporatist US empire today.
Posted by: Rich at Jun 5, 2008 2:36:20 PM
I want some of whatever Rich is smoking.
Issue 1: how a serial murderer can "pay restitution" to his (dead) victims.
And so on.
Posted by: at Jun 5, 2008 3:02:17 PM
Oh, I just realized it said jail, not prison. Sorry. If you're going to kidnap and incarcerate someone, you should generally be the one who has to pay them, as restitution, not the other way around. If someone's being violent, just threaten to shoot them, and if that doesn't work then follow through on the threat; it's called self-defense. I see little reason for the existence of jails, and if you really do find it necessary to make use of them, you should pay for it. It's absurd that the victim of the kidnapping and incarceration should have to bear the expense of their own victimization.
Posted by: Rich at Jun 5, 2008 3:06:04 PM
I'm not smoking anything. There's historical precedent for such systems not only working, and working well, but working better than our present system in the prevention and suppression of violent crime. A murderer, serial or otherwise, should pay restitution to the heirs of his or her dead victims. There's a vast body of research that's been done into the privatization of law, security, and arbitration, much of it available online. David D. Friedman, a professor of law at the University of Santa Clara, has done perhaps the most work in this area in modern times, but his research into this area is by no means unique.
Posted by: Rich at Jun 5, 2008 3:19:15 PM
All else aside, you're smoking something if you think comparing crime rates in the US to Iceland a thousand years ago can tell you anything about one policy in particular.
Posted by: Nick Tarleton at Jun 5, 2008 3:32:16 PM
Grant, the union of public prisons guards in CA is one of the strongest interest group in the state and one of the biggest sources of campaign funds. The prison guard union sets up and funds groups of crime victims to lobby for harsher prison sentences, like three strikes, and against thigs like rehabilitation for drug users instead of prison time.
Alex,
This is a jail, not a prison. There's no corrections officers involved. Not a one. Jails are run by the sheriff.
And you know very well that you're being deceptive here. You imply that simply because one union in one state has managed to get some political power, in general large economic actors such as private prison owners will have less political power than diffuse individuals like prison guards. We both know better than that.
Posted by: L2P at Jun 5, 2008 4:10:32 PM
Grant, your point was thoroughly examined by Volokh conspirators here.
Posted by: TGGP at Jun 5, 2008 5:53:22 PM
L2P - the fact is that the public prison guard union is large, unified, and politically powerful - far more powerful than private prison firms. I second TGGP's link to Sasha Volokh's excellent article on this topic
http://www.volokh.com/posts/chain_1173224886.shtml
Posted by: Alex Tabarrok at Jun 5, 2008 7:28:45 PM
If we consider that a goal of the justice system was to hand out punishments that have an equivalent impact on any persons found guilty of the same crime as each other, then the rich people should be fined proportionally more than the poor people. This would naturally provide the required income for the prisons at the same time as providing incentive for people with money to apply pressure for the removal of stupid laws so the system would self-correct.
Posted by: Andrew Downing at Jun 5, 2008 8:20:41 PM
Thanks TGGP and Alex.
Skimming the paper linked to by TGGP's link, I do wonder how much of the public sector's lobbying ability is tied to the undue power of unions. Without unions, I wonder if the relatively smaller number of capitalist beneficiaries from a rent-sought "public good" would lower transaction costs and make provision of that good easier.
Posted by: Grant at Jun 5, 2008 9:15:51 PM
A murderer, serial or otherwise, should pay restitution to the heirs of his or her dead victims.
Under such a system you better hope Bill Gates doesn't take a dislike to you.
Geez. Medieval Iceland again.
Posted by: Bernard Yomtov at Jun 7, 2008 5:17:37 PM
This has to be one of the dumbest ideas out there. If state prison systems are looking for ways to close budget gaps, they should simply charge every prisoner a means-tested fee for his or her stay. If the prisoner can afford it, the fee is equivalent to time spent in a luxury hotel. If the prisoner is indigent, the state pays. But the accommodations are exactly the same. Check out my post at http://eclecticdialectics.blogspot.com/2008/06/debtors-prisons.html.
Posted by: The Eclecticist at Jun 13, 2008 11:40:42 AM
