There are over 10 million people in some form of government incarceration around the world today.
There are 2.3 million in the USA alone and anyway you slice it that is a huge population of people.
The population of people living in prisons is larger than the population of people living in
most countries on earth.
Now the arguments for and against prisons, and criminal punishment, and the power of the state
are endless, and we will be trying to avoid this entirely in this video for two reasons.
One, there are people far more qualified to speak on these issues...
Yes, there are lots of people in prison that probably shouldn’t be
there and a lot of people that aren’t that really need to be.
Yes the conditions in many institutions around the world are abhorrent.
And yes there are probably crimes that land people in prison that really shouldn’t do.
BUT. go and learn that from someone who can speak on these issues with authority.
The second reason we are avoiding this side of the issues it would detract from what we
are really here to explore which is the economics of this whole system.
Locking people up is a big business. And whatever way you slice it,
10 million people is potentially a huge workforce.
All of this can add up to have a very significant contribution
towards national economies in more ways than you might expect.
But as always we need to look at a few key area’s to truely
understand the economics of incarceration. So
What is the opportunity cost of having people locked up?
What impacts does this all have on the wider economy?
And finally
What impacts does the economy have on incarceration?
Now while this all sounds like a pretty grim topic, that let’s be honest,
most of you economics nerds watching, are never going to experience directly...
it is still really important to understand.
This is because despite the social impacts this system can have,
there are some very serious positive and negative externalities caused by this system.
In a heartless, clinical, sort of way,
the study of economics could shed some insight into the system, by addressing….
The opportunity cost of the bars.
What does the New York Hilton, the Marriott Maui Ocean Club,
and the Grand Hyatt of Paris all have in common?
A night in any one of these hotels would cost less than a night n the average state penitentiary.
Let that sink in, average penitentiary,
not supermax, not intensive treatment facilities, but just the average run of the mill prison.
Whats more is that according to publicly available state budget records,
these figures get alot worse in certain area’s.
In New York for example the average prisoner is running the taxpayer just under $2,5000 a night.
That’s $892,206 per year. which is about the average total of state tax revenue from
110 citizens. And they wonder why their taxes are the highest in the country.
All of this ignores federal penitentiaries, which in fairness are cheaper,
only averaging around $300 per night but still add to the collective bill.
So prisons are expensive, this probably isn’t a huge surprise to alot of people but just
how expensive may be to some. Especially when this becomes a question of opportunity cost.
It costs the average new york taxpayer $2,000 per year to maintain the states prison system.
Of course more of this is paid by higher-income earners with higher marginal tax rates,
but on average that’s the figure.
Now I am sure that the average person watching would be more than happy to give up $2,000 of
their hard-earned dollars to keep people who are truly a danger to the community behind bars.
Nobody is advocating for free range serial killers because they are more cost effective,
but for non-violent offenders, eh that trade off might be a little more difficult.
Personal opinions about being tough or easy on crime,
sometimes the dollars and cents are the easiest and most rational way to think about it.
But of course there is more to this, even nonviolent crimes can have negative externalities,
community deterioration, property damage, knock-on implications that may push people
to violence, and genuine suffering from things like substance abuse.
Does the cost-benefit analysis still work then?
Well maybe, the total costs of crime in the USA
was estimated by the Government Accountability Office to be around 690 billion dollars in 2017.
Of which about 190 billion was the cost of maintaining those prisons,
but there are some ancillary costs that people might not consider.
The report broke the costs down into three sections, costs in anticipation of a crime,
costs as a consequence of a crime, and costs in response to a crime.
Costs in anticipation to a crime are important to consider because they are often overlooked.
Things like insurance premiums, home security systems, prevention programs and policing
are all costs that society incurs, because crime exists, if crime was to go away
these costs would be eliminated.
Now of course locking people up doesn’t necisarrily get rid of crime,
but most studies suggest that it does of course reduce it, which should be relatively obvious.
It’s also reasonable to see that spending on these anticipation
factors is relatively in line with crime rates.
Much more money is spent on security by the average resident of Johannesburg,
than the average resident of Oslo.
The second factor is the costs as a direct consequence of crime
as in once a crime is committed this is the bill of damages.
This can range from relatively mundane things like the costs of damages for graffiti or
a broken window all the way up to things that are a bit more difficult to put a price tag on,
the cost of a human life being the big one there.
This factor also incorporates things like lost
wages for unpaid workdays by the victims who might be recovering,
as well as the cost borne by an employer who will miss out on having a productive worker, working.
Now the final factor of criminal costs bourne by society are the costs
in response to a crime. These are the costs of providing public defendants,
running a court, paying for investigators to track down offenders and of course,
the cost to imprison them should that be deemed necessary.
Now if we understand this breakdown of costs perhaps the solution could be just as simple.
Work out how much of these expenses would be alleviated by imprisonment,
and then administer accordingly to balance the costs with the costs.
A nonviolent offender who didn’t do any property damage,
well they don’t really contribute to cost very heavily in these first two categories,
so not too much should be spent on them in the response category.
Someone who has the capacity to do massive property damage or inflict suffering on a victim,
well yeah maybe the cost-benefit analysis says that it’s worth the money to have these people
separate from any potential victims.
Either way society will foot the bill for crime,
it’s an inevitability, but all other things being equal, and assuming no changes are made
to the system that is currently in place this approach does show a lot of promise.
We use a capitalist system of cost-benefit trade off’s to determine who gets what in
most nations around the world, so what not use the same system to determine who, gets, what…
Now of course all of this is ignoring
one other externality that comes from a massive prison population. The impact it has on,
The labor force.
Most prisoners, especially those in the united states... work.
They work all kinds of jobs from basic manufacturing all the way up to fighting fires.
More or less, if there is a terrible job to be done its probably being done by inmates somewhere.
Now in fairness there are some major advantages to this,
for starters it provides some practical vocational training to those inmates.
These are skills that these people can use to find a job once their sentence is over,
and what’s more is that sometimes the companies involved even have programs
in place that offer similar roles to inmate workers on the outside once they are released.
Stable employment is hugely important to everybody but especially for people who
have just been released from prison because a stable income will help to dissuade them
from needing to resort to criminal activities all over again.
These kinds of working arrangements also seem fair to the outside observer.
A criminal sitting around all day doing nothing however terrible the conditions are,
just doesn’t sit right with people who need to work for a living to put food on the table.
More pragmatically the profits from prison labor also help to offset the costs of these facilities.
But there are two problems with this.
The first are that these profits primarily go towards private institutions, major private
prison providers like CoreCivic, GEO and Serco soak up a majority of this labor revenue.
Now this wouldn’t necessarily be a major issue, public services are privatized all the time to
varying degrees of success and if this work helps to offset the invoice so be it right?
Well unfortunately it doesn’t and the cost per inmate has actually risen by over
40% in the past 5 years, despite more and more work being done inside these institutions.
But all of this ignores a much larger problem this is work that could be done by a regular employee.
There are hundreds of thousands of jobs being worked by prisoners,
not just in the US but in almost every country around the world today. In almost every instance
these prison workers are paid a fraction of what a regular worker would receive.
This means that corporations are able to access a pool of cheap labor with workers
that are routinely paid less than a dollar an hour. which will displace
regular workers in these low-skilled professions.
We have studied the impacts of outsourcing many many times on this channel before,
but even nations with the lowest cost of living can not compete on price with workers in prisons,
especially when its factored in that shipping is not a major expense when its made right at home.
In a cruel twist of irony, one of the biggest tasks performed by prison labor
is sewing made in America tags onto items of clothing.
All of that aside, the net costs borne to the average worker of having to compete with
prison labor does not at all help to offset that equation we were looking at earlier,
but actually pushes it even further into the red.
And perhaps in many ways, this could be by design.
There is a book on this issue aptly named the rish get richer and the poor get prison.
This book was written by two criminal justice professors Jeffrey Reiman
and Paul Leighton and they explored the positive feedback loop of incarceration
causing poverty in communities that led to incarceration.
In a dizzying amount of cases, workers were sent to prison
because they were unable to leave work to appear in court out of fear of losing a job
that was going to be hard to replace thanks to the role being shipped off to prison workers.
Of course we promised we wouldn’t stray too far into the moral argument
but that is definitely worth a read to hear from people that can speak about this issue.
Final thoughts.
The prison system, criminal justice and the law in general
are all topics that are by their very nature, divisive.
Its something that most people don’t ever get too much exposure to
and so it is easy to forget about something that goes on that doesn’t really affect them.
But of course, it does.
It impacts our employment, our communities,
and perhaps most importantly for most people our wallets.
As with all issues that have this much at stake
it’s easy to get emotional and make decisions based on feelings,
but perhaps the best way to address the costs of crime is to treat it like a transaction.
In a perfect world, it wouldn’t be there but while it is we should work to reduce its costs.