Private prisons

A former student asked for research on private prisons. 

There is some data out there:

. . . [P]rivate prisons are one of the fastest-growing industries in the prison industrial complex. A privatization czar post was created during the Reagan Administration. During the Reagan years, private-owned prisons began to operate in response to overcrowding problem in Immigration and Naturalization Service facilities in Texas and California. Up until 2003, there were approximately 102 private prisons in America, holding more than 100,000 prisoners. Although the percentage of private prisons is around 10 percent of all U.S. prisons, that number is increasing. The largest private prison company is Corrections Corporations of America. It was established in 1983 by the chair of the Republican Party of Tennessee and a former FBI agent. It currently controls little less than half of all private prisons. Its stocks values have raised from $8 a share in 1992 to $35 in 2000. Today it manages services for 79000 inmates in 65 facilities. According to CCA reports, the private prison industry is likely to grow in future years given the general trend of increasing incarceration, lack of public funding for prisons, and accelerated growth of prison population after recession. Other small players in the private prison industry are Wachenhut Corrections Corpoartion and MTC (Gonzalez 2012). 

This is a 5-year chart from nasdaq.com of the stock of Corrections Corporations of America - there is a recent upward trend, but the long term trend is not very telling.  

Most of the research is being done in the US. The evidence is not as clear cut as one would like it to be. There are cross country variations (Cabral and Soussier 2011), and important challenges in developing countries (Massey 2005). The Wikipedia entry gives some useful information and it seems that the case of Israel is worth looking at. 

Alex Tabarrok favors private prisons:

More than two decades of experience with private prisons in the United States, Great Britain, Australia and elsewhere attest to the fact that private prisons can be built and operated at lower cost than public prisons.

Since the end of 2010 early 2011 people are searching more for "private prisons" in google. More in New Zealand than in the US. And within the US, more in Phoenix, Denver, and DC than in other states. See here. 

Erik Lotke blogged about the complexities of the issue. 

Given the current state of prisons in Central America (see an amazing pic here) (including prisons destroyed by fires in Honduras) I would like to see other alternatives. And if you ask me I would say that this might be an entrepreneurial opportunity, which should probably start at a small scale.