Private Prisons Save Taxpayers A Lot of Money

Conservatives often extoll the virtues of the free market and private enterprise. Liberals often decry the same things as harbingers of greedy fascist capitalist cronies. To say that the opposing views can confuse the uninitiated is an understatement.

Here’s the truth.

The free market (private enterprise) can do things cheaper, better and faster than the government. In fact, it should do everything cheaper, better and faster than the government. However, oftentimes the private enterprise gets caught up in the government wake at some point or another and what develops is what we call “crony capitalism.” This is where the private and public mix and the entire system becomes corrupted.

What is needed is for the government to not involve itself in private markets – if we could do that we could avoid the corruption and destruction that crony capitalism can breed.

Here’s proof. A recent study finds that private prisons can save taxpayers a lot of money… but if the system becomes corrupted, these prisons could become very dangerous places (for the inmates and for the public).


Have researchers been underestimating the cost savings of privately run prisons? A recent reportreleased by the Independent Institute says so.

Because states tend to omit indirect costs (such as administrative overhead) and underfunded pension obligations in their measures of avoidable costs,  economists Simon Hakim and Erwin Blackstone claim, official estimates are often grossly understated.

Using data from 10 states — nine that already utilize contract prisons, plus Maine, which could contract out inmates to contract prisons in other states — the authors determine each state’s avoidable cost (that is, the amount that could be saved by contracting prisoners out) and compare it to the per-diem amount charged by private operators.

In determining the costs of private prisons, the authors begin with the per-diem rate that those prisons charge the state to house each prisoner, and then make adjustments to account for expenses not assumed by the private operator (in Kentucky, for instance, healthcare and prescription drugs for inmates in contract prisons are paid for by the state).

In the case of prisons that are owned by the state but managed by a private operator, the comparison is a straightforward one between the day-to-day (short-run) operating costs of private and state-run prisons. Prisons that are privately owned, however, must be measure against long-run avoidable costs, which also include the capital costs associated with building, maintaining, and modernizing prison facilities.

States that use contract prisons to reduce costs generally require minimum savings of between 5 percent and 10 percent, but only the most optimistic studies have found this to be in keeping with the average savings realized by states that use contract prisons (most have estimated average savings at between 0 and 3 percent).

Blackstone and Hakim counter that this is only true in the short run, where they found an average savings of about 9.75 percent. However, when long-run expenses are the basis for comparison, as they are for seven of the 10 states in the study, average savings exceed 25 percent.

According to Hakim and Blackstone, “exposing public prisons to greater competition should lead to lower costs and improved performance of both public and private prisons,” because the threat of further privatization leads prison administrators to make more-determined efforts to reduce costs and induces public employees to temper their demands.

The competition created by contract prisons also reduces administrative overhead, because the profit motive creates a strong incentive toward managerial and technological innovation.

Finally, privately owned contract prisons relieve states of the burden of keeping up with fluctuation in demand. The number of inmates that a state needs to incarcerate varies over time, and significant costs are associated both with the building of new facilities during periods of high demand, as well as with the maintenance of unneeded facilities during periods of low demand.

Hakim and Blackstone conclude that their analysis, “finds that contracting our inmates to private prisons saves state governments money while maintaining performance at least at the same quality as government.”

By Peter Fricke of the Daily Caller News Foundation




Onan is a graduate of Liberty University (2003) and earned his M.Ed. at Western Governors University in 2012. Catch him at

Posted in Crime, Law Tagged with: ,
12 comments on “Private Prisons Save Taxpayers A Lot of Money
  1. abinico says:

    NO, NO, NO – private enterprise can NOT do everything better and cheaper. In fact, your attitude is an insult to the millions of fine and capable public servants than run everything from our water to fire departments.

    • Jack Laurie says:

      You couldn’t be more wrong, government can’t run anything because they can’t make a profit…government has to mooch off taxpayers, private business can run prisons bettor for everyone, even the prisoners

      • abinico says:

        You’ve just denied the existence of all non-profits, and insulted a lot of people who do things based on principle, not profit.

    • DetroitDom says:

      If you’re not being sarcastic, I think you need to take a closer look at the Detroit Water Dept. Detroit’s total debt was nearly $60 Billion dollars and $18 Billion (with a B) of it was from the Detroit Water Dept. Wanna take one guess which party has been running Detroit over the past 50 years?

      Private business can ALWAYS do it cheaper, better, and faster so long as government can stay out of the way!

      • abinico says:

        Yeah, sure, go back in history to that fiasco when CA tried to privatize electricity – total failure – people rebelled and the plan was dropped. The biggest problem with the private sector is that as soon as the going gets rough or they hit a bump in the road, they will bail out. It is no secret that certain things must be public controlled commodities, for a number of reasons.

        • DetroitDom says:

          I did not say that the private sector should do everything. I said that the things the private should be doing can be done better, cheaper, faster. NOT everything should be handled by the private sector (e.g. the military).

          And, for the record, NO COMPANY would go $18 BILLION in the hole and no one be held accountable, unlike the current situation here in the Motor City.

  2. Evan White says:

    Could have you just siad your Onan just said his point without one million % signs? I am not good @ percents and find them hard to understand

  3. Why not just return to the Bible’s system of government by which all prisons are superfluous.

    Convicted capital criminals are put to death expeditiously (Ecclesiastes 8:11). Non-capital criminals are required to pay two to five times restitution (depending upon the nature of their crime) to their VICTIMS (Exodus 22:1ff). If they are unable to pay the required restitution, they are put into indentured servitude until their debt to their victim is paid ((Exodus 22:3). If they refuse to pay the required restitution, their contempt of court (Yahweh) is a capital crime for which they are to be put to death expeditiously (Deuteronomy 17:9-13).

    No need for prisons. Perfect, just like we’re informed it is in Psalm 19:7-11.

    For more on how Yahweh’s immutable triune moral law (His commandments, statutes, and judgments) apply and should be implemented today, see free online book “Law and Kingdom: Their Relevance Under the New Covenant” at

  4. Finkster says:

    Crony Capitalism, is the system that was used for the “KIDS FOR CASH” Corruption in Pennsylvania of late. Check it out. Judges sending Kids to Private Prisons for Millions in Kickbacks.

  5. zagozana says:

    A private prison system bought off a judge who sent a kid to prison for a little marihuana and the fixed judge gave this 20 year old kid a very harsh sentence, way beyond reasonable. The judge got a kick back and the kid committed suicide.
    Now the judge is in prison…
    We have more people in prison then any other country…

    • Russell Sayce says:

      If you have a problem with lawyers/judges destroying young people’s lives, then I’m affraid you were born into the wrong place and time. The entire diseased western world depends on these criminals for it’s existence, they love them so much, that they vote them in as leaders, no matter how much personal suffering it causes in their own lives, just look around for proof of the phenomenon….

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