The Economics of the Prison Industrial Complex: Costs, Labor, and Opportunity

This podcast episode delves into the economic dimensions of the global incarceration system, deliberately sidestepping moral or social arguments to focus on the financial implications. With over 10 million people incarcerated worldwide, including 2.3 million in the USA, the system represents a significant economic entity. The core inquiry revolves around the opportunity cost of locking people up, the system's impact on the wider economy, and how economic factors influence incarceration rates. The episode highlights the exorbitant costs of imprisonment, noting that an average night in a state penitentiary can exceed the cost of luxury hotels, with New York taxpayers, for instance, footing a bill of nearly $900,000 per prisoner annually.

The analysis breaks down the total costs of crime, estimated at $690 billion in the USA in 2017, into three categories: costs in anticipation of crime (e.g., security systems, policing), costs as a consequence of crime (e.g., property damage, lost wages, human life), and costs in response to crime (e.g., courts, public defenders, imprisonment). This framework suggests a cost-benefit approach to criminal justice, where resources are allocated based on the economic impact of different types of offenders. The podcast argues that while society inevitably bears the cost of crime, a rational, transaction-based approach could help reduce these expenses, especially for non-violent offenders who contribute less to the first two cost categories.

A significant externality explored is the impact of the massive prison population on the labor force. Prisoners often work in various jobs, from manufacturing to fighting fires, providing vocational training and potentially aiding rehabilitation by offering stable employment post-release. However, this system presents two major problems: profits from prison labor often flow to private prison providers (like CoreCivic, GEO, and Serco), and despite increased inmate work, the cost per inmate has risen. More critically, prison labor, paid a fraction of regular wages (often less than a dollar an hour), displaces regular workers in low-skilled professions, creating a pool of cheap labor that even low-cost nations cannot compete with, further exacerbating economic challenges for the average worker.

Ultimately, the episode concludes that the prison system, despite being a divisive topic often overlooked by those unaffected, has profound economic impacts on employment, communities, and individual finances. It suggests that viewing the costs of crime through a clinical, economic lens, treating it like a transaction to be optimized, might be the most effective way to reduce its overall burden on society. The discussion also touches upon a positive feedback loop where incarceration can lead to poverty, which in turn can lead to further incarceration, highlighting the complex interplay between economic conditions and the criminal justice system.

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.

Locking people up is a big business. And whatever way you slice it, 10 million people is potentially a huge workforce.

A night in any one of these hotels would cost less than a night n the average state penitentiary.

In New York for example the average prisoner is running the taxpayer just under $2,5000 a night. That’s $892,206 per year.

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...

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.

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.

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.

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.

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.