TCS Daily

Compassionate Conservatism for the Ex-Prisoner's Dilemma

By James D. Miller - February 25, 2004 12:00 AM

In his 2004 State of the Union Address President Bush vowed to help reintegrate the 600,000 inmates released from U.S. prisons each year. Our President should use market mechanisms rather than government programs and grants to achieve his reformist goal.

The government should sell ex-con reform bonds on soon-to-be released prisoners. Each bond's final value would depend on whether a given ex-con gets caught committing a new crime during some specified period. For example, the government could sell a $50,000 bond on an armed robber just freed from jail. If the robber is convicted of another serious crime in the next five years then the bond becomes worthless, but if the robber can stay out of trouble for five years the bond becomes worth, say, $80,000. Purchasing a bond would give a prison reform organization a financial incentive to reintegrate the armed robber into decent society. If multiple firms wanted to buy a bond on our robber, then it would go to the firm willing to pay the most.

Since bureaucratic salaries are usually invariant to success or failure, government organizations often lack the motivation to succeed that the market embeds in private sector firms. Bush has, however, proposed using public grants to support private prisoner reform efforts. Unfortunately, though, such grants give bureaucrats, and not the market, power over grantees, so governments can't simply use grants to capture the efficiency of the marketplace.

Ex-con reform bonds, however, would strip power from bureaucrats and permit any organization with faith in its reformist abilities to participate in prisoner rehabilitation. Markets thrive by rewarding success and punishing failure. The firm most confident in its ability to reform a given ex-con would be the one to buy his bond. If this firm's confidence was justified, the bond market would reward it, and provide the firm with the resources to expand. Firms that overestimated their rehabilitation abilities, however, would lose capital and leave the market.

A bond program becomes even more useful to Bush if he wants to provide resources to faith-based prisoner reforming organizations. Consider the dilemma faced by a bureaucrat who must decide whether to award a grant to an organization which claims to use Christ's teachings to reform ex-cons. This bureaucrat must decide not only whether Christ's teachings could be used to rehabilitate effectively, but also whether the organization is correctly interpreting the words of Christ. Under the bond program, however, the bureaucrat needs never determine which organizations receive government resources and so can avoid ruling on the healing powers of Christian teachings.

Unfortunately, some bond purchasers might decide that rather than rehabilitate ex-cons, they could more easily teach their ex-cons how to avoid getting caught. To counteract such perverse incentives the government would have to do some monitoring of reforming firms.

To give reforming firms some control over their ex-cons, bond purchasers should have the right to end an ex-con's parole. Such termination should reduce but not eviscerate a bond's value. If the ex-con feels his parole has been unjustly ended, he could attempt to find another firm willing to buy his bond. Indeed, an ideal system would grant parole only to prisoners who could find reforming firms to purchase bonds on them. Such a system would create market incentives for firms to hire statistical experts to determine scientifically which prisoners would be the least likely to lapse into crime if set free. Market mechanisms would replace Parole Boards.

Government compassion tends to spawn increased governmental control and waste. To promote compassionate conservatism, therefore, Bush needs to accomplish his laudable visions without increasing government power. Since ex-con reform bonds would empower markets, not bureaucrats, to attempt rehabilitation, they belong in our President's domestic agenda.

James D. Miller writes The Game Theorist column for TCS and is the author of Game Theory at Work. He last wrote for TCS about free riders in the information economy.


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