The Economics of Incarceration

The Economics of Incarceration

Diana Alvarez

Melissa Chipres

Arturo Magana

California State University, Long Beach

Professor William Moore

PPA 518 - Microeconomics and Public Policy

Definition of the Problem

Over the last decades, the incarceration rates have significantly increased in the United States. Today, the United States approximately incarcerates 2.3 million people (Wagner & Rabuy, 2017). Since President Nixon declared a “war on drugs” in 1971, harsher drug related sentences emerged. As a result, these new sentencing policies and laws created the beginning of the United States high incarceration rates and overcrowding problem. In addition, these sentencing policies have also been discriminatory and disproportionate as they mainly target minority groups such as Blacks and Hispanics. For example, according to the Sentencing Project (2015), “more than 60% of people in prison are people of color” (p.5). As incarceration rates go up, the cost of incarcerations also rises. In 2010, approximately 80 billion was spent on corrections (Committee for a Responsible Federal Budget, 2010). Furthermore, we must be economically efficient and consider other alternatives to incarceration, such as probation or rehabilitation, that could be more effective and efficient for both offenders and taxpayers.  Evidently, we can see that criminal justice “tough on crime” policies are both ineffective, inefficient, inequitable, and have high financial costs which ultimately cost taxpayers. Thus, criminal justice policies must change to be both cost effective and efficient, but be ultimately fair.

Causes of the Problem

With the growing concern of overcrowding jails and higher incarceration rates, it is important to take a close look at how these increases are affecting the market. The exact financial number attached to an incarcerated individual can vary state by state and is usually not exact, for a number of reasons. The direct costs attributed to incarceration are easily identifiable, but it is the indirect costs that cause a more elusive number, as Fulmer (1995) noted. Direct costs of incarceration can include personnel and maintenance of the facilities, but the indirect costs are much less easily identifiable or typical. He reported that such indirect costs of incarceration were taxes lost from wageworkers, food stamps and welfare for the families of the incarcerated individual, family Medicaid, housing, and public defenders, to name a few. The majority of these costs, if not all, end up falling on the taxpayer’s bill. Henrichson and Delany (2012) shed light on the fact that taxpayers from 40 states are paying 13.9% more than their combined corrections costs. Henrichson and Delany attributes these high incarceration costs to the 700% increase in incarceration rates since the 1970’s. All these indirect costs are a clear indicator of negative externalities. Whereas the judicial system and the offender are the direct parties involved in the matter, there are third parties such as taxpayers and families that are negatively affected by this process. Additionally, there are other factors that further prove a market failure with incarceration. Clear (2008) illustrates that while incarceration rates are steadily growing, crime rates are almost doubling. Clear argues that incarcerating an individual can negatively affect criminal enterprises, by specifically noting that drug sales continue at the same rate with little to no interruption, and that the incarceration of an active criminal in a criminal group may create more hostility and increased violence with that criminal network. Furthermore, Clear illustrates in his study how incarceration lowers crime due to incapacitation, but increases crime through family destabilization. This clearly indicates the lack of marginal returns with incarceration. From a social equity standpoint, it is clear and evident that incarceration is not an equal opportunity activity. Clear continues to provide additional data supporting the inequities with arrests, indicating the following (quoted information):                

• Men are almost 15 times more likely to end up in prison than are women
• Blacks are almost seven times more likely to go there than are whites
• People who fail to finish high school are three times more likely to spend time behind prison bars than are high school graduates

Additionally, almost six in ten African American men who do not finish high school spend their entire lifespan behind bars. Location also plays a key role in incarceration rates. Lynch and Sabol (as cited in Clear, 2008) indicated that almost one in every five males aging 18 to 44 spent time behind bars in some of the poorest areas of Cleveland and Baltimore. Furthermore, there are negative effects to children of parents who are incarcerated. A study by Murray in 2005 (as cited by Clear, 2008) concludes that children of incarcerated parent(s) are three to four times more likely to develop a juvenile delinquency record. In addition, studies concluded that a child of an incarcerated parent more two and a half more times likely to develop a serious mental disorder.

        As we take the time to understand how problematic increased incarceration can become, it is important to note that there are more negative externalities than positive. Regardless of how incarceration is portrayed, either through the lens of privatized prisons or lack of appropriate rehabilitation and training programs, this system is failing our offenders, their families, and society. Policies such as Mandatory Minimum Sentencing and the Three Strikes Laws (Travis, Western, and Redburn, 2004) have few or no returns on deterrence. Incarceration also stifles employment. In a longitudinal study in Illinois, Ohio, and Texas, it was found that only a mere 45 percent of 740 males exiting prison were employed 8 months after their release. Of 46,000 ex-prisoners in Ohio, 42.5 percent were not employed even after a year after release.

Set Goals

                When speaking about a controversial topic such as incarceration, one is bound to get a number of different opinions and arguments. There are some individuals that believe once a person commits a crime, no matter how big or small, that they deserve no leniency, and should be punished to the severest extent. This is only adding to the problem of overflow in jails, and the costs to keep an individual incarcerated. On the other side of the spectrum, there are individuals that believe a person can become rehabilitated and that their crime should not follow them for the rest of their lives. To address this issue, there is an obvious need for policy change. It is recommended that rather than spending millions of tax dollars on incarceration, society should make it a goal to invest in probation, and rehabilitation programs for individuals who have committed nonviolent crimes.

                To begin to address this issue, government officials and policymakers should look into investing more funds in probation or rehabilitation programs. These alternative routes to incarceration could cost taxpayers a significant less amount of money than what it costs to keep an individual incarcerated for lengthy period of time. The first goal that government officials and policymakers should look at is probation. Probation is a very underestimated tool in aiding the reentry of an offender. Joan R. Petersilia, former director of RAND’s criminal-justice research program, has calculated that we currently spend about $200 per probationer for supervision. "It is no wonder," she notes, "that recidivism rates are so high." (Diiulio, 1997). The costs that are invested into probation can be staggering compared to those of incarceration. To allow this goal to succeed, the probation system will need more money, more probation officers, and closer supervision. For instance, in Philadelphia, the district attorney's office has developed a no-nonsense program in which volunteers from the neighborhoods where the juveniles committed their crimes hear the cases, set terms, and monitor compliance. Coordinated by the district attorney's office by veteran probation officer Mike Clearv, the citywide program boasts an 80 percent success rate, costs little to administer, and holds youth accountable (Diiulio, 1997).

                The second goal that government officials and policymakers should invest in are rehabilitation programs. Rehabilitation programs can also be low cost to taxpayers, but it also gives the offender a chance to take their lives into a different direction than it was headed. For example, there is the Los Angeles-based non-profit organization known as Homeboy Industries. Homeboy Industries employs and trains former gang members in a range of positive social enterprises, as well as provides critical services to 15,000 men and women who walk through its doors every year seeking a better life (Make, 2017). This non-profit organization helps former gang members through tattoo removal, workforce development, educational services, legal services, mental health services, offers a certificate program for solar panel installation, and more importantly, offers case management. Homeboy Industries, who refer to their clients as trainees, have a strict eighteen-month case management program where their trainees are assigned to a case manager who helps guide them in developing goal-oriented service plans, and holds them accountable as they move toward a better life. Through the process of monthly meetings with the trainees, they discuss the client’s service plan and what they’re doing. This is said to detect any issues before they arise. If programs such as these had more money invested into them, it would lower the rates of recidivism, and allow for well-rounded individuals to contribute back into both society and the market.