Prisons Don’t Arise Naturally In A Free Market

Would prisons exist in a free market? We’re talking a truly free market. A society without a state. A market driven purely by voluntary transactions. I have come to the same conclusion as Tucker and Massimino: no.

Prisons exist because of the state. These are not profitable institutions.

Even private prisons are not naturally profitable. While state prisons are funded directly through taxation, private prisons rent their facilities to the state. They are funded indirectly through taxation.

A stateless society is a society that necessarily lacks taxation. Institutions that rely on taxation for their survival would cease to exist. The defence contractor: gone. The police department: dissolved. The prisons: economic failures.

It is not an accident that the most evil institutions in society are the ones paid for by taxation. Nobody in their right mind would fund these institutions, as they currently exist, voluntarily. They must be coerced into doing so. Enter, taxation.

Alternative institutions may arise in their place, but only if they are profitable in the market. (Will people pay for private security? Yes. There is individual, personal, economic benefit in protecting life and liberty. Will people pay to keep people in cages, feed them and take care of them for years on end? Highly unlikely.)

But Who Will Build The… Prisons?

But without prisons what is the solution? Isn’t this absolute chaos? About about punishment and justice? How do we keep “criminals off the streets?”

Prisons are all that we know. Like the men in Plato’s Allegory of the Cave we are limited by the full extent of our experience. And we’ve only experienced the existence of a criminal justice system with prisons at its core. Yet, to assume that this is the natural state of affairs or the end of progress in criminal justice — that prisons are a “final form” in social corrections — would be wrong.

Prisons are a modern invention. And they aren’t one of the nice ones, like the toothbrush or the electric guitar. For most of human history we have solved disputes without prisons. We can do it again. And we can do it as free individuals better than the state can do it.

How Markets Replace Prisons

The solution is restitution. Restitution becomes the basis of criminal justice.

Victims of crimes do not receive direct benefit from having an individual put into a cage. A victim could in theory come to some form of resolution that involves putting a man in a cage. However, without the financial burden of taxation the victim would have to fund this out of pocket. The demand to lock individuals in a cage at your own personal expense will be low. The market will not select for this service. Prisons would not arise as institutions.

Imagine the case of a thief who steals your television:

You can have this man put into a cage for up to five years at the personal cost of $40,000 to $60,000 annually. You can have this man put into a “community” cage for up to five years, if you have been voluntarily paying dues to support a community-funded prison. You can compel this man to restore the value of your television to you as well as additional financial restitution negotiated during dispute resolution.

What does the free market select for?

Well, it doesn’t select for options 1 or 2. In the case of option one it is a bad decision due to its prohibitive cost and zero financial return. In the case of option two the only individuals who might subscribe to such a system are those who expect to be victims of crimes and are willing to pay dues for the potential of future vicarious revenge.

And these dues would be high. How high? In California the average cost to incarcerate one prisoner is $50,000 annually. There are approximately 170,000 prisoners in California. This is 8.5 billion USD. (And the actual cost in California is higher still – 10.5 billion.) There are 38 million people in California. If every single person in California paid a due to maintain prisons in a free market they would pay two hundred dollars annually.

This may not seem like much, but it also requires the full voluntary participation of every man, woman and child in California. If only half pay, dues rise to four hundred dollars. If half of that, eight hundred dollars. And so on. Before long yours dues are in the thousands annually. Would you pay this kind of money voluntarily to keep prisons open?

I suspect most people would not.