July 09, 2007
Conglomerate Junior Scholars Workshop: Alexander "Sasha" Volokh's Privatization and the Law and Economics of Political Advocacy
Posted by Christine Hurt

Welcome back to the Conglomerate Junior Scholars Workshop.  Today's paper is Alexander "Sasha" Volokh's Privatization and the Law and Economics of Political Advocacy.  Sasha is a Visiting Assistant Professor at Georgetown University Law Center where he teaches Law and Economics, Regulation Law and Economics, Environmental Economics and the Law, and Delegation and Privatization.  To do justice to a paper written by an economist, I had to call upon two distinguished economists who are experts in the field of law and economics, Tom Ulen and Paul Rubin.  In addition, Brian Galle, former workshop participant, has provided valuable feedback.

We invite readers to comment on the paper (and the comments) in the comments section of this post.  In the interest of running this workshop like a physical world conference, no anonymous commenters, please.

The abstract for the paper is here:

A common argument against privatization is that private providers will self-interestedly lobby to increase the size of their market. In this Article, I evaluate this argument, using, as a case study, the argument against prison privatization based on the possibility that the private prison industry will distort the criminal law by advocating for incarceration.

I conclude that there is at present no particular reason to credit this argument. Even without privatization, government agents already lobby for changes in substantive law—in the prison context, for example, public corrections officer unions are active advocates of pro-incarceration policy. Against this background, adding the “extra voice” of the private sector will not necessarily increase either the amount of industry-increasing advocacy or its effectiveness. In fact, privatization may well reduce the industry’s political power: Because advocacy is a “public good” for the industry, as the number of independent actors increases, the dominant actor’s advocacy decreases (since it no longer captures the full benefit of its advocacy) and the other actors free-ride off the dominant actor’s contribution. Under some plausible assumptions, therefore, privatization may actually decrease advocacy, and under different plausible assumptions, the net effect of privatization on advocacy is ambiguous.

The argument that privatization distorts policy by encouraging lobbying is thus unconvincing without a fuller explanation of the mechanics of advocacy.

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