Standard economic theory proposes that public goods (equally available to everyone) will be underprovided by private markets. Individuals can benefit without having to pay, so there is little incentive to invest or manage resources efficiently. The punishment of criminals is an example of this, since everyone in a society benefits from reduced crime whether they pay to apprehend criminals or not. On that basis, it is widely presumed that governments must provide criminal justice services, including prisons. But the evidence in favor of that view is ambiguous. Stateless societies throughout history have found ways to maintain public order without ever building a prison. Nations with adequate social safety nets and a high degree of equality are also likely to rely on alternatives to incarceration. Strong forms of public goods theory, when applied to punishments and prisons, are shown to be false, since crime control does exist without a centralized state. Furthermore, the available evidence suggests that centralized government provision and management can also suffer inefficiencies from overproduction. Only comparative institutional analysis can speak to the efficiency potentials of punishment, wherein the costs of underproduction are assessed against the likely consequences of overproduction.
D’Amico, Daniel J. “The social provision of punishment and incarceration.” American journal of economics and sociology 76.5 (2017): 1107-1132.
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