Privatization of prisons or prison management presents an opportunity to incentivize, through payment design, reductions in recidivism rates. There is ample literature and studies that show that conditions of prisons and the experiences that prisoners have while incarcerated have strong effects on their likelihood of committing additional crimes once they are released (of course other factors such as access to affordable housing play a role as well). States should design bonus structures for companies operating prison that can show an ability to reduce recidivism rates. This is a situation where multiple parties benefit. Prisoners who are less likely to commit another crime when they are released certainly derive benefit from such a system. The State saves money required to re-apprehend, re-prosecute, and re-incarcerate. These savings accrue to tax payers. Most importantly, fewer people become the victims of crimes.
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If you know how to reduce convict recidivism, write a letter to The Honorable Arnold Schwarzenegger, Governor of California. He will appreciate it.
In general, when a human deviates from social activities into crime and, as a remedy, is put into an alternate social structure which associates him or her with others who have similar tendencies so that re-enforcement occurs in anti-social activities and thought patterns, a human is created who becomes adept in criminality. This is further re-enforced after release back into a society which discourages the individual from easy melding into normal social patterns. The whole current system of crime and punishment is self defeating and unless it is rethought and revised logically, handing it over to a group of entrepreneurs who are motivated to financially profit from the mess only makes it much worse.