Internalizing Private Prison Externalities: Let's Start With The GED

Prison education is a remarkably good investment for society, yet an increasing proportion of inmates have no access to it because the operators of the prisons in which they are held have a powerful incentive not to provide it: they make more money that way. Critics and analysts of private prison operators have suggested various incentive structures to improve their performance, but most jurisdictions focus on the operator’s cost to the contracting entity. The social costs imposed by foregoing prison education are not part of the arrangement between a private prison operator and a jurisdiction with which it contracts. Although these costs are real and substantial to the inmates who bear them, because the inmates are not parties to the contract, these costs are externalities. Imposing these social costs on prison operators could improve the conditions for inmates in their custody and is very likely to improve these inmates’ success after release. Unlike more complex strategies for imposing incentives on correctional programs to reduce recidivism, prison education is a known, straightforward rehabilitative strategy whose provision can be measured quite easily at the point of release. There is even a well-accepted metric for prison education administered by an independent third party: the General Educational Development Test (“GED”). This article proposes using the GED to internalize the cost of reduced or poor inmate education by imposing financial penalties on private prison operators whose inmates do not obtain, or make progress toward, a GED during their incarceration. This would provide the social benefits of inmate education, alter private prison operators’ behavior at minimal administrative cost, and most importantly, benefit inmates being released.