Prison economic illiteracy

There are good arguments against privatizing prisons. Labour's Charles Chauvel doesn't use them here:

Labour's justice spokesman Charles Chauvel said Wiri was expected to cost the taxpayer about $1 billion over 25 years but its "indirect" costs were becoming clear and were "disturbing".

"National seems to have made a decision that, rather than refurbish many regional state-owned institutions, it will simply close them. Prison closures will be a big blow to regional economies. Job losses will be significant."

The proposal made "little economic or social sense".

The National-led Government should invest the $1 billion in improving existing state assets instead of boosting the bottom line of a private company, he said.

 A few of the problems:

• Prison guard jobs are a cost, not a benefit; if we could guard them for free, that would be better.
• Closing old prisons and opening a newer one will mostly mean job transfers, not job losses. 
• Viewing prisons as an economic development initiative is a quick route to bad outcomes; imprisonment becomes a good rather than a bad.

While Shleifer raised some really good points against prison privatization, those are mostly arguments about making really sure to get the incentive contracts right. Private prisons can too easily chisel on margins that reduce costs but brutalize prisoners and increase re-offending. But that doesn't seem to be the case here. 

The private manager of the prison facilities is subject to a re-offending target, according to the Press article:

Serco is expected reduce reoffending by more than 10 per cent and will face financial penalties if it fails to meet the target. 

And, Serco is the company that manages Mt Eden prison, where they found it cheaper to treat prisoners kindly and thereby save on guard costs. 

I have no view on whether total costs are reduced by closing the old prisons and building a new one; I've not looked at the numbers. But Labour's not making a particularly good case against the move.