Can Markets Provide Police Services?
By Art Carden • Tuesday July 6, 2010 6:15 AM PDT • 10 Comments
While Americans spend a lot of money on private security, we generally associate police services with a local government monopoly. And indeed, government is where the buck stops. One of the conventional rationales for government provision of police services is that the market will under-provide it. After all, if I subscribe to a protection agency that has to drive by my house, my neighbors presumably get some of the spillover benefits. The market will fail to provide the efficient level of police protection.
Of course, the existence of externalities has to be traded off against the change in incentives that comes with bringing protection services under the auspices of the government. Even if we accept the rationale, I’m not sure it applies anymore. People around our neighborhood have “Protected by [Whoever]” signs in their yards, and presumably properties can be “patrolled” remotely with cameras.
In an ongoing research project about the Memphis Riot of 1866, Christopher Coyne and I are discovering that the case for government provision of police services has never been very strong (here’s a very, very early version of what we’re doing; here’s Fred McChesney on fire services). As technology has changed, though, I’m coming to think more and more that “market failure” arguments for government provision of police services are incorrect.
Tags: Civil Society, Criminal Justice, Economics, Monopoly and Antitrust, Police, Privatization, Urban Issues 
All “market failure” arguments for government action boil down to apologetics for the state, which is itself essentially a criminal organization.
Economists stand at the blackboard and pronounce that the free market will “undersupply” policing relative to the “optimal” amount. It’s as though these economists have never had any dealings with a real cop. Ditto for the “suboptimal supply” of national defense, an argument made by economists who appear to know nothing about what the armed forces actually do (e.g., slaughter more or less randomly selected foreigners for no good reason except the profits of the contractors and the power and positions of the generals and their DOD counterparts.
If the whole edifice of neoclassical welfare economics were thrown in the rubbish bin, the result would be a net intellectual gain for humanity.
Robert Higgs | Jul 6, 2010 | Reply
As an interesting aside, Radley Balko recently had a post on what the military has to do when they do their version of “raid” on a building and shockingly the standards that have to be met are far, far, far higher. That is, there is much more review, preperation, and intelligence gathering than when it is Americans that are being raided. Not sure how that fits in here, but I thought it was interesting that foreign nationals are better off than Americans in this regard.
Overall, I think economists make a huge mistake on this one, especially when it comes to police/protection services. What is something just about all economist can agree on?
Monopoly is bad.
Giving the State the monopoly to use force, coercion and even lethal force against its own citizens should rightfully be very, very skeptically regarded. Yet this is not the case, the cavalier attitude is, “Oh, let the government do it.” But reading websites like Balko’s and Carlos Miller’s (Photography Is Not a Crime) and you soon realize that we’ve gone down the wrong road here.
Steve Verdon | Jul 6, 2010 | Reply
Off the top of my head, you may also look into the Tulsa race riot in 1921. Black Wall Street certainly would have the economic resources to provide its own security but likely was legally incapable of doing so.
Jeff Oxman | Jul 6, 2010 | Reply
One of the most important points to be made against govt police is their abusive nature. If the govt didn’t have armed thugs to enforce its will there wouldn’t be things like the war on drugs. Click on my name to read an article on the subject.
Private security would focus on protecting the customers period. Real world experience has already proved that they’re better at fighting crime than the police.
Darren | Jul 7, 2010 | Reply
Art,
You should read:
Ekelund, Robert B. and C. Dorton. 2003. Criminal Justice Institutions as a Common Pool: The Nineteenth Century Analysis of Edwin Chadwick. Journal of Economic Behavior and Organization, 50, 271-294.
And perhaps even:
Benson, Bruce L. 1994. Are Public Goods Really Common Pools: Considerations of the Evolution of Policing and Highways in England. Economic Inquiry, 32, 249-271.
and/or
Benson, Bruce L. 1998. To Serve and Protect: Privatization and Community in Criminal Justice. New York: New York University Press for The Independent Institute.
Bruce Benson | Jul 7, 2010 | Reply
Calling the state a “criminal organization” is correct. The state (government) is a part of man’s rebellion against God. Governments at all levels are essentially protection rackets. “Good” protection rackets not only protect you from themselves but from rival protection racketeers. “Bad” protection racketeers protect you only from themselves.
If mankind would simply obey the laws of God we would need no government. But this Edenic state is not going to return until the end of the age. Until then, government by men has to continue that the righteous not be consumed by the wicked. Reasoning men realize that when moral suasion fails, only raw force will suppress raw force.
Though the first organized government after the Deluge was established by Nimrod, its authorization is found when Noah and company came out of the ark. He who sheds man’s blood, by man shall his blood be shed. From that principle comes all earthly government. He who steals his neighbor’s stuff, by man shall his stuff (and his liberty) be taken away.
Organization of government attempts to proportion punishment to the crime. Thieves should not be put to death, and murderers should not be treated lightly.
Private police operate not on the principle of punishment for crime already committed but by preventing the crime from taking place. The most elementary private “police” function is carried out by locks. Locking a door, even when easily defeated by force, deters much opportunistic crime. An automobile is easily broken into or stolen outright, but locking the power plant deters most car thieves and locking the doors deters most theft of possessions and equipment in the car. This is because private policing is backed up by the regular criminal police system of police (and sheriffs), courts and prisons. If the private police efforts fail to deter, the state’s police are there to take up where the private ones can go no further.
Al Grayson | Jul 8, 2010 | Reply
How would people agree to and enforce a constitution if there were private police forces that locally competed instead of a state operated bureaucracy? I understand the idea of privatizing as much of the economy as possible but I don’t grasp how private police forces that were paid to invade other people’s private property would be accountable to a constitution. It seems like customers could pay the police business money to harass people who were only suspected of something on weak evidence. They even could be prosecuted over a law that is not recognized by any government because government would have no human power base to inflict violence that would be able to compete with the ability of private police. It perhaps would be similar to a mob or gang that were accountable only to a market instead of collective recognition.
(When I say recognition I do not mean approval.) I may hate the health care bill, but I still consider myself to be living under the authority of the U.S. government. (Too bad it doesn’t care about the constitution!)
Kcmoney | Jul 9, 2010 | Reply
A couple of weeks ago I was in NYC for the weekend. On a Manhattan street corner near my host’s home, the traffic police had set up a trap. The trap was a yellow no-stopping zone on the curb that was convenient for drivers to enter and pause to unload a passenger, but difficult to escape because of the passing traffic. Before making their escape from the curb, however, one of five—yes, five!—uniformed traffic police would saunter over, stop the “criminal” driver, and issue a citation. This went on for hours a day, five days a week. There is no telling how much money the city makes off this particular street corner. I was appalled.
The scofflaws did cause a problem for the bus that tried to stop in the zone. But rather than resolving the conflict between motorist and bus, instead the city choses to milk the drivers like money cows. Under a private system of traffic policing—a duty most likely conducted by the private road owner—it doesn’t make sense to treat non-criminals like criminals to be fleeced. It makes more sense to resolve the conflict by designing a better road, keeping the traffic moving, and thereby make your paying customers happy about both the roads and the cops patrolling them. After all, when was the last time you saw a mall cop pull a customer aside because they violated some arbitrary rule? Never, of course, because that would drive customers to other malls!
And btw, if you want to watch the NYC traffic-cop spectacle for yourself, head over to the SE corner of East 96th St. and 3rd Ave., in the afternoons. Take a camera. Please.
mikehell | Jul 11, 2010 | Reply
Only if you want to get arrested...which might not be bad if you want to make a point and try and stand up for your rights. But the sad fact is most cops think it is illegal to take pictures of them in public. It isn’t, but that is what they think and more often not they will arrest you. Just an FYI.
Steve Verdon | Jul 13, 2010 | Reply