Thursday, December 26, 2013

Would debtor's prison raise money?

There is a legal question here which I'll ignore.  I want to focus on the question of whether debtor's prison really costs a county money.  The story seems to imply that these are not only costly for the individuals, but for the governments that run these prisons. 


"The problem is it's not actually much of a money-making proposition ... to throw people in jail for fines and fees when they can't afford it. If counties weren't spending the money jailing people for not paying debts, they could be spending the money in other ways."

The Brennan Center for Justice at New York University's School of Law released a "Tool Kit for Action" in 2012 that broke down the cost to municipalities to jail debtors in comparison with the amount of old debt it was collecting. It doesn't look like a bargain. For example, according to the report, Mecklenburg County, N.C., collected $33,476 in debts in 2009, but spent $40,000 jailing 246 debtors -- a loss of $6,524.

The analysis done by these advocacy groups, as you might expect, is flawed.  While the county in NC mentions how they lost $6,524 that year, there is no discussion of the fines that were paid by others who wished to avoid being jailed.  There likely are many who pay their debts faster (or more completely) when there is a threat of serving time in jail.  

I suspect that for the cost of $6,524, Mecklenburg County, which has a population of about 970 thousand, might have an extra 500 people who pay their $50-$500 fines specifically because they know they could go to jail if they don't pay.  That would mean an extra $25,000-$250,000 in revenue.  That is a pretty nice return on the $6,524 cost incurred.

Often the economic analysis in news stories isn't sound.  This is a good example.

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