Assessing the Relative Benefits of Incarceration: The Overall Change Over the Previous Decades and the Benefits on the Margin

A given level of incarceration will pass a traditional cost-benefit test only if the marginal benefit from the last prisoner incarcerated equals the marginal cost of locking him up. This paper shows that the three most critical values that need to be estimated to implement such a cost-benefit analysis are 1) the elasticity of crime with respect to incarceration, 2) the dollar value of the crime avoided by the marginal incarceration, and 3) the social costs inflicted by that marginal incarceration (in terms of locking up the prisoner, losing his or her productive contributions if free, and other costs imposed on the inmate and society resulting from incarceration). Depending on the values chosen for these three items, enormously different conclusions about the optimal level of incarceration are possible. Even if the policy of incarceration meets this cost-benefit test, it is still possible that society would benefit from a reallocation of resources away from incarceration to other modes of crime-fighting. For example, spending more on police and less on prisons might well be advisable. Moreover, under certain circumstances, targeted social spending would seem to be capable of generating similar crime reductions at lower social cost than incarceration. This article appears in Do Prisons Make Us Safer? The Benefits and Costs of the Prison Boom, edited by Steven Raphael and Michael Stoll. New York: Russell Safe Foundation (2009).