Tyler Cowen, remarking on an NYT article on charging prison inmates for room and board, says

I'm not comfortable with this notion, since I don't think government prisons should move toward becoming profit centers.

That’s an understatement. If one is of a libertarian bent (as I am) with regard to victimless crimes such as drug use and prostitution, the problem would seem to be that imprisoning people doesn’t cost the government nearly enough. After all, the marginal prisoner is a lot more like Tommy Chong than Charles Manson.

From an economic point of view, the problem is that a huge portion of the cost of incarceration is borne by the person being incarcerated: which, of course, is the intent, for otherwise the threat of imprisonment wouldn’t have a disincentive effect on behaviors the state has prohibited. But since the full cost of imprisonment is not borne by the state, economics suggests that there will be too much of it.

Here’s my not-entirely-facetious* suggestion for getting government incentives right with regard to imprisonment. For each person the state imprisons, the state should hire, at whatever price the free market will bear, an innocent person who will be imprisoned under the same conditions for the same amount of time. (It need not be one single person for the full duration of the sentence. Presumably this job would have very high turnover.)

This way, the government will imprison someone only if the benefit to the government (which will be aligned to some degree with that of the public in a democracy) is greater than the cost, as determined by the free market, to the person being imprisoned.

Of course, there are other costs of imprisonment the state bears, such as maintaining buildings and hiring prison guards, so we would might end up with too little imprisonment under a such a one-for -one scheme. So perhaps the state should hire four innocents to be imprisoned for every five actual prisoners, or two for every three.

At any rate, the government would be a lot less cavalier about locking people up left and right under if it followed such a plan.