Hart, Shleifer, and Vishny (HSV) Argue That Private Prisons Have

question 14

Essay

Hart, Shleifer, and Vishny (HSV) argue that private prisons have strong incentives to cut costs at the expense of quality, therefore public prisons are better than private prisons. Is there a problem with HSV's argument? If so, explain.

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Definitions:

FICA Taxes

Federal Insurance Contributions Act taxes, which fund Social Security and Medicare, required to be paid by both employees and employers.

Unemployment Tax Rates

Refers to the taxes that employers must pay to the government, usually at the state level, based on a percentage of the total payrolls of their employees to fund unemployment compensation programs.

Medicare Portion

The Medicare portion is the share of payroll taxes collected from employers and employees that is allocated to fund the Medicare program.

Social Security Portion

The part of payroll taxes paid by employers and employees that goes towards funding the Social Security program.