Private Financing of Public Anti-Crime Efforts

| Posted: August 10th, 2012

Over the last three years, an innovative idea has gained some steam in policy circles. Social impact bonds take private capital and inject it into traditionally public sector activities leading to more cost-effective practices. Private investors put up capital to fund interventions that are too big or too risky for the public sector. Performance targets are established and if the private sector delivers, investors are rewarded with profits. If the performance targets are not hit, the government does not have to pay for the services delivered.

This big idea is being tested in the United Kingdom today. Private investors have put up five million pounds to deliver services that would help prisoners returning from Peterborough prison integrate into mainstream society and avoid reoffending. If the rate at which those returning prisoners are re-arrested and returned to prison falls below the performance targets (which are 10 percent below typical rates of return), then investors will see a profit. If not, the government pays nothing but still benefits from having received those services for returning prisoners.

Everybody wins. Philanthropically oriented investors get a chance to leverage their gifts with the potential to receive a profit, allowing them to reinvest those same dollars in another worthy cause. If they do not earn a profit, they still accomplish their initial intention to make a socially beneficial investment. The government gets private-sector investment for a risky intervention that otherwise may not have been delivered (to the detriment of society). If the services are effective and successful, government gladly pays for them. If they’re not, public dollars can be reallocated to something else or returned to taxpayers.

Now, New York City is bringing the idea—rebranded as pay for success bonds—to the United States, raising almost $10 million from Goldman Sachs for prisoner programs designed to reduce recidivism. Other cities and states may soon follow.

Somewhat lost in all this momentum is the big picture goal of getting the private sector to invest in projects that improve social welfare. While the social impact and pay for success bonds are excellent ideas, they are only two of many that should be considered.

Take the Benefit Corporation, or B-Corp as it is more commonly known. Most for-profit private corporations are organized as C corporations or S corporations (which determines their tax status), with the simple goal of returning as much profit as possible to investors. B-Corps are different. They are organized with a broader purpose than a profit-making responsibility to their investors. They explicitly define other corporation goals that involve providing a public benefit. In return for this broader mission, some state and local governments are granting B-Corps favorable tax status, which makes them more competitive in a market filled with C and S corporations.

How could this idea be translated more broadly into public policy in the manner of the social impact bond?

Imagine that a state government is struggling to pay for its expanding prison population but political realities do not allow changes to sentencing guidelines that would decrease the flow of prisoners into the system. B-Corps provide the perfect response. The state could pass a law giving tax advantages to private prisons chartered as B-Corps. And it could require its corrections agency to only contract with B-Corps that meet certain criteria. These B-Corps would seek to make a profit, of course. But they would also have a responsibility to their charges—the prisoners—to provide an array of services designed to help those individuals make a better transition back to their communities and live more productive, and less criminal, lives. And the B-Corps would be judged on how effectively they met these goals.

B-Corps solve several problems. They solve the problem of government running prisons that cost too much and do little to prepare prisoners for their return. And they solve the problem of private prisons that cost less than public prisons but do even less to prepare prisoners for release.

B-Corps could potentially fund all sorts of public activities. For instance, following yesterday’s post [link] about the need for massive investments in our forensic sciences, forensic labs could be established as B-Corps, merging the efficiency of the private sector along with the accountability of public labs.

Social impact bonds and Benefit Corporations are just two of many innovations that could be tapped to infuse private capital into the public sector. Given the realities of the current fiscal situation, states and local governments would be wise to consider them.

Tomorrow: A Roadmap for a Safer Society

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Is Crowd Sourcing for Wanted Suspects a Good Idea? No.

| Posted: July 16th, 2012

Technology is changing our lives in new and unexpected ways. Those changes are beginning to affect policymaking in many arenas and particularly in crime and justice policy. Advanced technology now allows law enforcement to collect and examine minute traces of physical evidence to identify a suspect, thus improving our certainty of catching and punishing the real offender. Law enforcement has access to sophisticated information systems to identify crime hot spots before they overheat and to hold police management accountable for changes in crime in small places. On the horizon are all sorts of interesting technologies such as biometrics, which includes facial recognition software, that allow police to scan crowds looking for specific people.

We are optimistic that these technologies can improve our ability to deter would-be offenders and apprehend and convict active criminals. However, these changes should be introduced in a thoughtful, strategic manner, not wantonly and recklessly.

One inevitable intersection between technology and policing will be the smartphone app. Already we’ve seen the remarkably ill-advised “Avoid the Ghetto” marketed by Microsoft as a way for private citizens to avoid places where their likelihood of criminal victimization increases (spoiler alert: it won’t work). That, however, is far less dangerous than ill-advised apps allowing private citizens, at the encouragement of police, to identify suspects at large in the community.

That awful idea is being trotted out by the London Metropolitan police and Scotland Yard. According to the Huffington Post, British police are marketing “Facewatch” to Londoners to combine biometrics (facial recognition) and crowd-sourcing (handing out a task, in this case looking for criminal suspects, to lots of people).

Facewatch comes pre-loaded with the faces of 5,000 suspects and the suspect database is regularly updated. While some may use the app as intended (providing the identity to police of someone they already know) the app could easily turn crime-fighting into a game. You enter a bar or some other crowded place with some friends, look through your pictures on Facewatch for suspects in that zip code and see who can be the first to spot a felon. Call it in, the police make a bust and you are a winner. What could possibly go wrong?

Lots, of course.

There are all sorts of possible unintended consequences. For one, many studies have shown that eyewitnesses are generally really bad at identifying strangers. Thus the app is likely to lead to lots of false reports and waste precious law enforcement resources. Also, the sorts of places where identifications are likely to occur (bars, restaurants, sporting events, public transportation, etc.) leave a lot of bystanders vulnerable if the suspect resists arrest. Or, worse, it is easy to imagine vigilantes taking the law into their own hands when, for example, a wanted child molester is spotted.

And finally, a clever crook could use the app to find out if they were under suspicion and use the app to monitor police investigations.

The other big problem with this idea is that it is actually a terrifically inefficient way to catch suspects. The app comes with the implicit assumption that the government does not know where these people are or who they are and needs your help to find them. In many places police know where suspects are most likely to be located but have insufficient manpower to catch them. Or, these suspects are low priority arrests. Or, their locations are known to one agency (the one sending them supplemental Social Security checks for instance) but are not available to law enforcement. And, rather than law enforcement making evidence-based decisions about how to prioritize scarce policing resources, the public is leading the process creating the most haphazard possible resource allocation.

A much better solution would be to ditch the app and spend those resources creating 21st century information systems that most cities do not have today. In many places, police, lab and court data systems don’t communicate with each other. Court data is often housed in one system and corrections (and maybe probation and parole) are maintained separately. Juvenile systems do not communicate with adult systems and none of these databases can communicate with social and human services. An integrated data infrastructure is lot less sexy than Facewatch but far more efficient and more urgently needed.

And finally, the Trayvon Martin homicide should be sufficient evidence to prove once and for all that it is always a terrible idea for private citizens to act like law enforcement.

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