How to Abolish Prisons by Using Career Agents
Prisons are a bad deal. They are expensive, inefficient, and often counterproductive. Prisoners live in dehumanizing conditions, the legal system groans under inefficiency, and taxpayers have to pay an average of $30,000 per year for every inmate.
The total price tag for U.S. prisons exceeds $80 billion annually, while the economic cost to incarcerated individuals in lost earnings exceeds $500,000 per person over a lifetime.
Prisons generally fail any purported goals of rehabilitation, failing to provide educational opportunities or career programming. Prisons also tend to create overcrowded spaces with heightened violence, that often makes people more criminal, not less, by surrounding them with antisocial values and criminal networks.
If something is expensive and ineffective, that’s usually a sign that there is a lack of coordination and a dose of market incentives might help do a better job.
So, what if we could turn incarceration into an investable asset class? What if, instead of locking people up at great cost to society, we could create financial instruments that align incentives toward rehabilitation and economic productivity?
That’s where Prisoner Tax Assets (PTAs) come in.
The Inspiration: Robin Hanson’s Career Agents
Economist Robin Hanson has a classic Robin Hanson idea. It involves auctions, market mechanisms, and a slightly eccentric tinge that makes you think, “Wait, this can’t be right” but by the end leaves you thinking, “Wait, why don’t we already do this?”
His proposal: career agents for regular people.
Here’s how it works. The government auctions off the right for someone other than themselves to collect a person’s future tax payments. The investor who wins the auction pays the government a lump sum today and, in return, receives that taxpayers income tax revenue going forward.
This aligns incentives: the “career agent” wants their taxpayer to earn as much as possible, so they might invest in job training, networking, or career counseling.
It’s like venture capital, but for people.
Just as actors like Morgan Freeman or Anne Hathaway have agents who want them to get better roles and take a cut of their bigger paychecks, so too would taxpayers have career agents who would want them to get better jobs and higher incomes so that they can get a cut of that increased income through their taxes.
For example, say Alice earns $50,000 a year and owes $5,000 in taxes.
The government might auction off the right to all her future tax payments for $500,000 upfront.
The investor who buys this asset now has a strong incentive to help Alice increase her income because the more income they make the more tax revenue the investor receives.
It’s a win-win all around.
Governments get an up front sum of cash, taxpayers get a highly motivated career agent, and the agents themselves get a new potential income stream with no upper bound on their earnings potential.
Now let’s apply this idea to prisoners.
How It Would Work: The PTA Market
Instead of sitting in a prison cell at taxpayer expense, governments could auction off their prisoners' future tax payments to private investors in exchange for more flexible confinement and rehabilitation arrangements.
These investors—let’s call them “prison career agents”—would assume full responsibility for their prisoner’s security and reintegration into society.
Crucially, these career agents would also be on the hook for their prisoners' negative tax receipts. That means if a prisoner fails to earn income or returns to crime and is imprisoned, the career agent eats the associated costs and not the taxpayer.
This changes the fundamental incentives of incarceration.
Currently, prisons have no economic reason to rehabilitate inmates.
In fact, they often benefit from high recidivism because more prisoners mean more funding.
And since taxpayers foot the bill, there’s no financial pressure to cut costs, improve efficiency, or treat prisoners humanely.
PTAs flip that incentive.
Now, financial stakeholders only make money if the prisoner stays out of prison and earns a legal income.
Governments could even allow prisoners to switch agents if they find a better opportunity, making their career agents use self-set Harberger taxes to ensure ongoing efficiency.
An Example: Chester the Check Bouncer
Consider Chester, a white collar, non-violent offender convicted of check fraud.
Under the PTA system, Chester’s career agent ensures he has stable employment with financial supervision rather than sitting in a prison cell, unable to earn an income, twiddling his otherwise very financially lucrative thumbs.
Maybe Chester could work at a call center, where he has no access to financial accounts, and submits to periodic financial audits.
His career agent helps keep him on track and out of trouble because that’s how they get paid.
Everyone wins: Chester stays out of trouble, taxpayers save money, and his agent profits from his productivity.
Of course, serial axe murderers wouldn’t likely be the first in line to access this PTA system.
PTAs would ideally start with low-risk offenders—people convicted of victimless crimes or non-violent offenses—and gradually expand as the market matures.
Investors would price risk accordingly: a pot smoker might command a low-risk, low-yield PTA, similar to a municipal or corporate bond, while a repeat felon would have a high-risk and a high-return, similar to junk bonds.
Market Incentives: A Practical Check
Economist Bob Murphy has pointed out that market forces would naturally regulate the private provision of prisoner security:
“No insurance company would vouch for a serial killer unless he agreed to live in a secure facility. These facilities, akin to hotels, would compete for prisoners by offering better conditions, as inspectors ensure safety. Undue cruelty would disappear because prisoners could switch providers, just as travelers switch hotels.”
PTAs would introduce competition into incarceration for prisoners, just as Airbnbs compete with hotels for travelers, Uber competes with taxis compete for riders, and UPS competes with the Post Office.
Getting into an Uber for the first time likely seemed like a first class ticket to being kidnapped but the service is now normalized and the company has a $166 billion market capitalization.
PTAs could create beneficial incentives to improve prisoner conditions while maintaining public safety, reducing costs, and creating economic benefits,
The Win-Wins
For Prisoners
Safety: Escape the violence and abuse endemic to traditional prisons.
Agency: Choose the terms of their imprisonment, incentivizing compliance.
Rehabilitation: Return to productivity quickly with tailored support.
Reduced Stigma: With less exposure to hardened criminals and a system resembling probation, reintegration becomes easier.
Optionality: Participation is voluntary, ensuring only prisoners who see value in PTAs opt in.
For Society
Cost Savings: Shift the financial burden of incarceration to private entities.
Lower Recidivism: Productive prisoners are less likely to re-offend.
Reduced Criminal Networks: Minimize the criminal subcultures fostered in prisons.
Family Stability: Keep offenders closer to home, mitigating familial disruption.
Increased Productivity: Prisoners become contributors rather than drains on society.
For Government
Revenue: Generate immediate revenue through auctions, just like with bonds.
Risk Transfer: Shift liabilities, costs, and blame to the private sector.
Efficiency: Reduce the bureaucratic load of managing prisons.
Budget: More room in budget to deal with other issues.
Information: Prices reflect recidivism risk and productivity potential for parole boards.
For Prisons
Lighter Caseloads: Focus resources on high-risk inmates.
Improved Conditions: With fewer inmates, abuse and overcrowding diminish.
Attract Better Staff: A less stressful environment draws higher-quality personnel.
For Investors
Diversification: New uncorrelated asset class
Status: Rehabilitation is seen as noble by society
Passive: Potentially passive income stream
New Niche: Massive potential market for specialization
Q: People hate pricing human lives. Why would society allow this?
We already price human lives through insurance and government bonds, which incorporate assumptions about the productivity of future humans. PTA auctions are a direct substitute for government selling debt, which governments already do to convert future taxes into present revenue. PTAs simply combine these two pricing mechanisms into a new asset class.
Q: Isn’t this just indentured servitude? Isn’t that illegal and wrong?
If prisoners voluntarily choose to auction their PTA rather than endure traditional prison conditions, it implies the current system is worse. That’s a greater indictment of the status quo than of PTAs themselves.
Q: What if a prisoner who auctions off their PTA commits a crime?
PTA agents could carry reoffending insurance similar to buying car insurance. PTA agents have strong incentives to prevent such outcomes since they bear the costs, unlike current prison officials, who often receive more funding after high-profile failures.
Q: What if PTAs create a perverse incentive where bondholders lobby for policies that criminalize more behavior just to expand their investment opportunities?
This concern already applies to private prisons, yet we don’t currently see major backlash or public concern. One easy solution would be to make it so that PTAs only are available to current prisoners and not future ones. Another easy solution would be to make PTAs voluntary and open to anyone, not just prisoners. If people could opt into the system regardless of incarceration, governments would have no reason to lock more people up just to expand the market.
Q: This just seems icky. It’s new, weird, and therefore bad.
Traditional prisons are already icky and bad, just old and familiar. A liquid market in PTAs would reflect the judgment of those most affected—a far more democratic outcome than the status quo.
Conclusion
Prisoner Tax Assets represent a radical but realistic alternative to mass incarceration.
By leveraging market incentives, we can cut costs, reduce recidivism, and restore dignity to prisoners while improving public safety and economic productivity.
The status quo is expensive and broken.
It’s time to try something new.