The Imprisoner's Dilemma

0:00I'm sitting here with Dan D'Amico, a professor of economics at Loyola University. I think for many people, this is the first time they've ever seen you on camera, at least in this format. So, welcome. It's great to be here. Now, how long have you been teaching at Loyola? This is my third year. Okay, fantastic. We were just a kid. All right. Thanks, Jeff. Now, we remember you from when you used to come to Mises University. How long... Absolutely. When was your first time? First time was my summer of junior year of undergrad, so probably 2000 or 2003, 2000.

0:48Yeah. Well, it's so great where your career has gone and I should mention right at the outside that you won an extraordinary honor, I guess, this year. Do you just mention something about that paper on public choice? Sure. I wrote a paper called The Prison and Economics, sort of modeled after Ronald Coase's The Lighthouse in Economics. And the subtitle was Private and Public Incarceration in Ancient Greece. And it describes the transition that the Athenian system of law undergoes after they basically invent prisons. They basically utilize this new technology of Enforcing Punishments by Means of Incarcerating People, by Holding Them Captive.

1:34And it has this entire series of sort of domino effects on the legal system after that because it gives the state an incredible new power. And so all of the subsequent descriptions that many Austrian economists have noticed over the years about the role of warfare as well as monetary policy and the subsequent effects that that had on the collapse and the eventual collapse of the Athenian Empire and other empires was actually, it appears as far as the historical record that the invention of the prison system sort of preceded that and I sort of trace out an explanation as to how those things are related. So within the prison system you have the fundamental claim of the state, you know, which is that we can take you, take your life and stick you away for any period of time which is according to whatever we happen to believe.

2:29So ultimately it establishes even more profoundly than something like the income tax. We own, we own you, we own potentially everybody. Well, not only that, but in the Athenian case what it really, the power it gives to the state is personhood. It gives the government the ability to decide who is and who is not a legitimate citizen. I mean, essentially, the notion of citizenship gets redefined as to those who are subject to sort of the private functions of enforcement, like you being liable to me as an indentured servant if you fail to pay your debts to me. That gets monopolized by the state and the state is the only person who is then allowed to use that form of force to threaten a last line of threat to ensure contracts.

3:27Basically takes all of that mechanism out of the hands of these private individuals. It then gives it that ability, it's almost like a gerrymandering system. They can now control who it is who votes and who it is contributes to the public contribution of Law. Yeah, I should mention, really, that this is a line of research for you. This is a field of study for you, and it's completely innovative, at least in modern history for Austrians. So it's an extraordinary thing, very creative, what you're doing, which is difficult enough to come up with a unique research program in this day and age. But what you're talking about, as you were speaking, it suddenly strikes me just how profound this is for libertarian research. Research Program. Well, certainly.

4:12I mean, basically, in graduate school, I thought there's sort of two ways to go about being a scholar. You can be sort of a theorist and have a unique contribution of a particular perspective or model or theory, and then find lots of applications for that theory and ways to sort of bring it to life. Conversely, I'm not particularly innovative as far as like unique theoretical contributions, but I'm very much fascinated with this one topic, mainly the historical origins and subsequent manifestations of prisons and incarceration. And when I read those literatures, it's either that thinkers like Mises and Hayek and Kirzner Center and their perspectives are either ignored or just sort of dismissed.

5:03And I think that their insights, like sort of Austrian perspectives of spontaneous order and public choice perspectives of rent-seeking and bureaucracy, are the critical tools that we should be using in order to understand these social phenomenon through history and today. And when you're talking about prisons, you're really talking about the teeth of the state, right? I mean, the fundamental thing. So, I mean, what inspired me to this topic was sort of my libertarian biases, absolutely. True love of liberty. But what's striking about that is that, you know, the history of liberalism has had this, there's an Achilles heel, I guess you could say that there's always been a belief out there that if you could just limit the state to specific functions, namely, the police powers, right, adjudication issues, things like this, then it could otherwise, you should otherwise Let's control it and you can have a free side, but what your research is showing is something much more fundamental, that it's this precise power that is the core power.

6:04Right. I think that there's a degree of inevitable growth that occurs when you reserve the right of force to the state. There's also, I think, some very interesting implications about constitutional political Political Economy, that I haven't had the opportunity to fully flesh out, but it's sort of sitting in the background as I'm continuing to do research, which is if the implications here are correct, that this is the inevitable sort of source of growth in the state, then the question of constitutional political economy should be that the goals of constraining the state have to be focused on constraining the forceful powers of police domestically and the forceful powers of military abroad. Yeah, and if you look at the growth of the state, even in our times, and we all draw on our own experience, our own lifetimes to understand things, this is the critical area of the growth of the state and its police powers. It's astonishing.

7:00I mean, I think so. I was more as a lover of liberty and concern for the state of society. I mean, to me, it's a notion of the thing that actually threatens liberty in the day-to-day lives of many Americans is the police state more than anything else. And we know this, we know this in our rig, and we all try to drive in a way that avoids the police. That's the last thing you want to do. And when you are targeted by the police in some way, you're shocked. It's just the arbitrary nature of everything. And if you ever find yourself wrapped up in the criminal justice system, I mean, forget it, right? I mean, the other sort of obvious parallel that came out of doing the work on Athens is many historians Let's just look at the process of indentured servitude and describe sort of a feudal serfdom arrangement where people are trapped in cycles of debt.

7:57If you borrow off of your labor and then you're sort of perpetually indentured to someone, you become essentially a de facto slave. Well, that in a lot of ways, our contemporary criminal justice system functions very similarly. And middle class, upper class people sort of ignore this when you get a speeding ticket for a couple hundred dollars. It's pretty obvious to recognize that if you put yourself in the position of someone who makes significantly less money than you and how difficult it might be to pay that several hundred dollars. Well, what happens if you don't pay that several hundred dollars and then sort of have an altercation or get pulled over again or something? turns into a criminal offense, and then you can end up being trapped in the system, so to speak, for something as menial as traffic violations.

8:51Or what I've seen in times, the judge will say, okay, you owe $500, you owe $800, whatever, and in addition to that, I suspend your driver's license, and in addition to that... And it inhibits your ability to earn again. Right. So, and who cares, you know, about this? And where's the appeal? I mean, there's no appeal. And the people who it harms the most are the least politically empowered. So, it's not surprising that they're sort of put upon with this burden. Yeah. So, when you hear people talk about the American system, it's cruel to the poor, it's cruel to minorities, we've got a whole The whole sector out there of second class citizens, you're listening to this, you're not dismissing it.

9:36You're thinking, yeah, that's really true. There's something to this. I definitely think that's true. I think that sort of accusation is strange. There's almost two fronts. There's people I think who recognize what you and I just sort of described that, yes, the criminal justice system is inherently biased. But then there's also this strange sort of perception that capitalism induces inequality and that that's really what's driving this notion. And I think that that's a very odd perspective because aside from there being like no real theoretical explanation as to why that's happening, I think that it ignores this role of the police state. I mean, if you just sort of just talk to a person who is poor and living in an urban Environment and ask them, well, are you frustrated because capitalism has created this system of inequalities for you?

10:35I don't think they're going to necessarily say, yes, it's the fat cats in the corporate offices that have made my life difficult. But if you ask them what they think about the police that are in their neighborhood, they'll probably give you a very straightforward answer. Can you throw out some numbers here about our incarceration rates in the United States so that we can have some perspective? I don't think about this much. Our per capita rate is higher than any other country around the world. It's about one in a hundred people. Greater populations are currently in jail in the United States than populate the cities of Los Angeles and Miami combined. It's an unprecedented magnitude around the world and through history, as well as today compared to yesterday. Most of this growth has occurred since the late 1970s.

11:25It's extremely expensive. Over six billion dollars of resources are usually expended in the various components of the criminal justice system. I read just this morning that our prison population is actually larger than the slave population before 1860. I would believe that, yes. It is a government program, and it has all the failings that you expect of a government program, right? And those numbers are explicitly biased. The proportions, as far as race is concerned, is African American men have a higher probability of going to jail than they do college. Yeah. And the drug war? That's sort of the fat elephant in the room.

12:10System. It's over a third of that growth since the 1970s is drug violations and it's difficult to disaggregate those numbers because much of the violent crime that is now sort of plaguing our cities and plaguing our criminal justice system is in conjunction with the drug war for both enforcement reasons, right? They don't have legitimate means of enforcing for monopoly reasons, that they fight over locations to sell and distribute drugs, but also there's sort of relative price issues, Alchin and Allen effects, if you will. If you're entirely enmeshed in a criminal lifestyle through prohibition, then the relative costs of being criminal on other margins in more libertarian crimes become sort of, well, more opportune.

13:06Right. If you're a meth dealer, it's just not that big a deal to go steal a ham sandwich from Walmart. Exactly. Yeah. I can't say I've had a lot of experience in this world, but that's definitely the little I've had. Back when you sold meth. Yeah. Well, I mean, in the prison system and it's related to... But that did happen. You like ran a stop sign and they took you and your bow tie right to jail. I did time in the big house myself and I got to know a lot. I've never. So you've never had this? Yeah. You're like, you've got more street cred than me, Jeff. I actually wrote an essay, maybe you read it, about what happens to you in jail. Yeah, I read every word. It was fascinating. It still intrigues me because... At the end, I was sort of, did this happen to Jeff? Yeah, I didn't reveal it when I wrote the essay because it was kind of embarrassing,

13:51which please don't let me forget that point because I really want to go back to this point about social embarrassment associated with going to jail. But the thing that struck me the most, and it's what I tried to convey, maybe I didn't do a good job of it, was something happens to When you're in jail, because you suddenly are not surrounded by anybody who values you, and the wardens look at you like a burden, you know, and so you just, you might as well just, you feel like everybody wants you to go away, to not exist, you know, and it's a strange thing, very different being in jail versus being in the outside world where your employers fulfill employees' values, your family, you know, to be valued and loved, and to have relational control over your human body as the essence of life.

14:43I mean, I think that the social science and sort of psychological insights that have come out of penology or studying the prison experience is that human beings are social animals. That one of the scariest elements of our current criminal justice system and mass incarceration is is the new growth of what are called solitary housing units or solitary housing facilities, maximum security prisons. In those facilities, inmates are not, they do not share rooms, they do not have social space, they do not interact with even other inmates. They are isolated completely to the individual level. where you have no opportunity to experience human contact other than very rare experience with guards.

15:38And the psychological ramifications for that for many people in solitary housing units, which it's extended periods of time. I mean, as an enforcement to deter gang activity in prison facilities, they've used this device. And so if you have a 20-year sentence, they can convert the remainder of your sentence, be that however many years to purely solitary confinement. And as if that's going to break up gangs. Right. But, I mean, the mental effects that it has on those inmates is pretty obvious. I mean, their writing becomes incoherent, their speech begins to deteriorate, I mean, it basically drives them insane. How much do you think society loses by having all these people locked up?

16:24I mean, the costs are obvious, but then, I mean, the other costs that we don't notice are more things like, well, what could they be producing and exchanging with us? Now, a lot of people have a difficult time sort of wrapping their head around that. Like, if you presume that all of these people belong in those prison systems, then you fear the things that they would be doing were they not locked up. I think if we recognize that people are much more adaptable to the incentives that they're placed within, that if we had a system that was rewarding better behavior and actually effective at deterring the bad types of behavior, then these people could easily be turned into productive members of society. That they could be contributing to an advanced division of labor. If you expect, if society expects something from people, sometimes people rise to the occasion.

17:17To a large extent, we are benefiting from a form of the extended division of labor that they do contribute to. I mean, to ignore the black markets and the underground economy is pretty naive, significant portions of wealth, significant portions of cooperation, of social bonds, of spontaneous norms that we recognize as things like money systems and property rights in the legitimate Economy and the underground economy, the stakes are all that much higher and their institutional norms are all that much more sort of functional and adaptable. And to a large extent, that's a stock of knowledge of not only evading the state, but of cooperating under with potentially hostile agents that maintains a degree of peace that we should should actually be looking more at to learn how it is that, how significant the potential for human cooperation and peaceful association really is.

18:16I mean, if rival drug-dealing gangs and sort of murderous mafia types have discovered mechanisms to maintain peace across themselves, why is it that our nations sort of can't fulfill those rules? You know, you're talking about these descriptions of murderous, violent people and antisocial people. You know, I think it's important for people to realize that that's a tiny number of the prison population. Most people who are embroiled in this have had various misfortunes in life for the most part. And, you know, the idea that one in ten people, you know, should be separated out, no, one should be separated out from the rest of society. That's a vast number of people. That's humongous.

19:10I mean, I also just think it's incredibly not creative. It strikes me as odd, even libertarians who I talk to. Well, if you do X, you should go to jail and insert any number of sort of obvious crimes that we really don't like. violence, murder, rape, etc., fine. But it's the second part of that sentence that I really am very discomforted by. Why is it so presumed that the notion of putting people in boxes is an effective means of responding to crime? Isn't it part of it that we can just forget, it allows us just to forget about them? I mean, that's what we really want to do, isn't it? We want to forget about these people. And when you hear that somebody's in jail, you're like, Oh, well great. You know, let's not talk anymore about that. Let's just treat that person as if he's dead. And that's what happens. They're treated as if they're dead by society.

20:02It sort of warps the creative process. There's no entrepreneurship in criminal justice. There's no one thinking hard and strategically about how to better react to crime. You know, Dan, maybe it's obvious to you, I'm very excited about what you're doing and I'm excited that you're young, I'm excited that you're just starting this because you've got a whole lifetime doing this research and you know it's possible that you're going to come out with a great book on the topic that nobody else has done, I mean this is extraordinary, the way you're thinking and what you're doing, but it's especially interesting to me that you seem to be more or less the first guy to get into this area Well, I was really inspired and a tremendous fan of sort of the hardcore wing of Austrian economics and libertarian research, Bruce Benson, David Friedman, Murray Rothbard. But when when I was reading those literatures, and they were taking head on this sort of question of, well, the difference between, like, minarchism and anarchism is police courts and prison systems. So I was really inspired by that.

21:16and even the most radical and consistent applications of markets to these legal phenomenon seem to go very quickly over this particular aspect of prisons. There's lots of work on policing, there's lots of work on roads, there's lots of work on now even national defense, but it seemed like that the real enforcement mechanism, to me when you go around and you say, Well, why, why do people pay their taxes? And they say, Oh, well, it's voluntary. You're afraid that you'll go to jail. And I think it's not even just that the police will come and get you. Because if they just came and got you and took you to court, and then you got a cent, you were said that you're wrong, and they raise your taxes even more, then you go home and you just don't pay that. It's really the aspect of being taken away, of being forgotten.

22:15Yeah, yeah, just dispensable, made dispensable by the state, and the potential for research here is, you know, it's unlimited because it's so unexplored, and yet, there's a lot of work done in this area, not from the point of view of the liberal tradition, but from criminology, sociology, all these others, so you've got a wealth of material there to draw attention to these broader themes. You know, as you were speaking about this, I'm realizing there's some parallels with the work you're doing and what many people today are doing in the area of IP, for example. It's one thing to have a theory, okay, patents for government monopoly, but the application of the theory, the real world is where it gets... I mean, the theory is essential without which you can't have the application, but it's the application in which you really begins to take flight. You begin to see how a theory of liberty can really illuminate the social workings and political workings in a way in which nothing else can.

23:20I also see a lot of overlap between the topic I work on and intellectual property rights because I think that the IP arena is really sort of this one of the scariest realms where The unintended consequences of excessive law enforcement occur because when you're talking about intellectual property, you're talking about the body of knowledge that we have to work with as a society. And so, if there are deterrent effects, if excessively incarcerating people does keep people from trading, in a sense, it also keeps people from thinking, it keeps people from innovating, it keeps people from being creative, from learning. Yeah. Well, so, I don't know if it's possible to frame this up, but, I mean, I'm looking at the big picture here.

24:05The problem with classical liberalism has been traditionally, there have been a number of problems with traditional classical liberalism. One is to grant the need for the police, right? Oh, we've got to have a state, however minimal, because we've got to have that police force. Another one has been confusion over intellectual property. And sure enough, these are the two areas where you combine the two and you'll find the essence I think that's absolutely true and I also think that the Austrian perspective is the sort of best tooled at being able to do that because we spend so much time thinking in terms of knowledge and we spend so much time thinking in terms of incentives in ways that sort of mainstreamer or neoclassical economists don't. Now there's a possibility that you're going to go ahead and plunge into teaching a course on the Mises Academy?

24:53I'd love to. I'd love to. I mean, I am a tremendous fan of the Institute, Jeff, and all the work that you do. And in any way that I can be of support or assistance, I'm happy to. Well, that's wonderful. We're big fans of you. And I tell you, I can't be more excited about your research program. I think this is very, very, very interesting. And I hope that your work gets out as well-read and that you stick with it, because I think there's a lot we can learn from you. Thank you so much, Professor Domingo. Thank you for having me, Jeff. www.fieggen.com