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form, the problem posed is that of monitoring a function that society trusts government to carry out itself32 when government has delegated that function to an entity that society does not trust. The obvious response, and the one that now prevails in the realm of prison privatization," is to make government the monitor. Surely the state can be trusted to monitor an activity that it is trusted to perform. Several factors suggest, however, that the state as monitor will be less reliable than the state as administrator." ' First, the costs of administrative review 5 will appear in the budget of the government that let the prison contract, perhaps with much fanfare, for the express purpose of saving corrections dollars. That entity will not allow the sum of the contract price and the cost of monitoring to exceed the costs it incurred itself in running the prison system. Monitoring expenditures are thus capped by a criterion wholly unrelated to prison quality. 6 The monitoring agency will have a similar reason not to monitor the firm too closely; the agency, or one closely allied with it, selected the firm and will be tarred with the same brush if improprieties are discovered. 37 If no ready competitive market exists to which the state can turn for another operator, the monitoring agency may recognize that the state has state, to some salaried employee. On this view, the state is simply a legal fiction, "a nexus for a set of contracting relationships among individuals." Jensen & Meckling, supra note 19, at 310 (emphasis omitted). We accept without qualm the state's prerogative so to delegate, both as a practical matter and because the constraint on the distribution of profits by the state, see supra note 25, perhaps combined with a perceived commitment to public service, see supra note 24, and a sense of greater political accountability, reassures us that the institutional arrangement is sufficient to monitor and to check the tendency of state employees to self-enrichment, and to guarantee their fidelity to societal preferences. When the organizational form changes from state hiring of private individuals to state hiring of a private firm, the problem remains the same: how to ensure that public duties are not sacrificed to private interest. Different monitoring mechanisms may be employed, but if they are as successful as those deemed acceptable under state management, the objection that the state has no authority to delegate cannot seriously be raised. 32. The trust may not be wholehearted, but it is sufficient to allow prison operation. 33. N.Y. Times, Feb. 11, 1985, at B6, ol. 3 (facilities inspected and monitored by state). 34. It remains to be demonstrated that another monitor can perform more ably. Cf Coase, The Regulated Industries-Discussion, 54 AM. ECON. REv. (Papers and Proceedings) 194, 195 (1964) (relevant comparison is "between social arrangements which are all more or less failures"). 35. Such costs are not inconsiderable. In the wake of Ruiz v. Estelle, 679 F.2d 1115 (5th Cir. 1982) (finding Texas state prison conditions to violate Eighth Amendment), "a special master with a staff of attorneys and investigators and an annual budget in excess of half a million dollars is required to monitor compliance with a judicial decree seeking merely to eradicate cruel and unusual punishment." Hearings, supra note 4, app. II at 481-82. One could expect effective general monitoring to cost more. 36. Often, the governmental entities that contract out incarceration do so because they face tight budgets and hence have few discretionary funds. See Wash. Post, Sept. 22, 1985, at F9, Col. 1. Even if the sum of immediate cost saving from privatization and the expected value of future cost-saving innovations were greater than the added costs of monitoring, such an entity might not monitor adequately if the immediate cash flow were negative. 37. For an early example of suppression by official inspectors of grievous wrongs occurring within a penitentiary, apparently because the inspectors viewed themselves as advocates of the particular penal system, see H. BARNES, THE EVOLUTION OF PENOLOGY IN PENNSYLVANIA 161-62, 306-07 (1927). The Yale Law Journal no interest in acting on the agency's findings, and the agency may therefore decline to publish, or even investigate, abuses. Furthermore, administrative monitoring is subject to the phenomenon of "capture" of the regulator by the regulated entity.3" Finally, state monitors face formidable difficulties in determining societal preferences with respect to prison operation 9 and in implementing those preferences. Governmental monitors have little incentive to push prison conditions beyond a legislated or courtimposed minimum standard.41 Their job is complete when that standard is

The Panopticon Revisited: The Problem of Monitoring Private Prisons