The paper "The Proper Scope of Government: Theory and an Application to Prisons" by Oliver Hart, Andrei Shleifer, and Robert W. Vishny explores the optimal choice between in-house provision and contracting out for government services, focusing on the trade-offs between cost efficiency and service quality. The authors develop a model where providers can invest in improving service quality or reducing costs, but incomplete contracts mean that private providers have stronger incentives to reduce costs than government employees, often at the expense of quality. The model is applied to the context of prison privatization, where concerns about quality and cost are particularly salient. The paper concludes that private provision is generally cheaper but may deliver either higher or lower quality, depending on the specific circumstances. It also discusses the role of competition and the implications of different levels of government corruption and self-interest in shaping the optimal ownership structure.The paper "The Proper Scope of Government: Theory and an Application to Prisons" by Oliver Hart, Andrei Shleifer, and Robert W. Vishny explores the optimal choice between in-house provision and contracting out for government services, focusing on the trade-offs between cost efficiency and service quality. The authors develop a model where providers can invest in improving service quality or reducing costs, but incomplete contracts mean that private providers have stronger incentives to reduce costs than government employees, often at the expense of quality. The model is applied to the context of prison privatization, where concerns about quality and cost are particularly salient. The paper concludes that private provision is generally cheaper but may deliver either higher or lower quality, depending on the specific circumstances. It also discusses the role of competition and the implications of different levels of government corruption and self-interest in shaping the optimal ownership structure.