Can Markets Provide Police Services?

While Americans spend a lot of money on private security, we generally associate police services with a local government monopoly. And indeed, government is where the buck stops. One of the conventional rationales for government provision of police services is that the market will under-provide it. After all, if I subscribe to a protection agency that has to drive by my house, my neighbors presumably get some of the spillover benefits. The market will fail to provide the efficient level of police protection.

Of course, the existence of externalities has to be traded off against the change in incentives that comes with bringing protection services under the auspices of the government. Even if we accept the rationale, I’m not sure it applies anymore. People around our neighborhood have “Protected by [Whoever]” signs in their yards, and presumably properties can be “patrolled” remotely with cameras.

In an ongoing research project about the Memphis Riot of 1866, Christopher Coyne and I are discovering that the case for government provision of police services has never been very strong (here’s a very, very early version of what we’re doing; here’s Fred McChesney on fire services). As technology has changed, though, I’m coming to think more and more that “market failure” arguments for government provision of police services are incorrect.