The Burgeoning Young Attorney

Social Impact Bonds: Reducing Recidivism Through Incentives

Posted on January 26, 2014

U.S. prisons are costly, overcrowded, and filling up with people who don’t belong there. This article suggests that a simple economic bonus system for reducing recidivism could change that.

Instead of encouraging incarceration, incentivize performance. How might the performance of the department of corrections be measured? By recidivism. A drop in reincarceration would offer evidence that well-performing prisons are not places that breed more criminals but provide rehabilitation instead.

Such performance incentives already exist. They are called “social impact bonds.” The first, issued in 2012 by Goldman Sachs (GS), is underway in New York City for $9.6 million. The money is going toward a four-year program to reduce reincarcation of juveniles at Riker’s Island prison. Goldman Sachs has a vested interest in the success of this program. If participants stop returning to jail at a rate of 10% or greater, Goldman will earn $2.1 million. If the recidivism rate rises above 10% over four years, Goldman stands to lose $2.4 million. In a recent report, the Brennan Center for Justice at NYU School of Law calls this a “bet on success … instead of using the typical model of privatization, in which private prisons generally bet on failure (i.e. the more prisoners, the better).”

See, What prisons can learn from Goldman Sachs