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NancyLebovitz comments on Crime and punishment - Less Wrong
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I'm inclined to agree with you-- the prison-industrial complex affects the number of people in prison in the US, but it's not the only way that sort of thing can happen.
As for the US, it's not just the guards' unions, though the unions have lobbied for "tough on crime" measures-- there's money in constructing prisons and in for-profit prisons. Also, prisons can be a major source of employment in rural areas, and prisoners count as residents for counties (I think-- it might be at some other organizational level) to get Federal aid, but the money need not be spent on them.
History of treating teenagers like adult criminals
Surely its effect is above zero, but I'm highly suspicious of how significant it really is. I wasn't around back then, but from what I know, it seems pretty evident that the crime wave of the sixties, seventies, and eighties produced a genuine popular sentiment in favor of tougher criminal law, which hasn't subsided to this day. In fact, this is one of the few major political trends in recent decades that looks like an authentic democratic response to popular demand.