Prison dilemma? CEO pay? Nobel winners Hart, Holmström helped supply answers

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Harvard professor Oliver Hart may have solved a federal prisoner dilemma.

When the Justice Department recently said it would stop using privately run prisons to house some federal inmates, the decision was influenced by one of the 2016 Nobel prize winners.

Longtime Harvard economics professor Oliver Hart has done pioneering work on when it makes sense for governments to provide a service, such as incarceration, or contract it out to private firms.

In a 1996 paper on the “proper scope of government,” he and two co-authors found that private prison operators were more willing to reduce costs at the expense of quality to the detriment of the public.

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