Rising costs of incarceration and prison overpopulation have led some Federal and State government authorities to propose that certain correctional responsibilities be transferred to the private sector. In the past, southern States participated in convict leasing systems, while northern States focused on private contract systems for providing prison services. The study points out that States grew dependent on the privatization of punishment and often lacked the capacity or knowledge to assume these responsibilities when contractors defaulted or economic conditions changed. Political pressures often led States to maintain ineffectual private prison systems of management. The study argues that earlier experiences with privatization provide object lessons for those who support the concept now. It is important to understand why earlier experience with privatization failed and how similar failures can be avoided. 91 references. (Author abstract modified)