From an economic efficiency perspective, the question of whether privatization in criminal justice should be supported or discouraged cannot be universally answered. Scarce resources mean there are always tradeoffs, and the nature of tradeoffs depends on the institutional environment. When both supply and demand are controlled by public officials, competitive forces are relatively weak and efficiency gains in the form of higher quality services at lower cost are generally possible. When supply is privatized through contracting out, incentives to compete for a contract are strong but the competition can take many forms. In a competitive environment, firms will provide the level of quality consumers demand and are willing to pay for, and they will provide that level of quality at the lowest possible cost. Although contracting out can lead to efficiency gains, it may not if politics stand in the way by creating an environment that shelters firms from price and quality competition, allowing them to reduce quality in order to raise profits. When both supply and demand are privatized, firms will have to compete on price and quality dimensions since political favors will not be options. Therefore, greater privatization on both supply and demand sides will generate the potential for greater efficiency gains. If the goal is increased efficiency in criminal justice, policymakers should look beyond privatization of the supply side toward ways of encouraging greater demand side privatization. 64 references and 12 endnotes