TEXT OF INTERVIEW

Tess Vigeland: We were talking earlier about the government's gradual relinquishment of ownership in General Motors. In these days of government intervention in private industry it might be hard to imagine, but one public sector is undergoing radical privatization. Police departments across the country are finding themselves supplemented, and in some cases supplanted, by private security firms.

Simon Hakim of Temple University has studied the issue and says in the early 90s, there were seven police officer for every four private security guard. Today, it's one officer for every three private guards.

Simon Hakim: The main reason is that the police, at state and local level, the budget pretty much stayed fixed over time. Now, the demand for security have grown, even by municipalities. And municipalities start to feel the budget crunch. So the result of it is that a lot of security that governments require, governments started to contract it out to private agencies. For example, guarding prisoners, guarding even police station and the other type of installations.

Vigeland: I know in the article that you talk about how part of the problem is that traditional police forces aren't quick enough to react to new threats, for example, identity theft.

Hakim: That's right. In other words, up to now, we talked about the lower-level security that private security guards enter into. Now, we have more sophisticated crime, like identity theft, like Internet crime. The police doesn't deal with it anymore at all. So, private security forces got into it, but it's further. A lot of those investigations require high caliber professionals -- accountants, IT people, lawyers, etc. -- that the police have difficulty recruiting, because of limited budget. And it can never pay the high salary that the private sector does.

Vigeland: But there are still a lot of crimes that private security forces certainly cannot tackle -- I mean murder, breaking and entering, that sort of thing.

Hakim: In the last 20 years, we've seen a drop of 25 percent in property and violent crime. That's traditionally being handled by our police departments. So what you're really facing is that the traditional work of the police has been going down because they have less crime to deal with.

Vigeland: So where does this go from here? Would you predict, based on your research, that we will see more and more police forces going into private hands?

Hakim: I believe it's true. The police is a monopoly. It's less innovative than the private sector that is under the gun of competition. A police department will never go bankrupt; private company could go bankrupt. So private companies adopt more technology. I expect we may find contracting out of small police department, 'cause a lot of small police departments really don't have the justification, in many cases, to exist. And for the consumers, they get better service in much lower costs.

Vigeland: Simon Hakim is a professor of economics at Temple University and the co-author of "Privatizing the Police" in the third quarter edition of the Milken Institute Review. Thank you so much for your time.

Hakim: Thank you very much for inviting me.