Think that the allegations of misconduct by employees of Blackwater USA are a classic illustration of market failure? Tyler Cowen doesn’t agree. He argues that the behavior of any contractor--even a provider of military services--is bound to reflect the priorities of those who hire him.
If Blackwater is assigned to protect a top American official, who is later assassinated, Blackwater may lose future business. A private contractor doesn’t have a financial incentive to protect Iraqi citizens, who are not paying customers. Ultimately, this reflects the priorities of the United States military itself. American casualties are carefully recorded and memorialized, but there is no count of Iraqi civilian deaths.