Posner has a fine discussion that covers lots of interesting issues. I will try to extend the analysis in a few directions.
Private security personnel are used throughout the American economy. There are more than 750,000 employees of security companies, which exceed the number of state and local police. Private guards regulate admission to important buildings, such as financial centers, patrol neighborhoods, transport money and guard banks, watch customers in shops to discourage shoplifters and robbery, and offer other kinds of protections services. Their numbers more than doubled since 1990, and grew even more rapidly after 9/11, especially in cities like New York. Posner suggests there are about 25,000 private security employees in Iraq, which is only a drop in the bucket compared to the total number of private security personnel operating within the United States. Since private security companies are often hired for dangerous domestic activities, their role in Iraq is in many respects an extension of their domestic activities.
Israel's use of private security protection in dangerous situations is informative about the kind of responsibilities guards can have. Many suicide bombings by terrorist groups in Israel did succeed in terrorizing many Israelis. They became reluctant to use buses, go to restaurants and movie theatres- food take outs and videos increased a lot, and bus travel declined- and they reduced their congregation in other public places. To alleviate these fears, restaurants, theatres, buses, and other private businesses spontaneously greatly increased their use of private guards to search individuals who entered an establishment or bus, and to watch out for potential terrorists. Evidence compiled for a study of terrorism by Yona Rubenstein and myself indicates that private guards remained cheap despite the large increase in their numbers. They also helped thwart a number of suicide attacks, sometimes at the cost of their lives.
Although private security guards are relatively cheap in Israel, it is not difficult to understand why American security personnel in Iraq are much better compensated than soldiers who serve there. Most of these soldiers signed up when the threat of actually being sent to a dangerous combat zone was pretty small. So their pay was largely determined by other factors, such as training they would receive by serving in the military, their young age, the attractions of military life, patriotism, and so forth. After the Iraq war started they had no choice over whether they went there-if ordered to go they went. By contrast, employees of private companies are older and more experienced, and they have to be induced to go; financial inducements are an important part of the inducement package. Enlistments in fact fell after the war started, so the military then had to offer larger bonuses and other inducements to stimulate enlistments and re-enlistments. These higher military personnel costs are part of the estimates of the cost of the Iraq war by Bilmes and Stiglitz that we discussed in our posting on March 19th.
To my knowledge there is no compelling evidence that American private guards in Iraq have been likely to behave irresponsibly, cowardly, or use excessive force. The relevant comparison would be with the behavior of soldiers in Iraq, and I do not know of such comparisons. Posner quotes a U.S. general on the bad behavior of private security personnel in Iraq, but I would not put a lot of weight on the general's assertions. Most military officers prefer to have security forces under their command, so they are tempted to overstate the performance of their troops relative to that of private security personnel.
To be sure, the military has some advantages over private security forces since the military can impose discipline that is unavailable to private companies, such as military trials, imprisonment, court-martials, and other punishments. On the other hand, private companies are forced to compete against each other for the Iraq and other security business. Competition induces companies to screen their employees and fire the bad apples since the Pentagon will stop using companies that supply ineffective personnel, or personnel that brings bad publicity because of an excessive use of force and other misbehavior.
Incidentally, since I believe private security usually performs very well, I never was convinced by the arguments to federalize employees who search baggage at airports. Private companies would do the job better than a single (monopoly) government employer if the standards of performance were clearly set by the government agency in charge of airport security. As in other sectors, a considerable advantage of private employees over federal government employees would result from the competition of different security companies for the business of providing airport security. I would expect competition among companies to have produced more innovation and greater efficiency in airport security checks than we have received, or will get, with federal employees.