The Knesset recently authorized privatized prisons in Israel. The rationale is primarily economic, based on claims of savings as high as 25%. However various studies contradict each other with regard both to cutting costs and to the efficacy of privatization. Not all agree that quality of life, daily functioning, and the quality of educational and rehabilitative activities are better in privatized than public prisons. The Ministries of Finance and Internal Security decided on privatization for financial reasons without holding a meaningful public debate on the social, value-based and moral aspects. One such question is whether it is appropriate for the state to transfer coercive power over prisoners lacking autonomy to private parties motivated by economic interests who could possibly exploit their power to profit at the expense of the prisoners' living conditions, treatment, training and rehabilitation upon return to the community. The notion of justice will likely suffer when subordinated to private profit motives. The Privatization of Prisons Law in Israel partially discusses these problems by means of various clauses that restrict the possibility of harming prisoners rights and require care, education and rehabilitative activities, in addition to requiring strict supervision over activities in privatized prisons. However, in Israel, public supervision of privatized entities is inadequate. The rigor of the law is seldom invoked with private parties who violate laws or the terms of contracts they themselves have signed. Hence, the effectiveness of supervision is also somewhat suspect. The disadvantages of privatization render its merits questionable when compared with Israel's current public prisons system. Despite extreme overcrowding and substandard facilities in some Israeli prisons, these function reasonably well. There is relatively little violence, and prisoners enjoy care, education, and vocational training. We may conclude that it is preferable to improve facilities in public prisons, expanding them and strengthening their rehabilitative orientation. This can be done by partially privatizing the care, education and rehabilitation components as well as the services and maintenance, while leaving the security and administration in the hands of the Prison Service.