This dissertation comprises of three essays that examine the relationship between public policy, the criminal justice system, and the economy. In the first two chapters, I demonstrate the ways that states' decisions to open different types of prisons can affect the local economy and other aspects of the criminal justice system. In chapter one, I focus on cataloging where states choose to open new prisons, specifically, where they choose to open public or private prisons. Notably, states that construct private prisons also construct more public prisons more rapidly than states that do not build private prisons. I find suggestive evidence that public prison construction is related to increased state employees in a county. I fail to find a relationship between either public or private prison construction and private industry employment. In the second chapter, I explore how opening private prisons, rather than public prisons affects states’ criminal justice systems. My paper explores how state use of private prisons between 2000-2019 affects state prison systems. I find suggestive, but statistically insignificant evidence, that states that opened private prisons saw increased recidivism compared to their pre-adoption periods. Interestingly, the increased recidivism does not seem to be driven by a change in crime; it appears that the rise in prison admissions is increasingly the result of parole or probation violations. While private prisons may offer states short-run savings, my results suggest that they cause more churn through the criminal justice system, potentially costing the state more in the medium to long run Finally, my third chapter examines how regulation unrelated to the criminal justice system can induce the creation of illegal markets. Specifically, in this paper, we explore the demand-side of an illegal market for menthol cigarettes using data from an online discrete choice experiment (DCE) where adult menthol smokers made hypothetical choices between menthol and non-menthol cigarettes, menthol and non-menthol e-cigarettes, and quitting. The DCE presents subjects with different choice scenarios where menthol cigarettes are described as either legal, prohibited but available under-the-counter and online from retailers who continue to sell them, or prohibited and strictly enforced and only available from illegal dealers. We find the proposed menthol ban would increase consumers quitting smoking by between 14-28 percent compared to status quo depending on the price of illegal menthol cigarettes. However, our model also predicts a substantial potential consumer demand forillegal markets for menthol cigarettes. Depending on the price of menthols, we predict the size of the illegal market for menthol cigarettes will be 48-87 percent of the status quo market for legal menthol cigarettes.