How would free market prisons work?

It seems that Clayton is referring to the inalienability of the will. Contracts regarding people’s wills are invalid (we are not talking about the transfer of property after death, we are talking about the mind and body). Someone saying that they waive their right to self-defense is making a claim regarding their will, and these are invalid. I suggest you read the thread Inalienability of the self.

Regarding the quote, the claim that rights are inalienable is a strange one, though most everyone knows it. Most peopel who use that phrase are talking about life, liberty and property (or the pursuit of happiness). Well, these are alienable. You can transfer the right to your life, depending upon the law. You can transfer the right to your liberty, depending upon the law. You can transfer your right to property. The will (mind and body) is different. No matter how much you want to, you cannot transfer your will to anyone else. Sure, someone could make a law saying so, but it could never be done.

Anyway, if you wish to read more about what I think on the matter, you can read the thread I linked to. I won’t hijack this one.