Well, thousands of years of prison usage has demonstrated conclusively that being cruel to bad people doesn't make them any better. The fact is that the practice of imprisonment is irretrievably flawed. It fundamentally clashes with human nature. Putting people into cages like animals doesn't work, it never has worked, it never will work. It is also unfair to the victims and to society at large. As others have pointed out, prison is basically a training ground for sharpening criminal skills, while stoking the flames of rage. It is no coincidence that the recidivism rate is so high.
I believe we need to move away from the retributive/rehabilitative dichotomy and toward a restitutive model. If someone steals a $10,000 car, putting him in prison at $30,000 a year doesn't benefit anyone, least of all the victim. But if he now is forced to work off his debt to the victim at some minimal wage, that not only benefits the victim, it relieves the burden imposed upon society by imprisonment. Yes, I am advocating the return to (temporary) slavery for criminals. This has the advantage of not honing the animalistic instincts of criminals, while providing a material benefit to the victims. During their period of enslavement, convicts could lead relatively normal lives: they could have families, they could moonlight at paying jobs, they could go to the bars at night. There would be a lot less incentive to "get back" at the world after having been deprived of their essential humanity for years.
Restitutive penalties for strictly financial injuries would be relatively easy to impose. What would get trickier would be imposing penalties for crimes less easy to quantify; for example, physical injuries from assault. What if a robber cut off someone's hand? By the old
lex talionis ("eye for an eye") principle, he would have his hand cut off. But again, that doesn't benefit the victim directly. I would propose that such crimes should be settled in the tort courts. In other words, the victim could sue for damages and appeal for whatever relief he desired. A person with a vindictive streak might indeed petition for the perpetrator's hand to be cut off as some form of psychological or emotional restitution, and a judge might even allow it. I would imagine, however, that someone whose livelihood was dependent on his hands (an artist or surgeon, for example) would be far more interested in financial compensation. The claim could be settled like any other suit and would result in some sort of lien being attached to the perp.
Such a system could lead to the development of new forms of liability insurance, in which people would take out policies to guard against the possibility of such suits.
Still trickier would be cases of murder, sexual assault, kidnapping, etc. I personally favor capital punishment for murder, since murder is forever, but if the family of the victim preferred other forms of satisfaction, more power to them. I know a lot of people say that sexual assault is worse than murder, but having experienced sexual assault first hand, I find that idea grossly offensive. I certainly got fucked up in the head for a few years after the ordeal, but after some emotional and psychological healing, I was able to go on and have a life with a woman who loves me, a couple of adorable but annoying children, etc. Do I think the guy should die for what he did? No. Would it bother me if he had had his left nut cut off? Not at all, particularly since he has no reproductive ambitions and thus doesn't need it anyway.
I don't understand why people believe the state should impose penalties for crimes. Why not settle criminal cases like civil cases, with a judge presiding to ensure that the law is upheld, a jury weighing evidence and determining guilt, and upon conviction, the penalty being negotiated and settled between perpetrator and victim?