I'm afraid the incentive to abuse is greater than the incentive to do the right thing. Most prisoners are in prison injustly. The actual criminals are a very low %. I don't consider a crime to be a crime if there is no victim. Most "criminals" are in jail for victimless crimes. Now if you make the prison system profit based, that will only result in more innocent people going to prison just to work like slaves. Corporations can easily abuse this to get under-minimumwage labour, essentially slave labour.
Prison is an unjust institution, and with a small % of dangerous criminals, the rest of the people can easily can let go free.
I believe the majority of people are good people and I also think that it's better to let ten actual criminals go free than it is to incarcerate one innocent person. I also identify with your views that if there is no victim, there is no crime. One can argue that for many industries corporations already have a very strong influence on wages and the conditions and quality of work life, whether it is inside or outside of prison. What would you find a fairer solution to balancing the evils of impinging on the freedoms of some to protect the freedoms of others, than the current system?
Yes, crime should be de-incentivized ,and not punished. There are many ways to decrease crime, before happening, like improving communities, organizing a local community better. I guarantee you petty crimes like burglary and larceny would rarely happen if a community is united. There are other way for other crimes.
I don't find the impinging of freedoms good at all, non-invasive and peaceful methods are already available to reduce crime, there is absolutely no need for endless survailance and agressive policing. Psychology already has the answers, its just that it's not mainstream.