The trick is, I'm not proposing that we specifically spend less on prisons. Instead I suggest that we analyze what we actually spend that money on and who benefits from it. At the moment most prisons are funded based on the number of prisoners they retain. It is in their private interest then that as many people go to jail as possible, for as long as possible. With huge profit margins and a close lock on supply from government contracts, private prisons have gained a powerful lobby that continues to back policies such as the "War on Drugs," and California's "3 Strikes" program. These questionably effective policies have swelled prisons with petty criminals with extended sentences.
Examining this system of incentives it seems clearly against the interest of a private prison to promote rehabilitation. Prison education and therapy might detract from profits, and besides, recidivism also means repeat customers. It sounds and feels deplorable, but prisons behave this way because of the rules and incentives we've created for them. If we want them to behave differently we should carefully create different incentives that encourage what benefits everyone the most.
Simply put, there should be an economic incentive for prisons to attempt rehabilitation. When a prisoner completes correctional education and finishes parole, this should be seen as a success of the correctional system worth rewarding. As prisoners who participate in these programs are more likely to find reduced sentencing, and less likely to return, we can expect to have an easing in the demand for prison cells. What's better, we can also expect an increase in skilled workers and perhaps a decrease in criminal behavior.