You seem like the type of person that loves seeing crime on your streets. Maybe that's a reason why Detroit is so messed up. People like you think that incarceration is a 'bad thing' when in reality it helps protect the law-abiding citizens of a city. Sure, prison is torture, but it is *meant* to be an incentive for people to obey the local laws! Wether you like it or not, without prisons there would be no protection for people like you to do your own jobs, unless you armed yourself. Ironic that you said how many crazy people there are in the world, and yet despite that you are still against the prison system.
As for having it in MLP, well, I think it is something that still could exist without being on the level of the real-world prison system. I mean, prisons have been seen in plenty of cartoons in the past, including ones meant for kids. They are very lighthearted versions of prisons, though, not meant to showcase the problems with real-world prisons. I think that is the route that Hasbro wants to go in with G5 MLP-having a proper justice system in Equestria, one thing that I took issue with in regards to G4 (they had tons of criminals in G4 that they didn't lock up-I really hated that).