WhoWee, ryan_m_b, et al, the idea is to improve the efficiency of the penal system. Just about all the problems in prisons arise from situations where prisoners are in contact with other people. The most expedient and efficient way to deal with this is to keep them locked in their, preferably single person, cells. Some maximum security prisons have been doing this for quite some time now.
By taking the food prep, laundry, etc. duties away from prisoners these jobs can then be given to law abiding people who need work, which would help the economy. Building more prisons and expanding the space of county facilities also provides jobs for law abiding people, which also helps the economy, and also positively affects the efficiency of the criminal justice system in general.
The idea of legalizing recreational drug usage, manufacture and sales, and prostitution, and taking control away from criminals seems like a very good idea.