THIS ANALYSIS OF THE COST OF INSTITUTIONALIZATION FOUND THAT, IN THE LONG RUN, A U-SHAPED AVERAGE COST SURVEY IS APPROPRIATE AND THAT SUCH ENVIRONMENTAL FACTORS AS SECURITY, REHABILITATION EMPHASIS, AND INMATE POPULATION CHARACTERISTICS ARE SIGNIFICANT INFLUENCES ON INSTITUTIONAL COSTS. THE SOCIAL COSTS OF CORRECTIONAL PROVISION ARE THE ACTUAL PRODUCTION COSTS ASSOCIATED WITH THE INSTITUTION, OPPORTUNITY LOSSES DURING THE INCARCERATION PERIOD AND AFTER RELEASE, AND INTANGIBLE COSTS. INCAPACITATION BENEFITS ARE THE VALUE OF CRIMES AVOIDED DUE TO THE INTERRUPTION OF CRIMINAL CAREERS. INDIVIDUAL INCAPACITATION BENEFITS AND LOSSES ARE DETERMINED BY THE SEVERITY AND FREQUENCY OF CRIMINAL ACTIVITIES WERE THE PERSON NOT INCARCERATED. A SERIES OF TABLES AND A MATHEMATICAL DISCUSSION ILLUSTRATE THE INTEGRATION OF THESE VARIABLES INTO THE MODEL AND POSSIBLE OUTCOMES UNDER VARYING CONDITIONS. OPTIMAL SIZE ESTIMATES FOR PRISON FACILITIES ARE PROVIDED, ALONG WITH CRIMINAL CAREER FUNCTION ESTIMATES FOR EACH OF THE SEVEN INDEX CRIMES AND FOR VARIOUS INMATE CHARACTERISTICS. THE STUDY RECOMMENDS THAT REHABILITATION PROGRAMS BE EXPANDED BECAUSE CORRECTIONAL INSTITUTIONS BECOME COST EFFECTIVE ONLY WHEN THEY PROVIDE GREATER SOCIAL BENEFITS THAN AT PRESENT. FOOTNOTES AND REFERENCES ARE APPENDED. (GLR)