A systematic theory of the economic functions of imprisonment can be constructed with reference to the interaction between the crime- and class-control strategies of prison reformers, prison administrators, and government officials, and their financial and industrial goals. I develop a theoretical model which links variations in prison discipline and prison labor policy to the processing of populations through the criminal justice system as both economic threats and economic resources. Using this model, I examine six periods of 19th-century U.S. history and show that changes in business conditions and labor supply coincided with identifiable stages in the development of penology. Each system of prison discipline discussed represented a distinct resolution to the issue of whether prisoners should work. (Author abstract modified)