An obvious first rule for economic efficiency is to maximize fines and minimize incarceration. A second rule is to minimize criminalization: lengthy incarceration, especially of youthful offenders, is more likely to criminalize than to rehabilitate the offender. The crime-spree interruption principle advocates removing the lawbreaker from the setting of his offense and his delinquent subculture. The incapacitation principle holds that incarceration be used for those offenders who, if released, are likely to inflict public damages at a rate that can be reasonably assessed as more than the cost of confinement. Selective incapacitation could be implemented by assessing the statistical risk of recidivism and incorporating this policy into sentencing and parole guidelines. In contrast to the just-deserts policy of making the punishment fit the crime, this principle would make the punishment fit the offender. An efficient correctional agency can make its penalties less criminalizing by adopting the differential association principle. This minimizes the unsupervised involvement of offenders with each other and maximizes their bonds with nonoffenders. This requires that small institutions have small residential units within them; and that involvement with staff be collaborative rather than authoritarian. As the end of confinement nears, offenders should be offered a trial release into the community to maximize contact with nonoffenders outside the institution. The final principle calls for the provision of intensive vocational education and work experience in occupations that are appealing and have good postrelease job possibilities. Successful application of these principles will require careful assessment of both the criminal and noncriminal record of each convicted person. Included are 17 references.