America's jails and prisons are overcrowded, creating a problem for the criminal justice system and society as a whole. Traditional alternatives to prison are also overcrowded, with probation and parole officers struggling to keep up with overburdened case loads. While many believe corrections costs to be expensive, in the aggregate this is not the case. In fact, if the benefits of the investment were worth the expense, State and Federal corrections budgets could easily be expanded. The question remains to find the correctional response that would garner benefits that outweigh the costs. The authors apply a cost-benefit analysis to the question of whether more prison cells should be built to increase sanctioning capacity or if it would be more cost-effective to add alternative sanctions. Among possible alternative sanctions are probation and parole, intensely supervised probation and parole, house arrest with or without electronic monitoring, shock incarceration, community sponsor programs, and victim restitution programs. The analysis included three major components of costs: amortized start-up and construction expenses for one prison cell or alternative sanction, its annual operating cost, and any welfare costs. Benefits include the direct costs to victims of those crimes that would be prevented by the annual operation of one prison cell or an equivalent alternative sanction. According to the cost-benefit analysis, the total direct cost of operating a prison cell for 1 year is between $34,000 and $38,000. The total direct benefit of operating a prison cell for 1 year amounts to monetary savings of between $172,000 and $2,364,000. The benefits of operating the prison cell for 1 year was based on estimating the number of crimes that would be prevented by adding 1 year to the time served by the average imprisoned felon. As such, the benefits of operating a prison cell for 1 year far outweigh the costs. As far as alternative sanctions, it is not clear whether a dollar spent on alternative sanctions prevents as much crime as a dollar spent on a prison cell. The authors suggest creating alternative sanctions that begin with the cost-effective approach of close confinement and then gradually reduce supervision. Tables, references