That's a very valid point about private prisons, but a completely wrong one. Let's think for a moment, would they indeed be acting the way you describe. To understand this, let's find out who funds private prisons. In the current system, a government does. Private prisons indeed have an incentive to keep prisoners for as long as possible to extract the maximum amount of money from the government. Since government doesn't spend its own money, it doesn't care nearly as much as each one of us would for every cent we have.

In a system I advocate, private prisons are, just like police and firefighters, funded by private citizens. A private citizen doesn't want to pay for the prisoner being held longer than it is truly required for him to become a decent member of the society again. If such a private prison decided to cheat its customers and extract more money by holding prisoners longer than needed, a customer may decide to stop paying it or switch to another prison (that is, switch to another protection agency). In many cases, people would not be send to prison at all, because it wouldn't be economically feasible from the protection agency customers point of view.

Now tell me, what's so extreme about my position? Why is it not reasonable?