Your third paragraph seems to contradict the first paragraph. If there is no system to institutionalize people, then how can it be less rigorous than the system to imprison people.
There still is a system to institutionalize people that haven't been breaking any laws, but it's very short-term. If you're interested in checking it out, a failed suicide attempt can give you a peek into it. They are unlikely to keep you for very long, though.
The long-term system was largely shut down in the 80s, because of the aforementioned abuses. The bar to get someone thrown in the loonie bin was very low, and once you're there, good luck proving that you're sane, or that you're being abused and mistreated.
> There still is a system to institutionalize people
why are we talking of "institutionalizing" people? Compulsory treatment of someone experiencing an episode involves depriving them of liberty, while staff ensure they take their drugs, and doctors monitor their effects. Institutionalization generally means that you've been incarcerated so long that the institution is now your home, and it would be a struggle to live back in the world. Institutionalization was a large part of the problem with the old asylums.
At least one mentally-ill person I've known had been taken off the street several times; she was bitterly critical of the abolition of the psychiatric hospitals.
There probably is, but as I understand, there are some Supreme Court rulings from 1970s to 1990s that make it very costly and/or require a high bar of proof that accused is a threat to themself or others.
The workaround to the very high costs of working within these rulings was imprisoning people for drug or other non violent offenses, which was much cheaper and easier.
The long-term system was largely shut down in the 80s, because of the aforementioned abuses. The bar to get someone thrown in the loonie bin was very low, and once you're there, good luck proving that you're sane, or that you're being abused and mistreated.