Agreed. There should only be a cost associated with punitive action. The incentive should be to get them out of the system (or, don't laugh- maybe rehabilitate them?), not to keep them in it.
I think this is sort of the exception that proves the rule. The people profiting form prisons have direct incentives to increase prison populations , but the people who can actually falsely imprison people have, at best, illegal side channel incentives.