John Robb's post on resilient communities and scale invariance, sheds light on why this cannot work:
Our global system is composed of intermeshed and tightly coupled networks. These interlinked networks enable our system to be efficient and relatively robust against random shocks. However, large shocks can overwhelm this type of network design, causing it to either act erratically (turbulence) or break apart (into smaller clusters via cascades of failure). We saw systemic turbulence in action via the recent brush with a global financial meltdown in September 2008 and we are seeing it currently with erratic swings in markets, trade, and other forms of economic activity. Examples of network failures that result in disconnected clusters are seen with every black-out in the electricity network. A pandemic would be a mix of the two, intentional clustering (quarantines) and high turbulence.
Prisons share with pandemics the joint features of "intentional clustering (quarantines) and high turbulence" Accordingly, we should not be surprised to learn from Wikipedia that rehabilitation appears to be more successful in non-prison environments:
Residential approaches—whether in prison or some other live-in option—tend to be less effective than non-residential approaches. These researchers found that effective programs delivered in the community were followed by a 35% reduction in reoffending, whereas effective programs delivered in residential settings (such as prisons and halfway houses) were followed by a 17% reduction in reoffending. One very likely reason for this is that for teens and adults, mixing with antisocial peers increases the risk of offending. In prison or residences inmates spend a great deal of time with other people immersed in criminal pursuits and beliefs, whereas in community-based programs there is more opportunity to mix with people involved in constructive, law-abiding activities. Antisocial peers in prisons and residences can form a very powerful pressure group, subtly and not so subtly influencing the behavior of other inmates.