Imprisonment is the worst punishment possible. I don't mean it's the biggest punishment. I mean it's the most despicable thing you can do to someone. No matter what the wrongdoing is, any other form of punishment is always superior.
Think about what you do to punish someone in each case. With beating someone up, you punish them by giving them pain - something no one likes, but that badguys hate more than goodguys (remember the Protagonism summary? badguys are more after pleasure, goodguys are more after Fuiki). But when you imprison them, you punish them by taking their freedom. Now that's a problem because freedom is something that matters more to goodguys than to badguys. Pursuing freedom is one of the 32 Virtues (Uncontainability), which means when you take it, you're punishing the virtue in someone, whereas when you beat them up, you're punishing the vice in them because pursuing pleasure is a trait of badguys. This should go without saying: if you want to punish a bad person, take something they want because they're bad, not something they want because of the little good they have in them. Another way to look at is this: if a criminal in jail repents, they want to make restitution for their crimes. But they can't. That means the more they repent, the more they suffer. What a fucking great idea.
There are other reasons why imprisonment is worse. One is that when you put someone in a cage and stop from them doing anything, you're stopping them from working, which means they become a drag on society since other people have to feed them (it is important that the taxpayer's anger here should be directed at the government, not the criminals). Then there's the reason of increased collateral damage: if you put a criminal in jail that has a spouse and kids, you're punishing them too by taking their loved one from them. Even their employer suffers from having one of their employees taken from them. But if you just beat the criminal up or take their property to give it to the poor or to the victim, those around them don't suffer as much.