> Why on earth did we do this?

Much has been written about this, but from what little I know, they were abusive, and didn't do the job well. And were abused to keep sane people in.

I've heard that the advent of better drugs was also a factor. Prior to those drugs, there was no alternative other than commitment to mental facilities. The drugs gave the promise of a more manageable life - either by the patient or by their family.

What did we replace them with? Prisons.

About 20 years ago I saw a documentary about the use of prisons as a means to get mental health care. It explored the history that led to mental institutions getting shut down, and how prisons are treating the mentally ill. As crazy as it sounds, the prisons are doing a better job - even the inmates agree. Quite a few inmates said that the biggest problem they had was that they would be released from prison and not get access to the care they were receiving (including medications).

It wasn't trying to paint a rosy picture - they actually said this is, in one sense, an abuse of the prison system and that there needs to be a better way to treat them - but the consensus was "Definitely should not revert to the prior mental institutions!"