Well, anyone could say somrone was crazy and they'd maybe get locked up. Women were getting diagnosed with hysteria and lobotomized. You can't really fix a system that takes away people's autonomy as the main feature of that system. Like people who get PTSD and are disempowered are the ones being diagnosed and locked up - even though it actually seems pretty rational to develop PTSD from the stuff they went through. So are they actually crazy, or are they victims?

It's really not that simple, and this is forced imprisonment we're talking about here. Not even in the fields of ethics and bioethics do we have concrete answers.

https://journals.academiczone.net/index.php/ijfe/article/view/2261

The article discusses an approach to solving bioethics problems through consensus and the establishment of conditional demarcation boundaries within the legal field. The author notes the lack of general criteria for assessing positions, which leads to an “eternal discussion” and makes some problems, such as abortion, euthanasia and biomedical experiment, fundamentally insoluble. Existing bioethical theories consider problems from an axiological position, remaining divorced from ontological foundations. The issue of abortion has historically depended on the dominant type of worldview - pantheistic, theistic, deistic and atheistic. The resolution of such issues is determined by external factors, which creates the ground for conflicts in society. The author calls for a deeper understanding of human nature and ideological dialogues to resolve bioethical contradictions.

Well, if the residents are free to leave, then what you're proposing is assisted living or a permeable institution, not a traditional institution. Institution by the traditional colloquial definition, means they cannot leave and they have their personal liberties taken. Everyone thinks you mean "lockdown" because that's what an institution is to pretty much everyone. If you specify "permeable institution," or "assisted living," it would better convey your meaning

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3702490/

Restriction of freedom is still often associated with psychiatric institutionalization and hospital treatment although modern psychiatric wards and hospitals have been found to be ‘permeable’ [20]. Similar to Goffman’s interpretation of psychiatric hospitals, McNown Johnson & Rhodes characterized psychiatric institutions as establishments where their residents have little or no choice about their participation in activities, and have little say about how they are being treated [38]. Admitted residents are not allowed to leave the psychiatric institution without being officially released or discharged. From this perspective, patients’ freedom of movement is restricted and the functions of psychiatric institutions are similar to a security guard.

The results of this review can be related to critiques of Goffman’s notion of the mental institution [20,37,83,84] namely that the earlier conceptualizations of institutionalization are limiting and can no longer be applicable in today’s context. The traditional conceptualization of institutionalization reinforces mainly a restrictive understanding of institutionalization as taking place in institutions, where patients are only the sufferers of the treatment process and have limited autonomy and are completely isolated from the outside world. Townsend [82] concluded in his review that studies from 1959 to 1975 support the idea that institutionalization involves patients accepting institutional life and developing a lack of desire to leave after a long stay in mental institutions. More recently, Quirk and his associates [20,56] found that ‘permeable institutions’ provide a better representation of the reality of everyday life in modern 'bricks and mortar' psychiatric institutions.