It's not quite the same as the "criminals are insane" view, but I am familiar with the "moral education" theory of punishment.
In 'The Moral Education Theory of Punishment,' Jean Hampton wrote:
Punishments are like electrified fences. At the very least they teach a person, via pain, that there is a "barrier" to the action she wants to do, and so, at the very least, they aim to deter. But because punishment "fences" are marking moral boundaries, the pain which these "fences" administer (or threaten to administer) conveys a larger message to beings who are able to reflect on the reasons for these barriers' existence: they convey that there is a barrier to these actions because they are morally wrong. Thus, according to the moral education theory, punishment is not intended as a way of conditioning a human being to do what society wants her to do (in the way that an animal is conditioned by an electrified fence to stay within a pasture); rather, the theory maintains that punishment is intended as a way of teaching the wrongdoer that the action she did (or wants to do) is forbidden because it is morally wrong and should not be done for that reason. The theory also regards that lesson as public, and thus as directed to the rest of society. When the state makes criminal law and its enforcement practices known, it conveys an educative message not only to the convicted criminal but also to anyone else in the society who might be tempted to do what she did.
She acknowledges her view is not perfect, by the by...
Jean Hampton wrote:
Much more work needs to be done before anyone is in a position to embrace the view wholeheartedly, hence I won't even attempt to argue in any detailed way here that it is superior to the three traditional views.
The three traditional views being deterrence, retributivist, and rehabilitation views.
Now, once in a lecture on this, the subject of the death penalty was discussed. Half-jokingly I suggested that the death penalty could be seen as "Maximum Education."
Along the same lines, within the view that criminals are somehow "insane," perhaps the death penalty can be viewed as being "Drastic rebalancing."
NOTE: Views expressed within this post are not necessarily those of the author's.