Here's a Batman/DC Comics head cannon pitch:
*Due to shifting timelines and the general haze that is time in general in comics, this could be true in some universes.
The reason so many criminals, especially in Gotham get labeled "crazy" and sent to an Asylum rather than to prison (or really to death, I mean jesus) is because of prior reforms and efforts by old heros. Here's the timeline pitch:
Pre-1920s: metas operated in various roles, rare, no formalized concept besides things like demi-gods.
1920s-30s: Superheros even become a thing. Today they'd be called anti-heros, as there were rarely qualms with killing. Government opposed them, but due to the social and material conditions of the time, so long as they weren't being Robin hood they were mostly unmolested. This solely filtered out a less violent, more order-centric superhero archtype.
-in industrialized societies, mostly America and Britian. Other countries tended to integrate metas more.
1940s: Metas join the war effort in mass. Heros and villains alike, precursor to groups like "the Suicide Squad". Heros and Villians on both sides (some being intentionally fed lies by the state to keep them on their side). End of the war saw a surge in post war super Heros intially.
1950s: mass super hero retirements, loss of social popularity. Between trauma episodes, post-war optimism, and just not being seen as cool, heros were began to be treated at best as relics and at worst as dangerous munitions left unattended.
1960s: Serious, dangerous villains put down brutally (by government, vigilante vetrans), a more comical breed taking their place. Matching is a rise of the (diminished) supply of heros to fight them. This is paired with a rise in awareness and recognition of mental illness. Movements for reforms to the justice program begin, backed by the heros of the time. Prior killings seen as brutal and unnecessary state action.
1970s: Movement gains traction, quietly backed by traditional crime groups and other parties. Initial attempts show success at reform, or gentle containment, near the end of the decade reforms are implemented formally to support this.
1980s: Campy villains become rare, violent villains not yet really making a comeback in a flashy or noticeable way. Aging heros begin to slowly retire, low social pressure for nee heros to take their place. Some metas find work with Government, others live normal lives. Near end of decade, long running government push to ban or control heros pushed through (partially in response to their long term support of social movements...), effectively banning Superheros.
1990s: Heros fall out of favor, institutions to handle the mentally unwell struggle and in some cases start to die out.
2000s: Mostly a continuation of the 90s, but 9/11 was a significant response from metas and heros. Even old 40s heros came back to help were they could. Huge jump in public relevance and approval. Many metas joined war in Afganistan/Iraq (with mixed feelings about it during and after). Depending on when you want your Batman/Superman to start operating, this decade may be it.
2010s: Most likely time for Superheros to "make a comeback". Probably starting with Batman/Superman. Legacy polices on crime, mental illness, metas, and government power should roughly form the shape that the comics usually have them start in.
Some random additional notes:
- Circuses probably employ metas in performances, extending their longevity by being cooler.
- Organized crime likely grew back after the 40s/50s in a more shadowy role. The time suppressed delaying their shift in ethics/style/methods as they are actively cultivating an image that ties them back to that original idea, rather tham having true continuity.
- 2000s era prime "re-do backstory" time period for Villains. Luthor being a mix of Madoff and Blackrock, Iraq war vetrans with PTSD, disillusioned people, etc.
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