1. In “The origin of political order” Fukuyama takes the point of view that the emergence of the western state depended on suppression of extended family ties, since those formed an alternative power structure.
If one were to punish not only the individual but also his family, I would think that inner family loyalty would in the end be strengthened.
2. In to command and persuade Baldwin asserts that punishment is most effective if it is ( in principle ) accepted by the punished. In Modern society punishing the family lost likely would not be accepted.
Also interesting the wiki article ( English ) about the concept in German law.