The Psychologist is an administrative staff member who informs you of your inmates' needs. Once the psychologist is unlocked and hired, each prisoner will display their needs while placing the mouse over them, and this information can be used to see what needs aren't being met and which need more coverage. The Psychologist enables you to view the needs of any individual prisoner as well as the overall needs of the entire prison population in the Reports section. Arguably one of the most essential members of your administration; it's vital to know what prisoners need and want, so you can provide them with that need to prevent violent outbursts.
Psychologists also lead the Behavioural Therapy Program in their offices and the Alcoholics Group Therapy in common rooms, so that they can make a inmates less violent and surpress their need for alcoholism, however it will never be cured entirely. Note that the prisoners can still fail the courses.