Even though Alabaster is a beautifully lush campus, it's no coincidence that Frankie compares it to the original panopticon, which was a design for a hypothetical prison:
[E]veryone in the panopticon knew they could be watched at all times, so in the end, only minimal watching actually needed to happen. The panopticon would create a sense of paranoia so pervasive that its inhabitants became practically self-governing. (10.9)
Though it is a highly selective (and expensive) boarding school, Alabaster also happens to carry quite a bit of rules with it. And however fancypants it might be, it's really eerily similar to the panopticon, when it comes to atmosphere:
Security at Alabaster was lax. The feeling of being watched generated by the panoptical nature of the boarding school institution was enough to keep most of the students obeying the rules without the need for any serious levels of surveillance. (12.1)
Yep, there's no denying that Alabaster's a bit of a prison, where there are lots of expressed rules and even more unspoken ones. Frankie finds herself navigating these dangerous waters, trying to decide whether she's even allowed to sit at the senior table by herself before everyone else gets there, or if she should retreat back to her sophomore table.
In the prison of Alabaster, Frankie and the other students feel like they're being watched even when they're not. There's the scene where Alpha comes to get Frankie to go get pizza with them and she hesitates, even though the likelihood of getting caught is rather low:
"Who's gonna know?" he asked her.
Alpha had a point. But such is the nature of the panopticon: most students at Alabaster didn't leave campus—even though it was as simple as hopping over a low stone wall. "I don't want to get caught," Frankie said. (14.10-11)
Neurotic much, Frankie? Ah, but that's the nature of the Alabaster panopticon, where students are afraid to rock the boat, even though they know the consequences might never materialize. It plays on their internal worries and neuroses, and takes advantage of their desire to please:
It's a systematic paranoia. Like, when you have that creepy sense that your dad knows you drank that beer, even though you drank it four days ago and there's no evidence whatsoever that he knows. (10.19)
The systematic paranoia is actually two-fold. It comes from both the school and from the students. Frankie feels forced at first to follow the rules, to only sit at the senior table when she's invited, to act sweet and understanding when her boyfriend ditches her. She knows what she's supposed to do, but finds it increasingly, disgruntlingly pointless.
By the novel's end, Frankie learns that there's no point in catering to that kind of "systematic paranoia." She can do what she wants and if she's smart and careful enough, she won't get caught. And when she finally does get caught, it's on her own terms—she confesses to Matthew. So in a cool way, the panopticon never worked on her at all. No one was observing Frankie, and so they're all surprised when she's the one who messes with the system.