In this example, what is fairness, if not the most accurate prediction possible?

Especially when you consider fairness to the community at large. Is it fair to black neighborhoods if we send proportionally more expected recidivist drug dealers and rapists back into their communities than we do to white communities?

Fairness is judging a case based on its merits, rather than correlations between other dimensions that are connected with systematic bias.

I should be judged based on the interpretation of my situation, not because someone who lives in a similar neighborhood was previously a bad bet.

Just to start with:

1. Not punishing someone for the sins of their family.

2. Not punishing someone for the unfair treatment that their family suffered in the past.

The effect of its use on policy.

That is incredibly vague. What effect and what policy?