Trends

MILKMEN VS POSTMEN

In another move to sidestep the costly and inefficient U.S. postal monopoly, a new business known as the Magazine Dairy Network has been organized by New Yorker Lon Carli. The premise is quite simple: milk delivery routes already cover many neighborhoods where magazine subscribers live; both magazine publishers and dairies are plagued by high delivery costs; so why not combine forces and deliver both milk and magazines at the same time?

The plan is under way in Rhode Island, where the Magazine Dairy Network has brought together giant Time-Life and H.P. Hood, Inc., one of New England's largest dairies. The program is already operational in both Providence and Barrington. Hood milkmen deliver magazines to customers' front porches (mailbox use is forbidden) along their route, whether or not they are also milk customers. By using a delivery list, the system saves the publishers the expense of address labels, thereby further reducing delivery costs.

Other competitors to the postal system are also being investigated by publishers. Besides the Independent Postal System of America (REASON, "Trends," December 1972), various independent delivery services, utility company meter readers, and housewives are being recruited to deliver magazines and advertisements.

SOURCES:
• "U.S. Publishers Turn to Milkmen, Cite Postal Costs, Slow Service," Mike Causey, INTERNATIONAL HERALD TRIBUNE, 7-8 October 1972.
• "Magazines and Milkmen," PARADE, 3 December 1972.

THE FED IN TROUBLE

The Federal Reserve System, the arbiter of the nation's money supply and ultimate source of inflation, is beginning to show signs of strain. Despite its monolithic appearance, membership in the system is technically voluntary on the part of member banks. Over the past few years increasing numbers of small and medium-size banks have decided to withdraw from the system—41 in 1971 and 51 in 1972 did so. And a leading California banker notes that 90% of all new banks being formed in that state will begin as non-members of the Fed. Thus, although 80% of all U.S. bank deposits still reside in member banks, the trend has Fed officials "concerned," according to a spokesman for the Fed, because "the fewer members we have, the fewer deposits we can control or influence with our monetary policy."

Bankers cite a number of reasons for withdrawing from the Fed, such as Regulation J dealing with the "float" on check payments and the Fed's large reserve requirements (which can tie up large amounts of funds). In addition, large commercial banks now compete with the Fed in providing smaller banks with such services as check clearing, coin and currency deliveries, loan buying and selling, and telegraphic transfer of funds. Thus, smaller banks can now obtain these services, usually at lower cost, without being members of the Fed.

Thus, a definite trend is under way, whose effects could be far-reaching. As the LOS ANGELES TIMES has observed, "If a large percentage of member banks withdraw from the Fed, its control over the U.S. economy would be severely reduced."

SOURCE:
• "Federal Reserve Defections Grow," John Getze, LOS ANGELES TIMES, 17 December 1972.

VOLUNTARY EDUCATION

An interesting, explicitly libertarian proposal appeared recently in CHANGE, the magazine of higher education. Titled "Learning by Contract," the article by Alan S. Waterman advocated a system of higher education based on voluntary contractual relationships between students and teachers.

Waterman cites a number of benefits from such a system. First, by paying each professor directly, the student would develop a legitimate stake in determining what is taught—students would be far more likely to profit from each course they selected than under the present system. The voluntary system would thus tend to promote innovation in curricula. as teachers sought to provide material of maximum usefulness. In addition, the quality of teaching should increase, as valuable instructors become more in demand and poor ones cease to be subsidized.

Waterman recognizes the criticisms likely to be hurled at his proposals and skillfully counters each one. Defending against fears of hucksterism and pandering he stresses the values of free inquiry. reputation, and rationality as appropriate counterbalances. Waterman also rejects the overriding paternalism inherent in the notion that students must be forced to take certain courses "for their own good," and rightly asks why those students with maturity and self-direction should be sacrificed to those who lack these qualities when voluntary counseling is always available. Finally, he lauds the absence of tenure under the libertarian system as a benefit rather than a shortcoming, arguing that "if the lack of security causes some faculty members to reconsider their choice of career, the effect would probably be beneficial."

SOURCE:
• "Learning by Contract," Alan S. Waterman (Hartwick College), CHANGE, Winter 1972/73, p. 12.

PRICE CONTROL BY DE-CONTROLLING

The hand of University of Chicago economist George Schultz is clearly visible in the Administration's latest series of moves to hold down food prices. And the resulting set of policies provides an insight into the kind of policies libertarians could pursue in a political context—without violating their principles. For all of the new food-price policies involve removing coercive restrictions or removing government subsidies—not adding controls. The package includes the following items:

• Continued suspension of import quotas on meats throughout 1973 (thereby providing free entry of lower-priced foreign meat).

• A 25% increase in the amount of land farmers are allowed to plant in wheat, corn, grain sorghum, soybeans, and rice (so as to provide incentives to expand production and lower prices).

• The sale of all but a small emergency supply of the grain stockpiles now held by the government (thereby putting further downward pressure on prices).

• The elimination of export subsidies on tobacco, flax, and other crops (the wheat subsidy was ended last September).

• Review by the Cost of Living Council of all USDA program changes dealing with food supplies (USDA typically aids farmers in cartelizing the market, in an attempt to obtain higher prices).

• Termination of the USDA rural environmental assistance subsidies (about $200 million in 1972).

• Increase in the interest rate charged on USDA commodity loans to farmers, to near-market rates (from 3.5 to 5.5%) thereby reducing the subsidy effect of below-market rates.

The set of policy changes provides a good illustration of the creative use of a crisis situation as the rationale for removing a host of unjustified government interventions in the economy. Both critics and supporters see the moves as a significant step towards phasing out the entire $4 billion farm subsidy system.

SOURCE:
•"Farmers Flinching at President's Ax," John Getze, LOS ANGELES TIMES, 28 January 1973.