Trends

PUBLIC HIGH SCHOOLS FLUNK AGAIN

The evidence continues to accumulate (for those who weren't already convinced) that public schools are incompetent to do their intended job. Two recent studies have unearthed shocking new facts about American high schools.

The first, done by the Joint Council on Economic Education, evaluated social studies textbooks frequently used in public schools. In particular, the Council looked at the way these books treat economics at the high school level. In general, they concluded, most of these textbooks "are unlikely to assist a student either to identify an economic problem or to use economic analytical process.…High school students whose knowledge of economics has been acquired through courses circumscribed by the textbooks principally used [in the social studies courses evaluated] would be quite unprepared to cope with most problems of economic public policy." Such a finding makes it easier to understand why some 80% of the population favors wage and price controls. Considering that it is the state which benefits from this kind of economic ignorance, and from widespread acceptance of economic myths (regarding monopolies, government regulation, the cause of inflation, etc.), it is hardly surprising that a state-run school system turns out economic illiterates.

And the next time you see propaganda urging high schoolers not to drop out, or to go back to school, consider the findings of a recent Penn State University study. This four-year study of some 400 youths living near Pittsburgh indicates that high school dropouts tend to earn more money than graduates who come from the same socio-economic background. Most previous studies have looked simply at dropouts as a group, compared with graduates as a group. But this, of course, ignores the potentially different backgrounds, reports Dr. Jacob J. Kaufman at Penn State, the dropouts are found to do better than similar students who go on to graduate. The dropout enters the job market sooner, gaining seniority and job training advantages over a student with a similar background who can expect a comparable job after graduation. At the end of the study period, the dropouts were receiving higher pay (averaging $1.96 per hour compared with $1.67 for graduates) and were less frequently unemployed than the matching sample of graduates. Followup studies also showed that dropouts were more satisfied with their jobs; the graduates had higher expectations which their actual jobs couldn't fulfill.

Dr. Kaufman's study is not the first to reach such conclusions; studies of over half a million students by both the University of Michigan and the American Institute for Research in Pittsburgh have reported the same findings. The myth of high school graduation as essential to success has finally been debunked. As Dr. Kaufman points out, "Many students who have dropped out have made a pretty shrewd analysis of the system as it exists." Which is more than one can say for the educational establishment.

SOURCES:
• "High School Text Authors Flunk in Basic Economics," UPI (New York) 27 August 1973.
• "Dropouts Earn More, 4-Year Study Indicates," LOS ANGELES TIMES (Knight News Service), 12 August 1973.

FDA VS. HEALTH FOODS

Clifford Wells, a San Francisco health food store owner, has filed a $500 million class action suit against the Food and Drug Administration for damages resulting from the FDA's description—in print—of health food store owners as swindlers. Wells said he was tired of being pushed around by "Big Brothers—the Food and Drug Administration, the American Medical Association, and the California Medical Association." He added "health store owners have the right to be recognized as businessmen on any street, just as ladies' shops, liquor stores, or grocery stores are. We have been referred to by the FDA, AMA and CMA as nutrition quacks, food faddists and health quacks and the products we sell as shotgun mixtures," he said.

The official FDA magazine had described the health food dealer thusly: "He is a health swindler…watch out for this man…learn his trade secrets…how you can recognize a quack…etc."

"I think that people are so conditioned and full of baloney about religion, government, and protection," said Wells. "The American Medical Association is trying to take vitamins out of the health food stores and put them on a prescription basis. The way I see it—and this is a personal opinion—the AMA hasn't got their fingers into enough pots. They are already controlling the drug industry. Now they would like to control this industry too. Today everything is controlled. Money is the name of the game."

SOURCE:
• "Health Food Store Owner Sues FDA," Pat Rogalla, FEMININE FITNESS, June 1973. (Reported by Patricia Mathews)

THE FUTURE OF GOLD

In the wake of a recent softening in the free market gold price, a few analysts began bleating that gold "speculation" had run its course. Those more familiar with the workings of the real world (and not in the pay of governments committed to fiat-money inflation) couldn't disagree more.

International monetary analyst Harry Schultz predicts that a new international monetary arrangement will be announced shortly, in which "gold will be freely bought and sold by central banks, possibly at a new official price (around $125-150) or at the free market price, which will continue to fluctuate." He links this report specifically to West German Finance Minister Helmut Schmidt. Schultz also reports that the U.S. government sold gold in Europe on 21 August, in an attempt "to hold the free market price down until a new official price is announced—which must be seen to be above the free market price in order to seem realistic."

Meantime, predictions of higher gold prices continue to be heard. Lee Kuan Yew, the prime minister of free market Singapore, told the recent Commonwealth Conference in Ottawa that gold could rise to $480 per ounce if a new monetary system isn't implemented shortly. Dr. Franz Pick, the well-known currency expert, recently predicted that gold would hit $420 within two years. (Pick is a constant critic of the press, "because it caters to government propaganda," e.g. by not challenging the government's cost of living figures. Pick claims last year's cost of living increase was 9% [vs. 3¼% reported by the government] and will be over 15% this year.)

Adding to the chorus of those favoring an end to "gold prohibition" in the United States is futurist Herman Kahn, director of the Hudson Institute. Kahn supports gold ownership for the most basic of reasons: self-protection against the state. "In my family," he says, "you used to give the eldest son a $20 gold piece. That was not to be spent on entertainment or women or wine. It was to bribe the frontier guard…to get out of the country in time of war, famine, or plague. How many people believe that an S.D.R. will be useful during a plague in bribing a frontier guard?" Kahn also supports a U.S. return to the gold standard, with dollar convertibility re-established at $150 per ounce. As to the likelihood of this occurring, Kahn said he would "bet even money" that the proposal would be realized "within a year."

SOURCES:
• THE INTERNATIONAL HARRY SCHULTZ LETTER, #303 (End August 1973), pp. 1-3.
• "Gold at $420?" BUSINESS WEEK, 19 May 1973.
• "'Jolly Herman' Kahn: His Forecasts Add Up," Sam Jameson, LOS ANGELES TIMES, 12 August 1973.

NEW CHALLENGES TO FCC CENSORSHIP

Recent months have seen the emergence of several new challenges to the Federal Communications Commission's stranglehold on American broadcasting. From the academic world has come a new Brookings Institution study urging an end to the FCC's economic regulation and control of program content of television. Entitled "Economic Aspects of Television Regulation," the report is the work of Roger G. Noll of Brookings and Profs. Merton J. Peck and John J. McGowan of Yale. The authors argue persuasively that, while current criticisms of the abominable quality and liberal bias of television are mostly deserved, these aspects of American TV are largely a result of the unusual economic structure of the industry. This structure, in turn, is largely the result of the FCC's regulatory policies.

Specifically, by regulating program content "in the public interest," under threat of license revocation, the FCC has given mighty incentives for blandness and timidity. Further, by its "local service" doctrine—namely that as many communities as possible should have local television outlets—the FCC has caused the very high degree of concentration of ownership and homogeneous program content. This paradoxical result comes about because the high cost of program production leads the vast majority of local stations to affiliate with one of the three networks, from which they obtain their primetime programs. To change this dismal structure, the Brookings report recommends removing the FCC's responsibility for program content, relying on competition rather than "localism" regulations to achieve diversity, and limiting the FCC's role to engineering and technical matters.

On another front, the FCC and Rev. Carl Mclntire have entered a new round in their several-year censorship battle. In 1970 the FCC revoked the licenses of two radio stations owned by Rev. Mclntire, on the grounds of consistent violation of the "Fairness Doctrine." Mclntire, who contends that the government has no right to force him to air views he considers wrong, appealed in federal court, meanwhile keeping the stations on the air. In June the appeal was turned down, and the stations went off the air in July. Undaunted, Mclntire has announced plans to launch Radio Free America, a pirate radio ship anchored three miles off the New Jersey coast. With a five-day-per-week broadcasting schedule, Mclntire intends it to be "the most controversial station in the country." All he wants from the government, he says, is to be left alone. "We believe in freedom," he maintains, "We want to tell the government what to do instead of having the government try to tell us what to think and say." To which we can only add "Amen."

SOURCES:
• "Does TV Have a Way Out of Its Box?" Leonard Silk, New York Times News Service, 16 July 1973.
• "'Radio Free America' to combat FCC Ruling," Louis Cassels, UPI (New York), 25 August 1973.

MORE COMPETITION FOR AIRLINES

Although the current make-up of the Civil Aeronautics Board (CAB) is the most pro-cartel, anti-competition in many years, external developments may force increased competition on the airline industry, to the benefit of passengers, In particular, two recent court battles may be harbingers of new antiregulation legal moves.

In the first battle, unresolved at this writing, maverick Continental Airlines has filed suit in the U.S. Court of Appeals for the District of Columbia to prevent the CAB from forcing it to go along with other airlines' demands to remove lounges from the coach sections of wide-bodied aircraft (747, DC-10, L-1011). Earlier this year, Continental's larger competitors decided to phase out the lounges in order to make room for more seats. United, TWA, and American all requested CAB permission to charge lower fares on the reconfigured planes. Continental, which kept the lounges installed, then countered by filing for an identical fare reduction. On 1 June, however, at the behest of its "competitors", Continental's proposed fare was suspended by a 3-1 CAB vote. Hence, the suit, in which Continental's attorneys argue that the CAB is overstepping its legal authority by using its rate-setting power to affect aircraft configuration and service features. The airline correctly views the CAB's action as "a serious precedent that threatens individual airline management competitive service decisions." So far, Continental has won the initial round when the court granted its request for a stay of the CAB's order suspending its fare filing, pending the court's review of the matter.

The same court recently set an important precedent in favor of increased airline competition. In a 2-1 decision the three-judge court remanded to the CAB for reconsideration a previously-adopted "fare package" for North Atlantic routes, which had been worked out by the International Air Transport Association, the industry cartel, and approved by the CAB. The court held that the cartelized rate-setting procedure was contrary to U.S. antitrust laws, as alleged by Ralph Nader's Aviation Consumer Action Project, which had brought the suit. The ruling is considered by aviation authorities as likely to lead to an "open-rate situation" or "price war" or "chaos"—i.e., free market competition.

SOURCES:
• "Continental Battles for Lounges," Harold D. Watkins, AVIATION WEEK, 6 August 1973, p. 24.
• "Fare Fight," AVIATION WEEK, 27 August 1973, p. 11.