Trends

TRYING OUT RESTITUTION

The concept of offenders making restitution to their victims is being tested in the Georgia prison system. Several methods of restitution are being considered for use in the two-year program, including civil action for compensation, a lien by the victim on the offender's future liberty, a portion of the fine paid to the victim, a system in which the offender is required to work and pay part of his wages to the victim, the attachment of prison earnings, leaving the offender at liberty but attaching his earnings, and monetary adjustments after trial.

Some 600 probationers are being assigned to four community restitution centers in Atlanta, Columbus, Rome, and Savannah. The centers will provide probationary supervision and job placement services, and will ensure that the offenders pay the required restitution. Georgia officials estimate the cost per resident will be about $1060 per year, compared with the $4500 per resident cost in the state prison.

As another part of the innovative program, the state plans to overhaul its prison industry program. The plan calls for establishing a semi-private prison, set up by private industry, which would pay for the housing, subsistence, and salaries of inmates. The state would provide the inmate labor force, security, and a graduated release program for the inmates.

SOURCE:
• "Georgia Forced to Seek Alternatives," Criminal Justice Newsletter, July 15, 1974.

VICTORY FOR IBM

A significant milestone in antitrust law was reached in January when a Federal appeals court reversed an antitrust judgment in a case brought against IBM by the Telex Corporation. Telex had made a name for itself in data processing by producing inexpensive copies of IBM computer peripheral devices—often by stealing IBM trade secrets. When such policies did not produce the expected success, Telex decided it might be more profitable to sue IBM on charges of monopolizing the computer peripherals business and engaging in predatory competitive practices (for trying to compete against copies of its own machines). The trial court had originally conceded Telex's thefts and awarded IBM $21.9 million in damages, but had also found IBM guilty of monopolistic practices, for which it was ordered to pay Telex $259.5 million.

The appeals court, however, has struck a resounding blow for justice and the free market. It upheld the finding of willful theft of IBM trade secrets, but reversed the trial court's finding of monopolistic practices by IBM. It found the trial court's definition of the "relevant market" to be in error, and stated, "This fundamental misconception affected the remainder of the court's decision." Further—and more important—it ruled that IBM's competitive responses to Telex were not "predatory" or "monopolistic" as these terms have been used in antitrust history: "The evidence establishes that IBM's actions constituted valid competitive practice." The judge noted that the trial court had admitted that IBM's specific actions were wholly lawful in themselves, but supposedly "became unlawful only because of IBM's size." This pernicious doctrine has now been rejected.

The January appeals court ruling came on the eve of IBM's biggest challenge: the beginning of its trial on Justice Department charges of monopolization of the data processing industry. The Justice Department's case rests on premises similar to those advanced by Telex, and rejected by the appeals court. IBM's pretrial brief sets forth an impressive case that its success in electronic data processing has been earned "through competition on the merits—new product innovation, superior service, and price competition." The government's case, says IBM, "is at bottom an attack on IBM's success through competition," and reflects the view that "success itself must be punished—and the consumer be damned." These views are supported by Solicitor General Robert H. Bork who has publicly stated that "the government's suit stands revealed as an attack on outstanding commercial success as such." IBM is mounting a carefully-researched, well-documented, principled defense of free and open competition, supported by such free-market economists as George Stigler, Sam Peltzman, and Hendrik Houthakker (all of whom are designated trial witnesses or economic experts for the defense). The results of the long trial will be a landmark ruling for or against justice and free competition.

SOURCES:
• Telex Corp. v. IBM, U.S. Court of Appeals, Tenth Circuit, Jan. 24, 1975.
• "$259 Million Telex Award Against IBM Overturned," AP (Denver), Jan. 25, 1975.
• "IBM Says Government Hasn't a Case on Competition Issue," Datamation, Feb. 1975, p. 69.
• "Pretrial Brief for Defendant IBM," U.S.A. v. IBM, U.S. District Court, Southern District of New York, Jan. 15, 1975.

TWO STEPS FORWARD, ONE STEP BACK

Socialist attempts to implement the "ideal" of "from each according to his ability, to each according to his need," have failed time and again, reflecting the reality that people work best when motivated by their own self-interest. In recent months this truth has been reconfirmed by the world's largest socialist nations: the USSR and the People's Republic of China.

In January Pravda carried an article by research scientist Yuri Yoloviev calling for a major economic drive to produce small-scale garden and farmhouse implements to raise productivity on the country's private farm plots. Though they comprise less than 4 percent of the USSR's arable land, the private plots produce 35 percent of the country's meat, 37 percent of its vegetables, 63 percent of its potatoes, and 20 percent of its wool. All work done on private plots must be done in people's spare time, after putting in full-time work on the state-owned collective farms. Yoloviev admitted the vital importance of the private plots and pointed out that their tremendous production is achieved, not only with spare-time labor, but with completely obsolete tools. He called for production of small hand tractors, drying ovens, juice presses, and improved cooking stoves to further expand the private farms' productivity.

Reality is dawning on the Chinese leaders as well. The new national constitution announced in January for the first time specifically guarantees people's right to work for their own and their families' benefits, within certain broad and undefined limits. Industrial workers have been granted the right to work for their own benefit, so long as their private labor does not interfere with state enterprises or their work for such enterprises. Farmers have for the first time been guaranteed the right to till private plots for their own profit and to make small manufactured articles for sale. Chinese residents of Hong Kong report that their relatives on the mainland are suddenly eager to receive money from abroad and are quite excited over the new economic freedoms. The Chinese government has finally faced the fact that whenever restrictions on individual enterprise have been lifted over the past 25 years, production has soared. "Chinese ingenuity invents a host of small ways to make life better when the entrepreneurs know they will benefit directly and immediately from their labors," reports correspondent Robert S. Elegant from Hong Kong.

Only Cuban officials are still keeping their heads in the sand. Castro's government has now made it a crime for individuals to grow their own vegetable gardens. How long such an insane policy will be continued, in the face of growing world food shortages, is anybody's guess. But judging by socialist experience elsewhere, Cuba could well be heading for famine.

SOURCES:
• "Russ Boost Once-Taboo Garden Plots," Chicago Tribune, Jan. 21, 1975.
• "China's New Charter Opens Door to Personal Freedom," Robert S. Elegant, Los Angeles Times, Jan. 20, 1975.
• "Good-Times-Coming Mood Sweeps China," Ibid., Feb. 9, 1975.
• "Arrest the Hungry," Southern Libertarian Messenger, Dec. 1974.

DUMPING UMTA

A recent study sponsored by the American Enterprise Institute concludes that the Urban Mass Transit Administration (UMTA) has done—and can do—nothing to reverse the decline of mass transit in the U.S. The study, by UCLA economist George W. Hilton, notes that while to date the Federal Government has spent nearly four billion dollars on UMTA, it has yet to develop a viable alternative to the private automobile. The study concludes that not only has UMTA failed to gain riders for mass transit, but it has not provided any of the related social benefits it was intended to bring: improved mobility of the urban elderly and poor, lessened rush hour traffic, and reduced air pollution due to fewer automobiles in service.

The UMTA programs are doomed to failure, Hilton argues, because they are based on the false premise that making the industry more capital-intensive through investment in new conventional buses and rapid-rail systems will attract more passengers. This approach fails, he argues, because, among other things, linear mass transit, operating along rigid, fixed routes, cannot take the majority of people where they want to go.

Hilton points out that far from breaking up this rigid structure, which is responsible for the decline of the transit industry, UMTA inadvertently solidifies it by strengthening the power of the transit unions. Transit unions, which can veto UMTA contracts, have a vested interest in maintaining the old transit mix of subway and bus monopolies, Hilton says. Members of these unions are protected from competition because entry into the transit business is severely restricted: mass transit in urban areas is either a public or government-franchised monopoly and jitney operations are usually illegal. The result, Hilton argues, is the perpetuation of an unworkable transit system, which must depend more and more on the public dole to survive.

The most effective way to get more people to use public transit is to make driving more expensive, Hilton concludes. He recommends that the government charge a variable fee for using the roads, making it most expensive to drive during rush hour. Hilton suggests replacing transit monopolies with competitive owner-operated jitney buses. He also proposes that drivers be given an incentive to fill the empty seats in their cars by being allowed to operate as jitneys, picking up passengers for a fee, without restriction.

SOURCE:
• Federal Transit Subsidies, George W. Hilton, American Enterprise Institute (1150 - 17th St. NW, Washington, DC 20036).

FREEING THE ENGINEERS

For years, state governments have taken it upon themselves to regulate the engineering profession. This typically takes the form of registration of engineers, by means of a written test, a period of approved apprenticeship under an already-registered engineer, and payment of application and annual renewal fees. The justification for this has been that since engineering works significantly affect the public, it is in the public interest for governments to regulate the practice of engineering.

In the beginning, this was strongly supported by various engineering societies, as a means to upgrade the profession by policing the unethical behavior of unscrupulous engineering firms. Even now, the trend is toward more government control, as various other groups such as geologists and soils scientists clamor for state registration. But, as is common with well-intentioned political schemes, various inherent defects in the system are beginning to surface.

The engineering registration boards are discovering that once the politicians get a taste of control, they tend to try to increase their influence. Thus, during the last several years, several boards which formerly operated essentially autonomously have now come under direct state control.

The most common form of control, now practiced in nearly half the states, is that the regulatory boards are run as profit-making businesses for the general state treasury. Thus, for example, the Pennsylvania board collected $150,000 in fees in 1973, but was permitted to keep only $35,000 of it. The situation in some smaller states is even worse, where the boards must be subsidized in order to operate. It is therefore not surprising that disciplinary actions are rare, and kickback schemes such as the Agnew case in Maryland easily occur.

The trend is also toward more direct supervision. In Pennsylvania, the five-member State Registration Board for Professional Engineering recently had to beat back a move to accept four new members. Three of the additional officials were to be nonengineers appointed by the governor, with obvious political overtones.

Bucking the national trend, Delaware has become the first state to go the other direction. In less than a year, various engineering societies drafted a bill, got a representative to introduce it into the legislature, and pushed it through both houses with only one dissenting vote. The law relinquishes state control, and gives responsibility for self-regulation to the Delaware Association of Professional Engineers. Operating funds are derived directly from testing and membership fees, rather than through appropriation.

The preamble to the law notes, "This act constitutes a new departure and experiment in the field of state regulatory procedure, being the first of its kind in the nation, wherein the First State of the Nation delegates to a professional association the powers, duties, and responsibilities of self-regulation…"

It is hoped that this experiment will succeed, and that other states and engineering societies will push for similar measures.

SOURCE:
• "Let's Unchain State Licensing Boards," Douglas Glantz, Civil Engineering, Jan. 1975, Vol. 45, No. 1, pp. 79-83. (Submitted by Paul Bilzi)

MILESTONE

Busing. An important academic psychologist has added his voice to those protesting government-forced busing of schoolchildren to achieve racial balance. Richard Farson, formerly president of Esalen Institute, board chairman of Western Behavioral Sciences Institute, and faculty member of the Humanistic Psychology Institute in San Francisco, charges that busing is a violation of children's rights. "Or rather," writes Farson, "it further violates the children's rights—those rights already having been thoroughly violated by the existence of compulsory education which, to put it exactly as it really is, incarcerates children against their will." Farson calls for increased attention to the rights of children, urging that "the basic right we all must have is protection from those who think they know what's good for us." (Source: "Busing Violates the Rights of Children," Richard Farson, Los Angeles Times, Jan. 28, 1975)