Trends

VICTORY FOR PRIVACY

Two years ago Frances Knight, director of the State Department's Passport Office, created quite a stir with her call for a national identification card for every citizen. Knight's proposal, widely regarded as a trial balloon to test public reaction, now appears to have received its coup de grace. The Federal Advisory Committee on False Identification has denounced any such move as "an invasion of personal privacy." The 75-member committee's final report opposes any "so-called national I.D. card" and "strongly opposes any new type of state or local government-issued I.D. intended to supersede existing documents." Recognizing that a considerable problem of fraud does exist, the committee nonetheless concluded that any new national system could make the problem worse instead of solving it. Why? A single monolithic system would likely be easier to defeat than the present multifaceted identification system, by people "taking advantage of careless inspection of documents or through corruption of officials."

Hopefully, this insidious threat to personal freedom will now be permanently laid to rest.

SOURCE:
• "National I.D. Cards Opposed," AP (Washington), Dec. 9, 1976.

CREDIT REGULATIONS BACKFIRE

New Federal laws designed to make financing more available to women and minorities are not achieving that objective. What they are doing is increasing the costs of credit for all consumers. These conclusions come from James F. Smith, senior economist in the Research and Statistics Division of the Federal Reserve Board.

Smith spent the better part of last year analyzing statistics on who does and does not get credit. Several major studies by university-based economists have found that in the several years prior to passage of the Equal Credit Opportunities Act (in 1974), women who were otherwise as well qualified as men actually received credit more often—by 5 to 10 percent. The new law, however, prohibits this kind of "discrimination" in favor of strict numerical equality. It also calls for setting up costly special-purpose credit programs, akin to "affirmative action" hiring programs, to re-evaluate applicants who fail to qualify under regular standards. Besides being unnecessary, says Smith, these programs result in added costs, and subject firms which don't adopt them to possible lawsuits.

Indeed, according to Smith's calculations, the cost of implementing the ECOA has been over a quarter of a billion dollars, borne directly by consumers. (Did you wonder why you now have to pay a monthly service charge for your Master Charge card, even if you pay in full?) And the ongoing annual cost of compliance is estimated at $118 million in paperwork and filing costs.

In his recent speech to the National Economists Club, Smith also had harsh words for the Truth in Lending Act, the Fair Credit Billing Act, and state usury laws, all of which he finds similarly costly and/or counterproductive. Is anyone in Congress and the legislatures listening?

SOURCE:
• "Fed Economist Says Many Credit Laws Hinder, Not Assist, Women, Minorities," Washington Post, Nov. 24, 1976.

BROADCAST MONOPOLY BROKEN

The State's legal monopoly on broadcasting—a fact of life in virtually all countries but the United States—has been broken in Italy. This development stems from two rulings of the Italian Supreme Court. The first, in 1974, permitted private transmissions of local cable TV stations, and reception of foreign TV programming by means of a special antenna. This ruling has created considerable competition for the government's two national TV channels. Further, in the same 1974 ruling the Supreme Court also warned that the State monopoly could be constitutionally defensible only if changes were made to ensure impartiality, objectivity, and completeness. (Italian TV has been notorious for censorship and for slanting news to support government policies.) This led to passage of a "reform" bill designed to reorganize the monopoly, but the bill's provisions have yet to be implemented.

Meanwhile, encouraged by the Court's ruling, hundreds of independent radio stations began springing up on unused FM frequencies, without State permission. They are presenting music, news, talk shows, political propaganda, and (shades of capitalism)—advertising! When the stations' right to exist was challenged by RAI, the State monopoly, the Supreme Court ruled by 11-2 last July that local airwaves are open to everyone. Now, some 600 "free" or "pirate" radio stations exist, providing an unheard-of diversity of programming around the country, and drawing listeners away from RAI's three national radio stations. In the recent Italian elections, free radio provided much-sought-after advertising for candidates, especially those of the smaller parties. Even the Communists, at first violently opposed to the idea, have come around, thanks to the availability of new platforms for espousing their point of view. Free radio, in short, appears to be working.

SOURCE:
• "Italian Broadcasting Wild and 'Free,'" Washington Post, Nov. 10, 1976.

EASING DRUG LAWS

December saw two additional steps in the slow but steady easing of the nation's drug prohibition. The outgoing Ford administration issued a policy statement on Federal strategy for drug abuse prevention that, for the first time, questioned the use of criminal penalties for marijuana possession. Robert L. DuPont, director of the National Institute of Drug Abuse, described the change in policy as a "very positive step." The strategy paper called for examination of the effects of partial decriminalization in the eight states and three foreign countries (Italy, The Netherlands, and Columbia) which have recently eased their laws.

On the same day that the report was released, a district court judge in Boston declared unconstitutional the Massachusetts law banning the use of cocaine. Judge Elwood McKinney stated that the law violates the 5th and 14th Amendments, in dismissing a case against a Roxbury man. The judge pointed out in passing that cocaine is far less dangerous than cigarettes or alcohol. But because district court cases in Massachusetts do not set precedents, the decision will not affect enforcement of the state's cocaine law.

SOURCES:
• "Ford Administration Eases Stand on Marijuana Laws," Los Angeles Times, Dec. 12, 1976.
• "Judge Calls Cocaine Safer Than Alcohol," AP (Boston), Dec. 12, 1976.

AIRLINE PRICE COMPETITION

A plan for significant airline price competition that the CAB previously rejected out of hand has won a new lease on life. The U.S. Circuit Court of Appeals in Washington, DC ruled that the CAB had misinterpreted the Federal Aviation Act in denying the application of World Airways to provide coast-to-coast service for only $89. The agency had claimed that it could not consider the application because World, a charter carrier, wanted to provide regularly scheduled service. The three airlines now franchised to provide scheduled coast-to-coast service—United, American, and TWA—had protested bitterly World's threatened upset of the status quo.

A week after the court's December ruling, the CAB gave in, agreeing to reconsider World's application rather than appealing the decision to the Supreme Court. Although the other airlines might still appeal, and the CAB may still turn World down, these developments appear to represent an important step towards real competition in commercial aviation.

SOURCES:
• "CAB Ordered to Give $89 Fare Plan 2nd Look," UPI (Washington), Dec. 9, 1976.
• "CAB to Reconsider World Airways Plan," Ibid., Dec. 16, 1976.

CLOTHING-OPTIONAL PROVES PROFITABLE

The past decade has seen a considerable boom in the concept of "clothing optional" beaches. Since virtually all beach land is government-owned, however, no market value has been placed on the availability of such resources. Swimming pools, however, are mostly privately owned, and Austin, Texas is the scene of a unique experiment in determining the market value of clothing-optional facilities.

Last June 32-year-old Terry Parker took over management of Canyon Villa, an 18-unit apartment complex with swimming pool. Its occupancy rate was only 50 percent, and as a result it was losing money. Parker, a libertarian and former minister, decided to introduce a clothing-optional policy on the apartment complex grounds. Six months later, despite a 10 percent rent increase, the complex is full. And the idea has become so popular that Parker has been hired to manage 78-unit Manor Villa, which went clothing-optional the first of the year. The owners plan to keep a watchful eye on the results, with the idea of introducing the concept in other apartment complexes if Parker's initial success is repeated.

Parker sees the clothing-optional policy as a matter of personal freedom. "It allows people to be friendlier," he says. He has abolished formal rules and regulations and encourages people to work out ways of coexisting without conflict. He encourages group meetings to resolve disputes, rather than simply evicting "nuisances." Only one such meeting has been necessary in six months at Canyon Villa. Parker's live-and-let-live approach is a refreshing innovation in the usually staid world of landlord-tenant relationships.

SOURCES:
• "Tenants Are Happy and Profits Are High," Austin American-Statesman, Dec. 12, 1976.
• "Texas Apartments Boom When Clothes Are Shed," UPI (Austin), Dec. 19, 1976.

RESTITUTION SUCCESS

Somewhere along the line in the development of American criminal law, the idea that the criminal should make restitution to those he harmed has been forgotten. Criminal proceedings have become contests between the State and the criminal, with the victim virtually ignored. To have any hope at all of collecting from the criminal, the victim must wait until guilt is pronounced and then at his own expense file a civil suit to recover damages. Not surprisingly, few victims take the trouble.

All that is being changed in Winona County, Minnesota, however, thanks to Judge Dennis A. Challeen of the Winona County Court. Challeen has developed and put into practice a "self-sentencing" program emphasizing restitution to victims. Since 1972 over 3000 misdemeanants have been sentenced under the program, often with amazingly successful results. Burglars go to work for those they ripped off, auto thieves locate the owners of the cars they stole, vandals repair the damages. Many of those sentenced have found new jobs as a result, and the repeat rate is only two percent compared with 50-75 percent nationally. The program has not required any changes in the law; it merely utilizes the vast discretion available to the judge in sentencing. The restitution arrangement is offered to the criminal as an alternative to jail or other conventional sentence, and most find it preferable.

Judging by the results, Winona County's program deserves widespread emulation by the costly, ineffective courts in most American communities.

SOURCE:
• "Self-Sentencing Results Productive, Surprising," AP (Winona), Dec. 16, 1976.

WRONG VILLAIN

Television broadcasting has fostered a massive increase in political campaign spending, creating a whole new industry for marketing candidates. Right? Wrong, according to two University of Delaware economists. Actually, political broadcast advertising has drastically reduced the amount of money that presidential candidates need to spend. The seven presidential campaigns of the years 1948 through 1972 would have cost $300 million more if TV broadcasting had not been available.

So concluded economists Burton Abrams and Russell Settle in a recent article in the Journal of Political Economy. They analyzed campaign expenditures from 1868 to 1972, using a complex econometric model to account for the growth of the voting-age population and a variety of other factors. The model predicts, based on past experience, post-World War II campaign expenditures far higher than those actually experienced, suggesting the importance of TV as an explanatory variable. Their conclusion is further supported by state-by-state comparisons of expenditures in the 1952 and 1956 campaigns, years when per capita TV ownership still varied widely among the states. In those years per capita expenditures were far higher in states with low TV ownership.

Abrams and Settle do not deny that campaign spending has nonetheless grown substantially over the past two decades. But they see the cause not as TV advertising but rather the vastly increased role of government in the economy. This creates the possibility of "legislative profits"—a polite term for the dollar benefits to be gained by getting the right politicians on your side. Indeed, the concept of legislative profits helps explain why one-sided campaigns (Johnson-Goldwater and Nixon-McGovern) where the outcome is all but certain actually generate higher campaign spending. The smart money is given to the sure winner, in order to purchase future benefits.

SOURCE:
• "Why TV Cuts the Cost of Campaigning," Business Week, Nov. 22, 1976, p. 12.

TACKLING HEALTH CARE COSTS

Although health care costs are rising at twice the rate of the Consumer Price Index, a takeover of health care by the Federal government, as advocated by many politicians, "would result in national expenditures of truly astronomical proportions." So said the outgoing Council on Wage and Price Stability, after a year-long study of U.S. medical care and its costs. "Cost control incentives proposed by the private sector—that is, by industry and labor—promise to be more effective than those imposed by the multitude of government agencies which have attempted to tackle the problem," stated the Council's report, in urging industry and labor to take action. One hopes the Council's thoughtful advice will be heeded by the new Congress, as well.

One example of the kind of cost-cutting the Council had in mind has been in the news recently: home health care. Over the past few years some 68 firms have quietly begun providing at-home treatment, under a doctor's supervision, for a fraction of the cost of hospital or nursing home care. A study of 485 home care patients in Rochester, NY, for example, reported an average savings of 21 hospital days per patient. With hospital costs in the city averaging $108 per day and home care averaging $15.61 per day, the annual savings amounted to $880,000. One of the largest home care firms is Homemakers Home & Health Care Services Inc., a subsidiary of Upjohn Co. It supplied 20 million hours of service in 1975, and operates out of 220 offices in 45 states.

Home health care is a good example of the response of the market to rising cost pressures. In making rational allocations of scarce health care resources, it exemplifies a philosophy opposite to that of the typical governmental "cost-plus" attitude.

SOURCES:
• "Industry, Labor Urged to Act on Health Costs," UPI (Washington), Dec. 22, 1976.
• "Health: The Big Private Move Into Home Care," Business Week, Nov. 15, 1976, p. 50.

MILESTONES

• Tax Return. One city government has gotten the word from tax-weary citizens. Garden Grove, California, like many other cities, experienced a large increase in assessed valuation during 1976. Rather than simply spending the increased revenue that resulted, the City Council decided to return the extra revenue to the city's 25,000 homeowners. The average homeowner will get between $10 and $40 back, depending on the amount of his increase in assessed valuation. As far as we know, Garden Grove's action is the first of its kind. (Source: "Garden Grove to Return Tax Hike to Homeowners," Los Angeles Times, Dec. 11, 1976.)