Trends
WEATHER FORECASTS—FOR PROFIT
Forecasting the weather is one of those true "public services" for which the benefits are so diffuse that everyone must pay for it via taxes. At least so runs the prevailing mythology. Disproving it, however, is the rapidly growing field of private weather forecasting.
Most private forecasters are individual radio/television weathermen who have gone into business for themselves. They sell their services, which are more specialized than those of the government's National Weather Service, to a variety of clients. The biggest markets for such information are weather-sensitive businesses, such as offshore oil drillers and growers of all kinds of crops. TV and radio news shows are, of course, another prime market.
One of the country's leading private forecasters is Harry Giese of Coronado, California. Giese began as a broadcast weatherman and currently does 30 programs daily for California and Nevada stations. But his specialty is long-range forecasts for agricultural clients. These range from individual farmers to giant agribusiness firms.
Another private forecaster is Nash Roberts of New Orleans. In operation for 30 years, Roberts' initial breakthrough came when he sold the New Orleans Cotton Exchange on the value of his services. Roberts provides daily cotton crop weather data at 8 A.M., beating out the National Weather Service by two crucial hours. Roberts also does a booming business with Gulf of Mexico clients—oil drilling rigs, flight services, and fishermen. His clients pay from $400 to $2000 per month, depending on the services supplied. Roberts estimates that he saves oilfield clients millions of dollars a year by such means as accurately predicting hurricane paths so that evacuations can be carried out only when necessary.
Next time somebody trots out that old "Only government can…" argument, remember Harry Giese and Nash Roberts and their growing number of colleagues.
SOURCES:
• "Forecaster Banks on the Weather," (AP (Coronado), Dec. 15, 1976.
• "Private Weather Forecasters Find Business Growing," UPI (New Orleans), Dec. 8, 1976.
FOURTH AMENDMENT VICTORIES
January brought two major court victories upholding the Fourth Amendment's prohibition on unreasonable searches and seizures. In the first case the U.S. Supreme Court ruled unanimously that IRS agents may not search a taxpayer's private office without a warrant. As part of its ruling the court held that the Fourth Amendment protection applies to corporations as well as to individuals. The decision came in a Utah case in which a leasing company's general manager had been convicted of a Federal offense. The IRS then sought to collect $1.1 million in back taxes from him, and as part of this effort broke into his office and confiscated his furnishings, books, and records. "Unconstitutional!" declared the court. But an assistant to the IRS director told a recent seminar at the University of Southern California that the IRS isn't sure the court's ruling prevents them from entering businesses without a warrant "if we don't have to break in." Thus, further vigilance appears warranted.
The other victory came at the U.S. Circuit Court level. A three-judge panel ruled that unannounced OSHA inspections, without search warrants, violate the Fourth Amendment. The decision came in an Idaho case brought by F.G. Barlow, a Pocatello electrical contractor. Barlow refused entry to OSHA inspectors, demanding a search warrant, which the government was unable to obtain since it could not show probable cause to believe any job safety or health violations exist at the plant. The three judges ruled unequivocally that Section 8(a) of the Occupational Safety and Health Act is "unconstitutional and void in that it directly offends against the Fourth Amendment." Further, the OSHA people "are hereby forever and permanently restrained and enjoined" from attempting to enforce Section 8(a). The court's ruling was much stronger than a previous ruling on the warrantless search issue in Texas (see Trends, June 1976). Both OSHA cases are now on appeal to the U.S. Supreme Court. That court's unanimous decision in the IRS case is a hopeful sign that OSHA's inspecting days are numbered.
SOURCES:
• "High Court Tightens IRS Search Rules," UPI (Washington), Jan. 12, 1977.
• 'Tax Report," Wall Street Journal, Jan. 26, 1977.
• "Search Warrant Needed for Plant Check—Court," Los Angeles Times, Jan. 11, 1977.
CAB CHALLENGED
Amidst all the deregulation rhetoric, the Civil Aeronautics Board has issued a ruling which would cause substantial increases in certain air fares, especially in California and Texas. As a result, the California Public Utilities Commission has taken the CAB to court, in an action supported by the Texas Aeronautics Commission, seven interstate airlines, and various consumer groups.
The CAB action grew out of an investigation to determine whether differences in within-state fares charged by interstate airlines were discriminatory. At present, such airlines base fares for certain state routes on one formula if the ticket is sold as part of an interstate trip and on another basis if it is sold as a within-state trip. The latter formula is governed by state regulation, the former by Federal rules. In December the CAB ruled that such dual pricing is discriminatory and ordered that all within-state fares of Federally regulated airlines must be computed by the CAB formula (except where a lower fare is necessary to meet competition from a local carrier). The effect of the ruling would be to increase many fares in California and Texas; in California individual fares would rise by amounts ranging from nine to 109 percent, with an average increase of about 50 percent.
The California PUC's suit, filed with the U.S. Court of Appeals for the District of Columbia, delayed the Feb. 1 implementation of the CAB ruling. Whether the Court will uphold the CAB's latest blow against consumers remains to be seen.
SOURCES:
• "California Agency Clashes with CAB," Aviation Week, Jan. 10, 1977, p. 25.
• "Fare Increases Held Likely on Many In-State Flights," Thomas D. Elias, Santa Barbara News-Press, Feb. 2, 1977.
POSTAL SERVICE DEMISE?
While the U.S. Postal Service continues stumbling along, hobbled by obsolete equipment, militant unions, and incredible bureaucracy, private industry is developing communications alternatives that could put the service out of business within 15 years. So concluded two recent studies.
One study was carried out for the Office of Telecommunications Policy by Arthur D. Little, Inc. It examined various ways in which telecommunications might affect society over the next 15 years. One of ADL's scenarios concerns a hypothetical USPS attempt to offer electronic message service—transmitting the content of letters between cities electronically, then delivering a printed copy by conventional hand delivery. The scenario pictures the postal service increasingly undercut by private competitors offering digital funds-transfer and message services, amidst massive legal and regulatory battles. The scenario ends in 1990 with USPS officials meeting to determine whether the service still serves any useful social function.
The other study was done by the National Academy of Science, under USPS sponsorship. Though not quite as pessimistic about USPS's future, the NAS study portrays the service as caught in a bind. On the one hand, "By maintaining the status quo it is unlikely that the Postal Service can be run as a modern, self-sustaining enterprise, without continually raising rates or sacrificing service." But on the other hand, the service is already well behind private industry in research and development on electronic mail service, "possibly foreclosing any opportunities for the Postal Service to move into the field in any meaningful way."
Thus, if technology continues to move faster than bureaucracy (a fairly safe bet), we may well wake up some morning and find that the Postal Service has become obsolete.
SOURCES:
• "Scenario Speculates on USPS Survival," Computer Decisions, Nov. 1976, p. 14.
• "Postal Service Urged to Offer Electronic Mail," AP (Washington), Jan. 28, 1977:
MORE LAETRILE PROGRESS
Close on the heels of a Federal appeals court ruling upholding people's right to purchase and use Laetrile in Oklahoma (see Trends, Jan. 1977), a U.S. District Court judge in California has issued a similar ruling. Judge Gordon Thompson, Jr. issued a preliminary injunction against the FDA and the U.S. Customs Service, preventing them from interfering with a San Diego man's importation of Laetrile from Mexico. The man, 74-year-old Ray Carnohan, is suffering from inoperable cancer of the pancreas and was given only 30 months to live as of last December. The judge ruled that to deny Carnohan freedom of choice when there is no other known remedy "would be grossly paternalistic."
Meanwhile, the National Health Federation has learned that Laetrile has for years been on the FDA's list of substances "Generally Recognized as Safe"—the so-called GRAS list. It is listed in the 1976 edition of the FDA Code Regulations, Title 21, CFR 121.101(e), and in earlier editions, under its generic name amygdalin—a natural extraction from bitter almond, apricot, or peach kernels. Thus, the FDA's 1963 ban on Laetrile as a dangerous drug is contradicted by its long-term and continuing listing of the substance along with thousands of other safe substances. It can thus be legally marketed either as an "old drug" or as a food. The NHF estimates that some 50,000 Americans are now consuming Laetrile on a regular basis.
SOURCES:
• "Cancer Victim Gets OK on Importing of Laetrile," Los Angeles Times, Jan. 22, 1977.
• "Is Laetrile Dangerous?" NHF Newsletter, Jan. 1977.
GOVERNMENT: HEALTH CARE CULPRIT
Last month's Trends mentioned a report by the outgoing Council on Wage and Price Stability dealing with the rising cost of health care and the government's role therein. A recent interview with the Council's director, William Lilley III, sheds additional light on its one-year study of how government and insurance company policies force up health care costs. According to Lilley the basic reason why health care costs have risen twice as fast as the cost of living is that the normal market mechanisms don't apply to health care.
For one thing, there is no price competition in health care services, as readers of this column are well aware. Two more examples of this lack appeared in the news recently. The Federal Trade Commission in January charged the American Dental Association and several state affiliates with barring advertising, forbidding price competition, and other anticompetitive practices, all backed up by force of law. The commission simultaneously announced an investigation of the entire dental care industry. The FTC has also been studying state bans on price advertising of eyeglasses. FTC representatives recently told a Senate subcommittee of various studies citing up to 350 percent differences in the price of identical glasses, due to lack of competition stemming from state bans on price advertising. All but five states prohibit or restrict such advertising.
The Federal government, too puts upward pressure on health care prices. Lilley calls the Hill-Burton Act subsidies for hospital construction a "criminal waste" at a time of surplus hospital beds. He cites numerous government regulations, many connected with Medicare and Medicaid, that require excess hospitalization and medical testing as a condition of reimbursement. Lilley considers government "a major part of the problem, not part of the solution. Its regulations have added enormous costs; it's questionable whether they've improved the quality of care that much."
Similar thinking is reflected in several other studies. A recent article in Science points out, again, the lack of market mechanisms in health care, and notes that the present system "encourages ever-increasing demand for ever-more expensive hospital services." Citing massive cost increases occasioned by Medicare and Medicaid, the authors contend that any further expansion of demand, such as by means of national health insurance, "may prove economically disastrous." They also point out that despite the massive increases in health care spending over the past 20 years, improvements in people's health and mortality have been minimal. Indeed, significant gains in health are likely to be brought about only by increased preventive efforts—reduced consumption of tobacco and alcohol, more exercise, a more nutritious diet—that people can do for themselves. This conclusion was stated succinctly in a recent Public Health Service planning document: "…further expansion of the nation's health system is likely to produce only marginal increases in the overall health status of the American people…the greatest benefits are likely to accrue from efforts to improve the health habits of all Americans and the environment in which they live and work."
The case against national health insurance thus grows stronger with each passing month. Will Congress finally get the message?
SOURCES:
• "Does the Nation Provide Too Much Health Care?" National Observer, Jan. 8, 1977.
• "Dental Price Fixing Charged by Commission," AP (Washington), Jan. 14, 1977.
• "Sharp Differences in Eyeglass Prices," Ibid., Feb. 1, 1977.
• "Health Economics and Preventive Care," Marvin M. Kristein, et. al., Science, Feb. 4, 1977, p. 457.
• The Forward Plan for Health, FY 1978-82, U.S. Public Health Service, GPO, Washington, DC, 1976, p. 69.
BAD NEWS FOR THE FED
The Federal Reserve System is taking it on the chin these days. In the past five years over 200 banks, with around $10 billion in deposits, have withdrawn from membership in the Fed. Latest to quit were Baybanks Inc. and Multibank Financial Corp., both Massachusetts bank holding companies. The banks cite Fed regulations on reserve requirements, which limit their investment options and reduce their income, as the principal reason for leaving. Over the past 15 years the percentage of all bank deposits held by Federal Reserve members has dropped from 84 to 74, thereby reducing the Fed's control over growth in the money supply.
The Fed's performance at that task has come in for some high-level criticism recently. The subcommittee on domestic monetary policy of the House Banking Committee has released a report charging that over 70 percent of the rise in the cost of living between 1966 and 1975 was due to "excessively rapid money growth." Further, the effects of hyped-up money stock are short-lived, improving things in the short term but producing new bursts of inflation a year or two later. None of this is news to our readers, of course. What is noteworthy, though, is that an important Congressional committee is drawing these conclusions and publicizing them. Perhaps such news will strengthen Arthur Burns' will to resist the new Keynesians in Washington.
SOURCES:
• "More Banks Shake Off the Fed Burden" Business Week, Jan. 10, 1977.
• '"Statistics Point Finger at Fed as Inflation Culprit," Los Angeles Times, Jan. 9, 1977.
MILESTONES
• Blue Laws Bite Dust. Vermont's laws forcing businesses to remain closed on Sunday have been declared unconstitutional. District Court Judge George Ellison found that the 190-year-old Blue Laws are so riddled with exceptions as to render the intent of the law "irrelevant." "The laws are unconstitutional," Ellison ruled. "They are discriminatory and they deny equal protection under the law." The case challenging the laws was brought by Ludlow Supermarkets, a member of the Independent Grocers' Association. It was unclear at press time whether the ruling would apply statewide or just within Windham County, where the case originated. Similar blue laws have been abolished recently in Connecticut and Massachusetts. (Source: "Vermont's Blue Laws Struck Down," Burlington Free Press, Jan. 6, 1977.)
• Competition in Space. After a year of hearings, the FCC has finally decided to allow Satellite Business Systems to proceed with development of a major new communications satellite system. SBS is a joint venture of IBM, Comsat General Corp., and Aetna Casualty & Surety Co. The SBS system will utilize rooftop antennas communicating directly with satellites to provide voice, facsimile, and data services (see Trends, June 1976). The system thereby bypasses local telephone service altogether, which led to heavy lobbying by A.T.& T. to have the FCC kill the project. But to no avail. SBS will now join RCA and Western Union as competitors of A.T.& T. in providing private-line satellite service. (Source: 'The FCC Lofts a New Satellite Network," Business Week, Jan. 31, 1977.)