Commercial Speech Is Free Speech

Extending an important recent trend, the United States Supreme Court has ruled that state laws prohibiting advertising by lawyers are unconstitutional. In a 5-4 decision, the court ruled that the First Amendment protects truthful advertising of the availability and terms of legal services. The decision, added to previous rulings overturning bans on advertising drug prices, eyeglasses, and (at the state level) physicians' fees, substantially strengthens the position that commercial speech is not fundamentally different from ordinary speech, and is therefore entitled to First Amendment protection.

The court's decision concerned an Arizona legal clinic set up by two young lawyers serving low-income clients. The lawyers placed ads in newspapers listing their fees for handling divorces, bankruptcies, adoptions, and other services. The lawyers, Bates and O'Steen, had been censured by the state Supreme Court after proceedings against them by the state bar. A similar clinic in southern California, operated by Jacoby and Meyers, fared somewhat better: the California Supreme Court ruled in May that Jacoby and Meyers had a First Amendment right to at least publicize their clinic (as they had done). In the wake of the U.S. Supreme Court's ruling, Jacoby and Meyers announced plans for full-scale advertising. Meyers predicted that such advertising would help reduce the price of legal services.

• "Supreme Court Rules Lawyers May Advertise," UPI (Washington), June 28, 1977.
• "Southland Legal Clinic to Start Advertising," Los Angeles Times, June 28, 1977.

More Freedom of Choice Advocates

The battle to establish freedom of choice in using controversial substances such as saccharin, Laetrile, and marijuana picked up new allies and won some new victories during the past month. William Buckley and the Honolulu Star-Bulletin made renewed pleas for easing up on marijuana. Buckley chided the New York Conservative Party for lobbying against a proposed marijuana decriminalization law for that state (whose law still provided up to a year in jail for possession of a quarter ounce). The bill passed anyway, making New York the ninth state to decriminalize pot. The Star-Bulletin, meanwhile, editorialized—seriously—that marijuana should be legalized and could become an important commercial crop for Hawaii, now that sugar is declining in importance. The newspaper also urged the government to "get off people's backs" in the case of saccharin and Laetrile.

On the saccharin front, although a new Canadian study provided evidence of a link between its use and bladder cancer in men, pressures continued to have the government permit individuals to make their own risk-benefit assessment, rather than ban the substance outright. The Council on Wage and Price Stability challenged the FDA's proposed ban, charging that the agency's inflation-impact statement underestimates the costs of the ban and "contains no discussion or analysis of benefits or of possible alternative actions." In its statement the FDA had ignored the "potential costs and hazards to diabetics and obese people," counting as costs only the expense of converting products from saccharin to sugar. Also joining the anti-ban wagon was the American Medical Association. The AMA's House of Delegates urged the FDA not to ban saccharin, but merely to place warning labels on products containing the substance. One physician commented, "I hope my diabetic patients live long enough to get bladder cancer." The AMA also called for repeal of the controversial Delaney Amendment, which requires the FDA to ban additives which cause cancer in animals—whether or not they cause cancer in humans.

Finally, at press time, two more states had legalized Laetrile, bringing the total to 10. The Delaware and Louisiana legislatures both passed bills permitting the manufacture as well as sale of Laetrile, a provision which was also included in the previously passed bills in Arizona, Indiana, and Texas.

"Calling the Pot Black," William F. Buckley, Jr., syndicated column, May 23, 1977.
• "Pot Decriminalized in New York," AP (Albany), June 30, 1977.
• "Marijuana, Laetrile Should Be Permitted," Honolulu Star-Bulletin, May 24, 1977.
• "Proposed Saccharin Ban by FDA Is Hit By Wage-Price Unit," Wall Street Journal, June 16, 1977.
• "AMA Asks Repeal of Amendment," Wall Street Journal, June 23, 1977.
• "Two More States OK Sale of Laetrile," AP (Washington), June 21, 1977.

New Airline Competition

After years of bureaucratic delay, the Civil Aeronautics Board and President Carter have approved the Laker Airways Skytrain proposal. On Sept. 26 Laker will begin providing no-frills, no-reservation transatlantic service in DC-10 jets for $135 from west to east and $102 east to west. Skytrain will provide the first real price competition across the Atlantic—and competitors moved in quickly with plans of their own. Both TWA and Pan American said they would match Laker's prices for similar no-frills service. National Leisure Corp., operator of air charters, has asked CAB permission to offer no-reservation round trips for $18 less than Laker.

On the home front the CAB is proceeding with consideration of World Airways' under-$100 no-frills cross-country proposal. Several other airlines have now filed similar proposals, and the CAB has decided to limit its consideration to routes linking four cities in the east (New York, Newark, Baltimore, Washington) and six in the west (Los Angeles, Ontario, Long Beach, San Francisco, Oakland, San Jose). The specter of deregulation has finally prompted the bureaucracy to take price competition seriously.

• "Carter Approves Skytrain," UPI (Washington), June 14, 1977.
• "Laker Skytrain Prods Competing Proposals in U.S.," Wall Street Journal, June 27, 1977.
• "CAB Limits 'No-Frills' Air Fares to 10 U.S. Cities," AP (Washington), June 9, 1977.

Cutting Water Subsidies

Mention government subsidies and most people think of dollars being handed out to special interest groups. But many subsidies are more subtle—the providing of goods or services by the government at less than their cost. Two multimillion dollar examples have recently come under well-deserved attack.

The first concerns Federal dam construction. Both the Army Corps of Engineers and the Bureau of Reclamation carry out benefit-cost calculations in an attempt to show that the total benefits of a new dam (preventing flood losses, generating power, providing recreation) are greater than its cost. Unfortunately, these calculations have never been worth the paper they're printed on. Why? The most glaring reason is that one of the largest costs—the opportunity cost of capital—is always grossly understated. For years this figure, known as the discount rate, was set at 3.25 percent for such projects, when the market rate has been between 7 and 12 percent. President Carter wants to up the rate to 6.375 percent—a substantial improvement. Using that figure, such projects as the Applegate Lake dam in Oregon have their benefit-cost ratio decreased from 1.34 to 0.64—meaning the project is clearly uneconomical. Such a project provides benefits to a favored few who live in its vicinity at the expense of taxpayers in general. This is the case with most Federal dam proposals.

A similar problem exists with Federally improved waterways. Both Carter and many Republican Senators favor imposing user fees on ship and barge owners who use these waterways. Historically, billions in Federal tax money have been spent on developing and maintaining the waterways, without the users having to pay a cent. Carter wants all users of Federal water projects to be charged something for the benefits they receive, calling user willingness to pay "essential as a test of economic demand." In June the Senate voted 71-20 to impose user fees on Federal waterways, but the proposal faces strong opposition in the House. Carter, though, has threatened a veto if some form of charging is not included.

• "Carter's Hard Line on Water Projects," Business Week, May 2, 1977, p. 25.
• "Senate Votes Fees for Shippers Using U.S. Inland Waterways," AP (Washington), June 23, 1977.

No Work—No Payments

Two recent court decisions may put a halt to the common practice of government subsidization of strikes. First, in New York the U.S. District Court ruled that it is unconstitutional for striking workers to receive unemployment compensation. Judge Richard Owen overturned a New York law that had permitted such payments, ruling that it was "state intervention on behalf of the strikers" since it forced "an employer to finance its own strikers." This, he said, conflicts with Federal labor law policy and is therefore void under the supremacy clause of the Constitution.

One month later the U.S. Supreme Court ruled that states are free to deny welfare benefits to families of strikers. In a 5-4 vote, the court overturned a lower court finding that Maryland could not deny welfare payments to the family of a striker. The Supreme Court held that a Federal regulation which lets each state define unemployment as it chooses is permissible, therefore allowing Maryland to withhold benefits by excluding from the "unemployed" those who are on strike or have quit voluntarily. The court has not yet ruled on whether paying such benefits to families of strikers is constitutional—only that not paying them is.

• "Striker Jobless Pay Ruled Invalid," AP (New York), May 24, 1977.
• "States Are Free to Deny Welfare Benefits to Families of Strikers," Wall Street Journal, June 21, 1977.

Fiscal Responsibility Laws

A conservative group called the American Legislative Exchange Council has developed a program of 22 model laws, mostly aimed at controlling the growth and cost of government. Among the proposals are the following:

• A state constitutional limitation on taxation (similar to proposals by the National Tax Limitation Committee),

• A Zero-Based Budget and Sunset Act calling for termination of state agencies after four years unless re-authorized,

• The Balanced Federal Budget Petition, calling on Congress to convene a constitutional convention to pass a balanced budget amendment (already passed by 18 states),

• The Economic Impact Disclosure Act, based on the model law developed by the Law and Economics Center at the University of Miami (see REASON, May 1976, p. 40) and enacted last year in Florida.

The program also includes constitutional amendments supporting the right to property and the right to keep and bear arms—provisions frequently not spelled out in state constitutions. Another interesting measure is a Judicial Sentencing Disclosure Act, requiring a complete public record of each judge's sentencing history.

Many of the model laws have been introduced into the Louisiana legislature by one of the program's authors, Rep. Louis (Woody) Jenkins. And an Economic Impact Disclosure Act was introduced in the California legislature in April.

1977 Suggested State Legislation, American Legislative Exchange Council (600 Pennsylvania Ave., SE, Washington, DC 20003).

Competing for Sites

Where to locate that new oil refinery, airport, or power plant? That's an increasing dilemma these days, as residents become more concerned about large-scale impacts on their way of life. The brute force approach, so popular with governments, is becoming harder to implement, thanks to citizens' ability and willingness to protest, file lawsuits, etc.

So why not try a marketplace approach, say a group of MIT researchers. Let communities make competing bids: specify how much they'd pay to get the facility in their town—or how much they'd have to be paid to take it. And the best bid gets the facility. The proposal is a serious one, says Prof. Lawrence Susskind, an urban studies specialist at MIT. "Siting by auction" is the best approach his team has come up with, under a grant from the Energy Research and Development Administration to study the "boomtown phenomenon" associated with building new energy facilities in rural communities.

Susskind has already tested the idea—successfully—in trying out various Massachusetts communities as sites for a new prison. And political leaders in that state and California have expressed interest. "Siting by auction" may be a way to replace force by choice.

• "Not on My Block," Alan L. Otten, Wall Street Journal, May 19, 1977.

Another Private Weather Service

This column's report on for-profit weather forecasting (April) omitted mention of Accu-weather, one of the nation's largest and most successful private enterprise weather services. The company provides an excellent example of the market in operation. Its basic modus operandi is to seek out markets for weather information and serve them, better than the National Weather Service.

Accu-weather's principal customers are truck fleets—some 25 of them—but clients also include city and county governments and highway authorities. The firm collects weather data from 700 U.S. reporting locations, another 100 in Canada, and from ships and planes en route. Reports come in continuously, via teletypewriter, providing data that are only minutes old. These data form the basis for the company's specialized services.

The heart of its service approach is the individualized forecast, tailored to a customer's specific needs and specific location. Accu-weather is able to pinpoint weather conditions in specific areas, due to its extremely frequent data updates. By contrast, National Weather Service forecast data can be up to seven hours old. Of particular value are the company's storm alert and storm-warning services. From 18 to 36 hours before a snow, sleet, or ice storm threatens a customer's area, AW telephones an alert to the customer. If the storm becomes definite, AW telephones a comprehensive storm warning, updating it while the storm is in progress. (The company predicted last December's four-foot snowfall in Buffalo three days ahead of time.) Another AW offering is its map service for fleets serving a wide area. Each map is prepared for the specific fleet, for a given time period, and is delivered by telecopier. For those clients who need to verify weather-caused damages or delays, AW offers weather reconstruction service, providing a detailed log of the actual weather conditions at the time and place in question.

This kind of service explains the company's growth from serving six fleets to the present 25 over the last six years. Its 23 full-time and 10 part-time meteorologists demonstrate that you don't have to work for the State to forecast the weather. A market for such information exists, and is growing rapidly.

• "What's the Weather?" Fleet Owner, Feb. 1977, p. 63.


Costly Regulations. The regulations imposed on trucking cost consumers at least $4 billion a year. So says the government's own Council on Wage and Price Stability. COWPS would like to see the ICC stop restricting entry into trucking, so that competition could force rates down. As it is, ICC licenses (called certificates) are so difficult to obtain that one recently changed hands for $20 million, an indication of the extent of monopoly power being granted by the State. (Source: "Wage Unit Says ICC Rules Boost Rates," AP (Washington), June 10, 1977).

Medical Freedom. A practitioner of homeopathic medicine who holds no medical license has been granted permission to continue his practice of holistic healing. Dana Ullman's attorney reached a settlement with the Oakland district attorney's office, under which if Ullman makes written contracts with his patients, the charges against him (practicing medicine without a license) will be dropped. The contract must state that the client should see a licensed physician for treatment of any disease, as opposed to obtaining preventive advice and treatment which Ullman dispenses. "This is the first legal case to confirm the existence of an approach other than the medical approach to health care," said Ullman's attorney. "For the past 70 years all health care approaches outside the medical profession have been illegal." (Source: "Non-Doctor Wins Right to Provide Health Care," UPI (Oakland), April 10, 1977.)

OSHA Gives In. Conceding that OSHA has wasted taxpayers' money by harassing small businesses with petty regulations and inspections, Labor Secretary Ray Marshall has announced a change in policy. Henceforth, OSHA will ostensibly focus its resources only on serious health and safety problems, and will remove "unnecessary and complex government regulations" from the backs of small business. We'll see. (Source: "Agency Will Shift Focus to Major Worker Hazards," UPI [Washington], May 19, 1977.)

Government costs exposed. The total dollar cost of Federal, state, and local government comes to $9035 per year for the average family. So reports the National Taxpayers Union, based on several recent studies. Direct taxes take $5464 per family. On top of this are (1) the cost impact of government regulations, estimated by OMB to be $2000 per family, and (2) lost income attributable to the social security tax system—$1841 per family, according to Harvard economist Martin Feldstein. The resulting $9035 per year works out to $174 per week, a truly remarkable burden. (Source: "New Figures on Cost of Government," NTU press release, March 14, 1977.)