Cargo Airlines Deregulated

In a preview of hoped-for passenger airline deregulation, Congress in November removed cargo airlines from nearly all Civil Aeronautics Board regulation. Previously, any new cargo service had to be justified to the CAB—including a showing that it would not harm existing carriers. Rates were established by the CAB, not the marketplace. And small-package carriers were restricted to using planes with a maximum payload of 7500 lbs.

No longer. Existing carriers may now provide service wherever they wish without having to justify it. Rates will be set by the market. New carriers will be allowed to begin service on the same terms a year from now. And the weight restriction has been lifted. Reaction from the cargo airlines was immediate. Plucky Federal Express, jubilant over removal of the payload limit, placed orders for six large Boeing 727 cargo jets, to supplement its 32 small Falcons and allow it to add more cities. Flying Tiger Line, which has been restricted to only 10 US cities, plans to add 10 more as soon as it can obtain enough planes. It has already purchased two DC-8-61s from another carrier. Seaboard World Airlines, which has been forbidden to carry domestic freight into or out of New York, will probably now add domestic service to its transatlantic cargo flights.

Air cargo deregulation is thus demonstrating the benefits of getting the government out of the field. Hopefully, the lesson will not be lost on Congress as it considers passenger airline (and trucking) deregulation later this year.

"Deregulation Arrives for Cargo Flights," Business Week, November 21, 1977, p. 55.
• "Cargo Airlines Expand Fleets," Aviation Week, Nov. 14, 1977, p. 34.

Medical Freedom Upheld

California's law prohibiting physicians from using or prescribing cancer remedies other than those approved by the State has been ruled unconstitutional. In a 2-1 decision, the state Court of Appeal overturned the conviction of Dr. James R. Privitera and four others who had been convicted of conspiracy to sell Laetrile.

The judgment, written by Judge Roy C. Fitzgerald, goes to the heart of the matter. "The issue here is human liberty," stated Judge Fitzgerald's opinion. "Can the informed cancer-ridden patient be limited in choice of treatment received from a state-licensed physician to 'state-sanctioned alternatives'?" Carefully reviewing prior federal and state cases, Fitzgerald agreed with both of Privitera's contentions: the right of privacy of the patient to choose or reject his or her own treatment and the doctor's independent right to practice medicine without unreasonable government interference.

The former claim is relatively straightforward and based on ample precedents. The latter is less well established, but has been given a substantial boost by the court's decision. "To require prior state approval before advising-prescribing-administering a new treatment modality for an informed consenting patient is to suppress innovation by the person best qualified to make medical progress. The treating doctor, the clinician, is at the cutting edge of medical knowledge," states the decision. Further, "to require the doctor to use only 'state-sanctioned' methods of treatment…is to invite a repetition in California of the Soviet experience with 'Lysenkoism.'" Such a requirement "raises the specter of medical stagnation at best, statism, paternalistic Big Brother at worst. It is by alternatives to orthodoxy that medical progress has been made. A free, progressive society has an enormous stake in recognizing and protecting this right of the physician." To buttress this point, Fitzgerald then cited extensively Sam Peltzman's studies of the harmful effects of the Food and Drug Administration's 1962 "efficacy requirements" on the introduction of new life-saving drugs.

Summing up, the landmark decision finds "there is no compelling reason shown to override the patient's or the doctor's fundamental right of choice." Denial to cancer patients of "medical treatment, albeit unorthodox, albeit unapproved by a state agency, must surely take on a Kafkaesque, a nightmare quality. No demonstrated public danger…warrants an Orwellian intrusion into the most private of zones of privacy."

"People of the State of California v. James Robert Privitera, et. al.," Court of Appeal, Fourth Appellate District, Div. 1, Nov. 10, 1977.
• "Doctor Hails Upset of Laetrile Conviction," Los Angeles Times, Nov. 12, 1977.

Licensing Harms the Poor

Occupational licensing is finally becoming seen for what it really is: a device by which a group of producers uses the State to restrict competition and secure higher prices for themselves. That conclusion is being reached in an increasing number of studies, many of which are coming into public view. And the newest of these studies show specifically how licensing frequently harms the poor—the very people generally thought to be most in need of "protection" via licensing.

Robert Gaston and Sidney Carroll of the University of Tennessee's Economics Department have studied the licensing of 31 occupations, making cross-state comparisons. Generally licensing produces a "Cadillac effect," leading to high-quality services—for those with high enough incomes to afford them. But people on low incomes cannot afford the high-priced services so they must either do without, do it themselves, or rely on low-priced unlicensed "quacks." Studying data from all 50 states, the economists found that in states with stricter licensing, people do their own plumbing and wiring far more often. As a result, death rates from accidental electrocution are much higher—up to 10 times—in states with strict licensing.

In some cases licensing reduces the quality of service across the board. Gaston and Carroll found that stricter licensing of real estate brokers restricts the quantity and lowers the quality of service available to buyers and sellers of homes. Houses stay on the market significantly longer in states with stricter broker licensing requirements.

Licensing also discriminates against minorities and the poor who want to enter the licensed occupations. Stuart Dorsey of Western Illinois University has shown that in Illinois and Missouri these groups fail licensing exams for barbering and cosmetology more often than whites, because they tend to have poorer educations. These states require written as well as practical exams for those seeking to be barbers or cosmetologists. This penalizes minorities who are well qualified by experience but hampered by limited written skills.

Even medical licensing can harm consumers. Although one recent state comparison (done for HEW) shows no correlation between licensing stringency and dental care prices, another study reaches the opposite conclusion. Laurence Shepard of the University of California at Davis finds that state licensing inhibits dentists from moving from state to state, due to differing, idiosyncratic state requirements. The resulting inefficient distribution of dentists has caused dental fees to be 15 percent higher than if dentists could move freely among the states.

Studies such as these are leading to new attacks on licensing laws. Federal agencies, especially the Federal Trade Commission and the Antitrust Division of the Justice Department, are conducting investigations and taking state boards to court. Some state agencies are doing likewise. One by one these restrictions on the free market are being picked off.

"How Licensing Hurts Consumers," Business Week, Nov. 28, 1977, p. 127.

Insulated from the Market

Once again the free market has shown itself far more responsive to human needs than the politicians. As part of the administration's "energy plan," Congress has been debating a tax credit of up to $400 for homeowners who add insulation to their homes. The idea is that government knows better than individuals that investing in insulation is a wise energy-saving measure, so it must tinker with the economy to induce more people to do so.

In the real world, however, people are way ahead of politicians. They have been buying insulation at such a rate—without tax credits or any other government inducement—that manufacturers are having to allocate (i.e. ration) supplies to dealers. The Maryland Home Builders Association reports that demand for insulation has quadrupled in the past year. Some 90 percent of new homes are now being built with fiberglass insulation.

Consequently the National Association of Home Builders has asked Congress to delay the introduction of the tax credit, to let supply catch up with demand. Better still, they should just ask Congress to take a long vacation—and let the free market solve our energy problems.

"Builders Urge Postponing of Insulation Tax Credit," Los Angeles Times, Nov. 20, 1977.

Radio Deregulation

The chairman of the House Communications Subcommittee has endorsed deregulation of radio broadcasting. Rep. Lionel Van Deerlin is head of the committee charged with rewriting the Federal Communications Act of 1934. He expressed his views at the annual convention of the National Association of Broadcasters.

Pointing out that the typical large city has 40 radio frequencies, Van Deerlin said, "Radio is so fragmented that there is a little piece of the action for every listener." Laws of supply and demand could be relied on to determine how many stations would broadcast rock, country, soul, and news, he said. Under deregulation, as Van Deerlin sees it, the government would still determine radio frequency allocations and power levels, to prevent interference, "but not whether a station fairly dealt with an issue. We don't need seven people in Washington to watch over something like that."

Deregulation would especially benefit small station owners, who would no longer have to spend large amounts of executive time and talent on license applications every three years. "That time and talent could be spent on improving the product," he said. And how did station owners react to the prospect of deregulation? "They loved it," reports Van Deerlin.

"Decontrol of Radio Is Urged," San Diego Union, Nov. 13, 1977.

Abolishing Agencies

Many people were rightly skeptical of the concept of sunset laws—statutes providing for the automatic abolition of government agencies and programs after a given time period, unless specifically reauthorized. The strong vested interest of the bureaucrats in preserving their jobs, and of protected industries in preserving their protectors, were seen as overwhelming obstacles to the success of such efforts. Now, however, the first evidence that such laws can be made to work is beginning to trickle in.

The big news comes from Colorado, where the nation's first sunset law was passed in 1976. (Since then 22 other states have followed suit, though most of their laws have not yet gone into effect.) Colorado's law covers only the state's regulatory agencies (which make up about a third of all executive units) and provides that one-third of these 41 agencies be reviewed in public hearings every three years. The first such review, of 13 agencies, was held last summer—and resulted in the abolition of four of them: the State Athletic Commission, the Board of Shorthand Reporters, the Board of Mortuary Science, and the Board of Registration for Professional Sanitarians. Although agency personnel protested bitterly, the legislature stuck to its guns.

Although no comparable sunset law has yet been passed at the federal level (despite several attempts), the Carter administration has taken some action on its own. In August Carter announced the abolition of 176 more federal advisory panels, including such relics as the Board of Tea Experts and the Advisory Board on Cholera Eradication. The Carter action brought to 480 the number of advisory boards abolished by executive action this year, at an estimated saving of $15 million per year. But 709 others remain in existence. There's a long way to go before regulatory reform window-dressing gives way to substance.

"Colorado's Prototype Sunset Law Called a Success," Wall Street Journal, Aug. 24, 1977.
• "Abolishment of 176 US Advisory Boards Ordered," AP (Washington), Aug. 25, 1977.


Freedom for TV Ads. Broadcasters are not required to apply the Fairness Doctrine to TV ads when no controversial public issues are involved. So ruled the US Court of Appeals in Washington. Groups such as the Committee for Open Media had sought to require the FCC to force broadcasters to require equal time for opponents of commercials for breakfast cereals, feminine hygiene sprays, and other products they don't like. No way, said the court. (Source: AP (Washington), Nov. 14, 1977.)

Decriminalize Pot. "We believe the time has come to liberalize laws regarding the possession of marijuana for personal use." So stated the presidents of the American Medical Association and the American Bar Association in a joint appeal to Congress and the state legislatures. The two organizations have gone on record in favor of removing criminal penalities for marijuana possession and use. The Senate Judiciary Committee recently approved a revision of federal law that would eliminate arrest records and jail sentences for marijuana use and limit fines to a maximum of $100. (Source: UPI (Chicago), Nov. 14, 1977.)

Billion-Dollar Paperwork. Reforming federal requirements for paperwork could save up to $10 billion per year. So concluded the Commission on Federal Paperwork in its final report. Congress continually creates new programs and new reporting requirements, without really considering the need for the information, simpler ways to meet the need, or the costs imposed by so much reporting. Although proposing reforms to save only $10 billion, the commission estimated that up to $25 billion of the total $100 billion burden of federal paperwork could be eliminated, without impairing the government's ability to function effectively. (Source: Washington Post, Sept. 10, 1977.)