Prison for Profit

"Prisons as now structured simply do not attract the kind of innovative professionals who can create new ways of doing things. For better or worse, talent gravitates in our society toward profit." So saying, Richard L. Mitchell, former chief program administrator of the New York Department of Correctional Services, proposes "a startling, yet rather obvious alternative to the present penal system: the private prison, something akin to a profit-making corporation."

Under Mitchell's plan, private prisons would exist side by side with, and in competition with, state prisons. They would incarcerate prisoners on contract from the state government, receiving a base annual rate per inmate with upward and downward adjustments based on how well it protected inmates from violence, the quality of training and rehabilitation it provided, and its success in discouraging inmates from returning to crime upon release.

Mitchell expects that the profit motive would lead prison companies to use their own personnel more efficiently than state prisons, and to make innovative use of inmate labor. (The contract would prevent labor practices deemed abusive.) The likelihood of inmates learning useful, productive skills would be much greater than in present state institutions.

None of this should be surprising to serious students of the free market. What is noteworthy is that Mitchell has reached these conclusions from his own experience in the frustrating world of today's state prison systems. Consequently, there's reason to hope that his proposal will be taken seriously by legislators.

• "A New Idea: Private Enterprise Prisons," Richard L. Mitchell, Los Angeles Times, Feb. 7, 1978.

Criminology Revisionism

Two new studies are shaking up the comfortable world of criminology, until recently the exclusive province of political liberalism. One gives new substance to the concept of the "criminal mind" and the idea that individual criminals—not society—should be held responsible for their behavior. The other recommends doing away with the insanity defense in criminal trials.

The late Samuel Yochelson and his colleague Stanton Samenow have produced a three-volume work called The Criminal Personality. The result of 14 years of intensive observation of 255 hard-core criminals at St. Elizabeth's Hospital in Washington, DC, the study documents in great detail the ways in which such persons differ from ordinary people. These hard-core felons, all of whom were classed as sociopaths or psychopaths, were found to be prone to 52 "thinking errors"—such as extreme present-orientation, emotional fragmentation, and being unable to think in abstractions or to empathize with others. Their entire lives had been devoted to anti-social, exploitative behavior. Such persons continually think in these terms; hence, the crimes they commit are only a fraction of those they contemplate. Most of them have quite violent thoughts—even if they have only been caught committing property crimes. Few of their crimes are actually done on impulse; most result from their ongoing, opportunistic thought processes.

The implications of Yochelson and Samenow's findings are far-reaching. To begin with, the old liberal idea of the criminal as a victim of society goes out the window. As James Q. Wilson wrote several years ago, we must acknowledge that "wicked people exist." But further, given the nature of the criminal personality, naive efforts at rehabilitation (e.g. by job counseling or group therapy) can be seen as largely wishful thinking. The authors spent many years developing an intensive, year-long Synanon-type therapy program, designed to break through the criminal's game-playing and destroy the criminal personality. But although they hold out great hope for it, only 30 of the 255 felons managed to complete it, and of these only nine are considered truly rehabilitated.

Although a few professional liberals have denounced the Yochelson/Samenow study, most people who work with criminals agree with its findings, according to a survey conducted by Science magazine.

More controversial is a recently released study of the insanity defense. Conducted by a lawyer, a sociologist, and two psychiatrists, for the New York Department of Mental Hygiene (DOMH), the report recommends that the defense of not guilty by reason of insanity be abolished. This recommendation is based on a detailed study of how the defense is actually used in New York State. The authors document a fourfold increase in acquittals on this basis in 1971-76 compared with 1965-71, and find that in more than half of the cases, the charge was murder. More significantly, they find that the insanity defense has been used by four specific subgroups to escape punishment: mothers who have killed a child, police officers, persons with no prior record, and persons of high social position.

Most damning of all, the authors present evidence that psychiatric assessment of insanity (at the trial) and of continued dangerousness (the criterion for release) is nothing more than "guesswork dressed up in the false cloth of reassuring pseudoscience." They point out that in most trials where insanity is an issue, both prosecution and defense utilize psychiatrists as expert witnesses—giving opposite testimony. "Who should be believed? The psychiatrist who uses the most scientific language? Who uses the least? Who looks and sounds most like a psychiatrist?"

The authors recommend that the insanity defense be replaced by a rule of diminished capacity, under which evidence of insanity could affect the seriousness of the charge that could be brought but not the question of innocence or guilt. Anyone found guilty—"insane" or not—would have to serve a prison sentence.

The DOMH study is long overdue. In recommending abolition of the insanity defense, the authors join the National District Attorneys Association in calling for a return to individual responsibility for criminal actions—a position also implied in the Yochelson/Samenow findings.

• "The Criminal Mind: A New Look at an Ancient Puzzle," Constance Holden, Science, Feb. 3, 1978, p. 511.
• "The Criminal Insanity Defense is Placed on Trial in New York," R. Jeffrey Smith, Science, Mar. 10, 1978, p. 1048.

Fighting Apartheid

In recent years various groups have demanded that US corporations withdraw all their operations from South Africa because of the racially discriminatory policies of that country's government. This position ignores the fact that such a withdrawal would most likely harm South African blacks at least as much as the government, by destroying many thousands of jobs. Furthermore, many US corporations have been among the leaders in promoting equal treatment for blacks in industry.

A far more sensible policy is to differentiate between the South African government—which enforces the policies known as apartheid (separateness)—and the South African economy, and to cease assisting the former while continuing to be a positive force in the latter. Just such a policy has now been announced by a number of US banks. In March Citicorp (parent of First National City Bank) announced that it will no longer make loans to the South African government or to any companies owned or operated by it. Instead, "Citicorp is limiting its credit selectively to constructive private sector activities that create jobs and benefit all South Africans." Chase Manhattan and Morgan Guarantee followed up with similar statements of policy. Citicorp is one of 60 US firms pledged to a six-point program of equal opportunity and support for human rights in all its South African operations.

Besides promoting peaceful change, these policies make sound long-range sense. When the white minority regime is eventually replaced, those companies which have refused to back apartheid over the years stand a far greater chance of being allowed to continue operations in South Africa.

• "Citicorp, Citing Apartheid, Halts Loans to South African Government, "Wall Street Journal, Mar. 13, 1978.
• "World Roundup—South Africa," Business Week, Mar. 27, 1978, p. 61.

Capitalist Inroads

All around the world, socialist governments are taking steps to reintroduce elements of capitalism to their economies, spurred on by the desire for greater prosperity. If the new policies clash with the official ideology, those in charge simply overlook the inconsistencies.

Sri Lanka's new government is typical of Third World efforts in this direction. Within months of taking office it had successfully gutted that country's most sacred of political sacred cows: its free rice distribution program. Over only minimal protests, it cut the number of people eligible for the one pound per person, per week handout from 14 million (virtually the entire population) to only 7 million. Also planned are cuts in subsidies for milk, flour, fertilizer, transportation, health care, and education. Such subsidies last year absorbed 15 percent of total government expenditures. "Ultimately, only the unemployed and destitute will get a subsidy," states central bank advisor Neville Karunatilake. Besides cutting subsidies, the government is making a major effort to attract investment. "We'll give foreign investors more opportunities than they've been given in any comparable situation," says Sri Lanka's trade minister. "You name it—tax concessions, rebate, export assistance, no red tape."

Policies such as these are also being tried in the communist countries of Eastern Europe. The government of Hungary is now exempting private artisans from all taxes in their first two years of business, in order to encourage more people to become self-employed entrepreneurs. In small villages, the tax holiday runs for three years. And the tax rates on artisans and craftsmen have been cut 17 percent.

The Bulgarian government has introduced a program of pay incentives throughout the country, after finding that incentive pay doubled productivity in a Sofia department store. The government has also eased restrictions on the size of private farming plots, which make up 12 percent of all Bulgarian farm land. It will give land to those who wish to begin farming and will exempt from taxes all produce sold to State cooperatives.

The Czech government is also embarking on a capitalist experiment. Five major industries, encompassing 487,000 employees, have been designated the "reform sector" of the economy. Within this sector, wage policy will stress bonuses and production premiums, and enterprises will be allowed to make unsupervised decisions on investments of up to $360,000. If this retreat from central planning works, it may be applied to the entire economy in the 1980-85 five-year plan.

Creeping capitalism is even showing up in China and Russia. The reformist government of Hua Kuo-feng has just abolished the system of managing Chinese factories via "revolutionary committees" made up of workers. To correct 10 years of industrial chaos and stagnation, professional managers will once again be hired to run the factories. In the Soviet Union a major debate is taking place on the subject of central planning and labor problems. A series of articles in Pravda last fall by economist Dimitri Valovi strongly criticized central planning—"'according to plan' has become synonymous with waste and inefficiency," he wrote. Recent Central Committee debates have repeated such criticisms, but without resolving the central Soviet dilemma: how can the economy be decentralized (increasing efficiency) without losing political control? Sooner or later the Soviet leadership will have to bite the bullet on that one—as its fellow socialists around the world are already doing.

"Sri Lanka Revamps Its Economy to Ease Island's Stagnation," Sharon Rosenhause, Los Angeles Times, Mar. 26, 1978.
• "New Communist Order—Capitalism," World Money Analyst, Mar. 11, 1978.
• "Bulgaria Finds New Job Incentive—Pay," Murray Seeger, Los Angeles Times, Dec. 25, 1977.
• "World Roundup: Czechoslovakia," Business Week, Mar. 20, 1978, p. 56.
• "China Apes US Business," Linda Mathews, Los Angeles Times, Mar. 7, 1978, p. 78.
• "The Soviets' Shadowy Economic Debate," Business Week, Mar. 20, 1978, p. 58.

Privatizing Government Operations

Recent studies of two major high-technology federal programs have reached the same conclusion: turn them over to the private sector. The programs involved are uranium enrichment and the Space Shuttle.

Prof. Thomas Gale Moore of the Hoover Institution examined the uranium enrichment process—currently a government monopoly. In order to be usable in nuclear power reactors, natural uranium must be concentrated about fivefold. The most common process for doing this is known as gaseous diffusion. The federal government owns and operates three gaseous diffusion plants. With additions currently under way, these plants will provide a supply of enriched uranium adequate for the number of power plants expected to be operating through the late 1980's. But much additional capacity will be needed thereafter. The subject of Moore's study was how best to ensure this needed capacity.

Moore identified four basic policy options: (l) continuing the government monopoly, (2) converting present operations to a profit-making government corporation (like Conrail or the Postal Service), (3) continued government operation of the existing plants and construction of additional ones by private enterprise, and (4) selling off the whole business to private enterprise. Moore finds that options (l) and (2) would be unlikely to meet projected demands, since (as government operations) they would be subject to strong political pressures from the anti-nuclear lobby. The third option is also troublesome, because of both political opposition and worries by the companies about competing with the subsidized, below-cost government plants.

But selling off the existing plants to private industry avoids all of these problems. Besides yielding about $2 billion to the taxpayers, this sale would "ensure that the [enrichment] business operated efficiently without subsidy on a strictly commercial basis," writes Moore. "For the first time fossil fuels would compete with atomic energy on an equal footing." Both those who contend that nuclear power is uneconomical and those who see it as ultimately the most cost-effective would have a chance to see the marketplace decide the question—instead of politicians and bureaucrats.

Similar considerations affect NASA's Space Shuttle. Just by contracting Shuttle launch operations to a private contractor, NASA could cut costs by 30 percent, concluded Booz-Allen Applied Research. This is because NASA requires so many employees to keep watch over numerous component contractors. During initial Shuttle operations at the Kennedy Space Center (at the rate of 20 launches per year), costs could be cut by $2.5 million per launch. NASA management is "strongly considering" the consulting firm's recommendation, with 1981-82 as a target date for virtually complete contractor management.

An even stronger recommendation for Shuttle privatization has come from another consulting firm, Science Applications, Inc. After a year-long study of Shuttle operations and space industrialization, SAI concluded that NASA's best course would be to turn over the entire Shuttle operation to private industry, to be paid for by its customers. "Let TWA or Pan Am operate the Shuttle like a common carrier, with appropriate licensing fees to NASA," recommends consultant Peter Vajk, who says that NASA's "goldplated" approach is "no way to run an airline" and would be "disastrous" for future space industrialization.

Uranium Enrichment and Public Policy, Thomas Gale Moore, American Enterprise Institute, 1978 ($2.75).
• "Shuttle Operations Shift Studied," Aviation Week, Mar. 6, 1978, p. 12.
Space Industrialization Study, Science Applications, Inc., April 1978.

What Population Bomb?

The rate of world population growth peaked in 1970 and has since declined substantially, especially in many of the poorer countries. By the year 2000 world population will be about a billion less than the UN and other agencies had predicted as recently as last year. And government-sponsored family planning programs have had little to do with these changes.

This surprising news was made public by a panel of demographers at the recent annual meeting of the American Association for the Advancement of Science. Between 1970 and 1977 birthrates in the developing countries (excluding China) dropped from 42 to 36 births per thousand. A country-by-country breakdown shows that 19 of these countries had declines of 20 percent or more—including South Korea, Taiwan, Thailand, Colombia, China, and Cuba.

What factors contributed most to the declines? As economic theory would predict, the most important factor was social and economic conditions leading people to decide that their lives would be better off with fewer children. In the case of China and Cuba, this took the form of exhortation and coercion to change the social structure: delaying marriage, moving women into the work force. But in the noncommunist developing countries, it was booming economic growth that changed people's expectations and desires. Rising real income levels and the emergence of women as wage earners and household decision-makers have made large families appear much less desirable in these countries.

What about massive government family planning programs? W. Parker Mauldin of the Population Council thinks they have "speeded up the decline" set in motion by economic advance, but others disagree. At the AAAS meeting William Peterson of Ohio State University said there is little firm evidence to support that position. He was seconded by Maris Vinovkis, University of Michigan historian, who reminded the panelists that the major decline in US birthrate occurred during the booming 19th century-long before the pill and the IUD. This point is further supported by the fact that countries with family planning programs but without economic growth—Bangladesh, Pakistan, much of Africa—have shown no declines in birthrates.

Once again, it appears that the best course for governments to take is to pull back from policies that discourage or restrict the growth of the market—and let nature take its course. That way, the population bomb will prove to be a dud.

"Surprise Slowing of World Population Rise Noted," Robert Gilette, Los Angeles Times, Feb. 15, 1978.


Another Usury Law Repealed. Tennessee voters repealed the state's archaic 10 percent ceiling on interest rates. As a result, the availability of funds for consumer loans has soared, ending a severe credit crunch. Small loan companies had virtually stopped making loans after an August 1977 court ruling enforcing the 10 percent usury ceiling. (Finance company interest rates had been averaging 19 percent prior to enforcement of the law.) Tennessee voters decided, wisely, that they would rather have loan money at 19 percent than no money at 10 percent. (Source: Business Week, Mar. 20, 1978, p. 40.)

Another Life Patent. For the second time in less than a year, the Court of Customs and Patent Appeals has ruled that a newly created life form is patentable. The new ruling upheld the patentability of a bacterium that consumes oil, developed by a General Electric microbiologist. As in its earlier Upjohn Company ruling, the court held that the substance, though alive, is a "manufacture or composition of matter" within the meaning of the basic patent law of 1790. (Source: Science, Mar. 17, 1978, p. 1184.)

Communications Competition. The head of the House Commerce Committee Subcommittee on Communications, which is rewriting the entire Communications Act of 1934, has endorsed substantial new competition in telecommunications. Rep. Lionel Van Deerlin believes that the telephone companies should be free to compete with television and telegraph firms for a share of the coming markets in broadband video and voice/data terminals. He also favors full competition between the phone companies and data transmission firms for intercity telecommunications traffic. Congress should not leave such decisions to the Federal Communications Commission, he said, because "there is every indication that the telephone industry has outgrown both regulation and litigation." (Source: Electronics, Mar. 2, 1978, p. 55.)

Yen for a Choice? The nation's largest bank, the Bank of America, has asked the Federal Reserve Board for permission to offer accounts denominated in foreign currencies. Such accounts became legal under the Helms Act that legalized gold clause contracts. Accounts in Japanese yen, Swiss francs, or Deutschemarks would permit Americans to protect their assets from inflation without having to utilize an overseas bank. (Source: IMI Bulletin, Feb. 24, 1978.)

Handgun Possession. New York State's highest court has upheld an appeals court ruling that residents of New York City are entitled to purchase and possess as many handguns as they wish under a single "on-premises" license. Moreover, the city may not demand proof of "need" for possession of the guns, but must follow the letter of the criteria specified in the licensing law. The case was brought by the Federation of New York Rifle and Pistol Clubs. Unfortunately, the City has now asked the state legislature to change the law to give police officials power to demand "proper cause and unique need" for handgun licenses. (Source: NRA Reports from Washington, Mar. 9, 1978.)