Trends

Studies Debunk Energy Roadblocks True or false:
• Solar power and conservation offer the best hope for reducing energy shortages over the next 30 years.
• The fast breeder reactor is too dangerous to develop, and unneeded, anyway.
• There's too little water in the West to permit development of coal and oil shale there.
• Coal slurry pipelines cannot be built without government intervention to obtain rights-of-way.
• Fossil fuel usage must be curtailed to prevent heating of the earth via the "greenhouse effect."

If you answered "true" to most or all of the above, welcome to the "everything you know is wrong" club. In just the past two months, authoritative information challenging each of these popular ideas has surfaced.

To begin with, a massive four-year National Academy of Sciences study released in January concluded that coal and nuclear power are the only means by which the United States can meet its electricity needs over the next 30 years. And, concluded the Committee on Nuclear and Alternative Energy Systems report, while conservation will be an important factor in easing the near-term crunch, solar is much less promising: "Because of the higher economic costs, solar technologies will probably not contribute much more than five percent to the energy supply in this century unless there is massive government intervention to penalize the use of nonrenewable fuels." And the report went on to warn, "The danger of such intervention lies in the possibility that it may lock us into obsolete and expensive technologies." For the same reason, although the report urged development of synthetic fuels from coal, it opposed crash programs toward that end.

On the breeder reactor, the NAS report concluded that, unless the demand for electricity drops off sharply, breeder reactor development must continue, so that this technology will be available early in the next century. (It opposed the government's very costly project to build a prototype breeder at Clinch River, however, as too much, too soon.) The Carter administration has opposed nuclear fuel reprocessing and plutonium breeder reactors on grounds of the dangers of nuclear proliferation—that is, diversion of some plutonium to bomb making. But a 60-nation study—the International Fuel Cycle Evaluation, originally proposed by Carter—has just concluded that there is no real alternative to the breeder reactor for the long term. Countries with large electrical power needs and no other ready alternative are justified in proceeding with breeders and reprocessing, according to the study report. (Breeders are already in operation in France, Japan, and the USSR and another is under development in West Germany.)

As for continued coal development, three of the major obstacles have been lack of water in the West, the difficulty of building coal slurry pipelines, and fears of the greenhouse effect. A major study of western water resources by the General Accounting Office, released late in January, concluded that western water resources are "ample" for anticipated energy development projects. Earlier pessimistic conclusions resulted from (1) obsolete and incorrect information on water resources, (2) unrealistically high projections of future electricity demand, and (3) greatly exaggerated estimates of the number and size of the energy projects. In particular, said the report, the amount of water consumed by coal slurry pipelines would be less than what would be needed to cool mine-mouth power plants.

But can such pipelines be built without State intervention? Until recently, everyone assumed not. That's because railroads (which also haul coal) would refuse to permit competing pipeline firms to cross their trackage. As a result, there has been intense lobbying to get Congress to give coal pipeline companies the power of eminent domain, to condemn land for cross-trackage rights-of-way. Because Congress has thus far resisted, however, one pipeline firm has now found a noncoercive solution.

Energy Transportation Systems, Inc., attempting to build a 1,400-mile pipeline from Wyoming to Arkansas, was refused crossing rights by 9 of the 10 railroads in its path (with 70 separate tracks). ETSI thereupon researched the ownership situation and learned that in most cases the railroads possess only surface easements across privately owned land. Contacting the actual owners, ETSI has been able to obtain subsurface easements for its pipeline in nearly every case. The company is confirming the titles via the courts; so far, out of 65 cases it has lost none and has had only one appealed.

Finally, what about that old greenhouse effect—the gradual heating of the earth by increased CO2 build-up from fossil fuel combustion? According to astronomer Carl Sagan and two colleagues (Science, Dec. 21, 1979), the earth is getting cooler, not hotter. According to their calculations, the human race has been altering the earth's climate for thousands of years, largely by destroying vegetation (creating deserts and chopping down forests). These changes have increased the earth's albedo (reflectivity), resulting in an estimated temperature decrease of between one and two degrees Centigrade over the past several thousand years. Since 1940 the global mean temperature has dropped another 0.2°C.—despite the increase in CO2 during that period. Extrapolation of present land-use trends (tropical deforestation, desertification) suggests a further 1°C. decline over the next century, "at least partially compensating for the increase…due to the greenhouse effect."

And Now—Private Control Towers With virtually every other type of government service, from weather forecasting to garbage collection, now being offered in the marketplace, no one should really be surprised by the emergence of yet another form of privatization. Thus far there are 16 privately operated airport control towers around the country—and their numbers are expected to climb in the years ahead.

The market for private towers arises out of Federal Aviation Administration practices. It seems the FAA will only build a tower once an airport reaches an arbitrarily defined (and relatively high) level of air traffic. That leaves many growing airports—including many with airline and business jet service—unprotected for years.

Into the breach have stepped private firms, led by Barton ATC, the industry leader. The company will come in, set up a modular control tower, and staff it with company-trained, FAA-certified controllers, for a fee in the vicinity of $120,000 a year. (If the airport already has a tower in place, the cost of operating it is below $100,000 a year.) By contrast, an FAA tower costs around a million dollars to install and $275,000 a year to operate. Thus, the private alternative is considerably less expensive—as well as being available to airports the FAA won't serve.

Barton achieves these economies by doing more with less. Its towers consist of prefabricated cabs mounted atop modular home structures; additional modules can be added to accommodate growth. The radios cost one-third as much as FAA equipment—but do the job as capably. The three-person controller complement does its own clerical and secretarial work during slack time, and are also trained as weather observers. Thus, Barton gets by with three people where the FAA uses nine (and all at civil service-level salaries).

Thus, if you happen to fly into airports like Smyrna, Tennessee (hub of the Emery Air Freight system); Gillette, Wyoming; Middle River, Maryland; Waukesha, Wisconsin; or Latrobe, Pennsylvania, relax. Your safety is being looked after by the private sector.

Pay TV Expands Bypassing the government-protected shared-monopoly of the three major networks, alternative (pay) TV is coming into its own. Expanded use of satellites and continued reduction in Federal Communications Commission regulation are leading to major expansions of these forms of television.

How would you like your own satellite ground station, receiving up to six channels of first-run movies, live concerts, and sports events? Several years from now you may be able to call your local Sears, Roebuck store and order such a system. If a proposed joint venture with Comsat General Corporation goes through and the FCC approves, Comsat will provide the satellite and Sears will provide the antennas. The two-foot dish antenna will be installed on your roof for between $200 and $300, and thereafter you'll pay a monthly fee of $15–$20. Sears and Comsat expect the new service to be especially marketable in big cities and rural areas, where cable companies have not had much success due to high installation costs and low population density, respectively.

Cable TV may soon get a break in rural areas, however, if the FCC follows a recent staff recommendation. Since 1970 FCC policy has prevented telephone companies from providing cable service, but the staff thinks that rule is unduly restrictive. Under its proposal, if there would be fewer than 30 homes per mile of cable, the local phone company would be permitted to offer cable TV service, unless a cable firm were already there and ready to begin construction.

Meantime, pay-TV "networks" keep springing up, with solid advertiser support. Ted Turner's Cable News Network is due to debut on June 1. The Entertainment and Sports Programming Network went on the air last September, competing with the Madison Square Garden Sports Network. In January the Black Entertainment Network began two-hour weekly broadcasting. Altogether, there are now 40 of these program organizations, serving the nearly 2,000 cable systems that have satellite ground stations. And that number is expected to grow to 4,000 by the end of 1981.

Thus, the new forms of TV are providing a real alternative to the "vast wasteland" that has grown up under the protective arms of the FCC.

Pricing Flying Commercial aviation is becoming more and more a marketplace operation. As federal regulations continue to be relaxed and repealed, the pricing system is starting to do its stuff. Besides giving airlines more freedom to set fare levels, both the CAB and the FAA are about to let pricing start serving another of its usual functions—coping with shortages and surpluses.

One shortage occurs at airports during periods of peak operations. More airlines want to land and take off planes than the airport can physically handle. Up till now airports have resorted to crude forms of rationing—generally, by setting up a committee of airline representatives to divide up the available "slots." But in February the Federal Aviation Administration issued a proposal that would allow airlines to bid for the peak-hour slots and to resell acquired slots to others—that is, to establish a market in the scarce resource. The proposal resulted from a CAB-commissioned study by Polinomics Research Laboratories in Pasadena. Thus far, nearly all the airlines have opposed the idea, which is backed only by the Justice Department, the California Transportation Department, and Frontier Airlines. Most of the opposition seems to be the usual blind hostility to solving problems via pricing that have been traditionally handled bureaucratically.

Much less controversial is a similar proposal by the Civil Aeronautics Board. During peak periods, says the CAB, the airlines should be free to charge higher fares, so as to even out peaks in demand. They should also be free to set prices by supply and demand on all short-haul routes. Unless opposition develops (and so far there has been none), the proposal will take effect sometime in April. Under the 1978 Deregulation Act, all CAB control over air fares will expire in 1983, and the current proposal is another step in that direction.

Third World Exploiters The editor of an Icelandic newspaper in Reykjavik delivered a speech at a conference on information and human rights in Venice, Italy, recently, criticizing Third World representatives for blaming all their problems on the First World. Editor and Publisher reprinted the speech in which Jonas Kristjansson accuses the bureaucrats and leaders of UNESCO and the Third World of "assimilating the vocabulary of Eastern Europe rulers and…of Third World rulers who want to be left in peace to exploit their subjects while they attract Western aid to bolster their private bank accounts."

Specifically, the Icelander was referring to UNESCO efforts to impose international censorship of Third World news by restricting activities of foreign journalists in those countries. Those who think the only places that Western journalists are under attack are Iran and Afghanistan are sorely mistaken. The effort is being funded, as are all UN activities, mostly by US taxpayers. The reasons that are used to justify this attack on freedom of the press are the old and tired accusations of colonial greed. The UN is actively propagating this guilt trip in order to gain funding for its grand scheme for remaking the entire world economy along socialist lines. The name of the plan is the New International Economic Order.

Kristjansson explained to his audience that "the so-called national identity and culture of Third World despots is based upon the shoulders of their slaves and semi-slaves. In Europe and North America all this was changed in the industrial revolution and the following social democracy. The First World got rich and was able to distribute the wealth more or less to all classes of the population. This wealth was new, not taken away from anybody. It was certainly not taken from the Third World."

He went on to warn: "The First World does not even need the Third World.…On the other hand, the Third World desperately needs the First World if it wants to quicken its own road to the industrial revolution. .. .This is important in considering the demand for a new international economic order. It is a part of a successful strategy of Third World despots to excuse their greed, inefficiency and exploitation and put the blame on the First World.…Of course they want themselves to decide what information comes from and into their countries. And they have a good chance of winning."

After exposing the dangers of the plan, Kristjansson debunked the practicality of initiating any workable news-monitoring system. "Even if we could join an eventual Third World rulers' conspiracy against the news agencies, the distributed material would end up in the wastebaskets of the newspapers, radio and TV stations of the outside world. The news customer in Nebraska or Lombardy is simply not interested in Icelandic fishing problems. Neither I nor the Third World can force information down your throats."

Kristjansson's conclusion is something we have known all along, but it is still good to hear it from somebody outside of the First World. "The UN and UNESCO are controlled by the representatives of despots. |The First World] is not guilty of exploiting the Third World, neither in economy nor in information." Well said.

Government's Silent Majority

Reason

The evidence is in. The results of the New Deal, the Great Society, and decades of political promises have accomplished some sort of success—success if you are enthused by the idea that over half the population is hooked on government. The majority, in this democracy, now have considerable and vested interests in the maintenance of big government. Gary Shilling, president of Shilling and Co., a New York-based economic firm, has gathered some startling data.

The statistics presented here do not include the population that receive the plethora of little services, such as tax-funded library cards or subsidized parking. Shilling's statistics only count those who receive incomes directly due to government action (and their families). The biggest increase between 1960 and 1977 has come in the area of transfer payments—payments made without any current work done in return.

Social Security recipients soared from less than 10 percent to almost 17 percent of total population, most of which is accounted for by the lowering of minimum eligibility age from 65 to 62. The percentage of the population receiving government-paid pensions also grew dramatically, including veterans pensions. Over five million children were added to the rolls of those benefiting from Aid to Families with Dependent Children. This is interesting because the number of children under 18 actually decreased by 300,000 during the same time.

As a percentage of total population, those working directly for the government has actually gone down. Even the percentage of the population that is working in the private sector on government jobs has decreased slightly. Transfer payments, welfare, and generous government pensions are the area of uncontrolled growth. One must wonder what it means to the future of the country when half the country would be immediate losers if government spending were reduced.

Gold's New Credibility Since our last report on gold (Trends, Jan.) the price of the metal has continued to soar, into the $700-$800 range. At the same time, the prospects for a return to some form of gold standard continue to improve.

Public opinion is being prepared for such a move by articles in leading publications. The Times of London last December 12 editorialized that "paper currencies have ceased to be satisfactory as a security for the failure of independent nations." It pointed out that the "European Monetary System recognizes that gold has again become the reserve base of the world monetary system," the US Treasury notwithstanding. The editorial was reprinted in the December 21 issue of the Wall Street Journal.

About that time the January issue of The Atlantic hit the stands, featuring a cover story on gold. Author Charles Cerami pointed out how the last 20 years should have taught us that "precious metal is the only real money in the world—the only steady standard of value." Quoting Voltaire ("All paper money eventually returns to its intrinsic value—zero") and citing Roy Jastram's The Golden Constant, Cerami too concluded that because "a large part of [EMS] reserves is in the form of gold, the gold will be used to back and to finance each country's spending again."

Similar comments are emerging from European bankers and financial analysts. The chief economist of the French bank Societe Generale points out that today's high gold prices make (for example) US gold reserves equal to half the US money supply. (Britain's pre-World War I gold standard operated with far less than 50 percent gold backing for over 200 years.) French bankers argue persuasively that remonetization is in fact under way and view the cessation of US gold sales as further evidence. Adds Hans Mast of Swiss Credit Bank, "They [central bankers] want to keep the gold they have, indicating that they view it as a precious metal asset."

While bankers thus prognosticate, economists are debating the proper form of a new gold standard. Even Milton Friedman, long considered anti-gold, has explained that what he's against is the anemic "gold exchange" standard of the postwar era. "I don't think any country in the world is willing to restore an honest-to-God gold standard," he told the Wall Street Journal (Jan. 20). But if they did? "It would be a pretty good system," conceded Professor Friedman.

Legal Advertising A Plus Bans on advertising by professionals are supposed to ensure quality of service, according to their defenders. Advocates of lifting these bans have countered by pointing to the probable benefits to consumers in the form of lower costs and arguing that, as with other purchases, consumers should be free to make tradeoffs between price and quality. In the wake of the 1977 court decision that opened up legal services to advertising, prices have indeed fallen. And now, a study by two lawyers has found that consumers haven't even lost out on quality in the process.

The study compared traditional firms and a legal clinic operating in the same market. The clinic advertises heavily and charges lower prices, but on all seven attributes measured (by questioning clients), the clinic scored not only as well as but better than the traditional firms: on a scale running from 1 = excellent to 4 = poor, the traditional firms rated a composite score of 2.53; the clinic, 2.17.

How can a firm charge less but not lower the quality of the product? By cutting costs, conclude Fred McChesney and Timothy Muris, who conducted the study. Advertising increases volume—one clinic in Los Angeles reportedly attracts 2,500 new clients a month with a heavy television campaign; and higher volume makes possible less-costly delivery of services.

An important factor is specialization. As with studies showing private police to be more responsive and satisfactory to consumers because of their ability to provide more specialized services, specialization increases legal expertise in any one area, note McChesney and Muris—thus reducing time spent per case, hence reducing costs. Legal clinics have made it their business to specialize in routine legal matters such as divorces and wills and are thereby able to provide more efficient, and cheaper, service. In Baltimore, for example, the average cost of a plaintiffs uncontested divorce, as handled traditionally, was $344 in 1975; the price charged a year later by a legal clinic in that city was $150.

The increase in volume also allows firms to use systems management techniques, to automate some work (with memory typewriters and computers, for example), and to hire lower-cost paralegals to handle much of the workload. (Paralegal salaries average about half those of associates and one-sixth those of partners.)

All this spells lower prices for consumers—and yet another weakness in the organized bar's case for a ban on lawyers' advertising.

"Free Food" Affects Productivity It seems the US Department of Agriculture just doesn't know when it's not wanted. The Federated States of Micronesia, part of the US Trust Territory, recently voted to turn down a $6 million USDA free-food program. Nevertheless, the feds are planning to introduce a $5 million federal food stamp program.

In opposition to the free-food program, a report to High Commissioner Winkel (Commission on Future Political Status and Transition) stated that social, cultural, and traditional values of the island communities have been disrupted. Copra production has either declined or stopped, and traditional subsistence food gathering such as reef fishing or planting taro has fallen off drastically. In some cases, the USDA programs have resulted in the government buying from parents food that is then given to their children, instead of the parents giving the food to the child directly.

A basic problem with the free-food program is its use of the US poverty level standard, which is based on cash income. Subsistence economies, as in Micronesia, tend to have low monetary incomes, since some food—in this case, fish—is readily available. Despite this, almost everyone is entitled to the program because of the cash basis for eligibility. Local leaders would like to see such programs ended, not only because of the cultural disruption, but also because their new governments (post-trusteeship) will be unable to provide such massive handouts.

Apes vs. Humans Can a chimpanzee create a sentence? Judging from some experiments reported in the scientific literature and picked up by the popular press recently, one might think so. Stories of apes learning sign language or communicating via computer terminal have informed, entertained, and amused us. More ominously, such stories have also gladdened the hearts of those who find offensive the uniqueness of human beings in the hierarchy of nature, who denounce this as a new social evil—"speciesism"—and agitate for "animal rights."

Now, however, it turns out that some of the conclusions drawn from ape-communication studies have been premature. A recent book (Nim: A Chimpanzee Who Learned Sign Language, by Herbert S. Terrace) and an article in Science ("Can an Ape Create a Sentence?" by Terrace and three colleagues, in the Nov. 23, 1979, issue) reviews the experience of teaching a chimp named Neam Chimpsky ("Nim," for short) to use American Sign Language. It turns out that, although Nim did make certain signs in an order that suggested human sentence-structure patterns, analysis of videotapes of the sessions showed that most of Nim's signings were prompted by those of his teacher. In addition, Nim interrupted his teachers to a much larger extent than a child at a comparable stage of language development interrupts an adult's speech. Overall, concluded Terrace and colleagues, there is no evidence that Nim is capable of constructing sentences, as opposed to merely associating signs with objects or actions.

This is not to say that such higher capacities may never be discovered in nonhuman beings. But it is interesting to note how eager some people are to convince us that we aren't very important, even as a species, let alone as individuals. One wonders whether the too-hasty announcements of the demise of human distinctiveness have less to do with a love of truth than a love of power.

Milestones • Small Capitalists. In France, 700,000 new investors were drawn into the stock market when the government instituted a tax credit of up to $1,250 for stock-market investment. The decrease in new equity capital in Britain due to the previous Labor government's policies—as well as the Conservatives' desire to de-socialize its economy—has led the Thatcher government to propose a similar measure in Britain.

• A Banana Revolution. St. Vincent, one of the Caribbean islands, has reelected overwhelmingly its incumbent pro-West, pro-free enterprise premier, Milton Cato, giving his party 11 out of 13 seats in parliament. St. Vincent becomes the first Caribbean nation to turn thumbs down on socialism.

• Middle America Sacked Most. A report by the Advisory Commission on Intergovernmental Relations concludes that the rise in federal, state, local, and Social Security taxes has hit the middle-income family most severely. A family of four with a $16,000 annual income paid 90.6 percent more taxes in 1977 than in 1953. A family with a $64,000 annual income, however, paid just 55.4 percent more taxes. Social security takes 5.9 percent of the average family's income but only 1.5 percent of the higher-income family's earnings.

• Traitors, All. In a harsh and emotional criticism of his fellow Republicans (and the Democrats), former Secretary of the Treasury William E. Simon lambasted Congress for passing both the windfall profits tax and Chrysler bail-out bills. Simon swore he would no longer support people simply because they are labeled conservative but would save his dollars and votes for the candidates of any political party who "understand and are…committed to the fundamental principles and ideals that gave us the abundance and freedom that is America."

• Abortion Sentiments. A nationwide survey commissioned by the National Abortion Rights Action League showed 85 percent of those polled believe abortion should be legal under certain circumstances (19 percent believe it should be legal under all circumstances).

• Cost In Space. NASA's space shuttle program has another potential buyer. Earth Space Transport Systems Corp., out of New York, is seeking financing to become the owner of NASA's fifth shuttle. The company would contract with NASA to launch and operate the orbiter. ESTSC would sell and arrange cargo-handling schemes to other companies.

• Tax Revolt Escalates. Most experts agree with pollster Mervin Field's conclusion that two-to-one support for personal-income-tax reduction makes passage of California's Jarvis II almost a certainty. A victory of that magnitude would probably inspire similar moves in other states. An income-tax repeal has qualified for Alaska's November ballot, and another is circulating in Montana.

• Postal Service Pressured. Postmaster General Bolger has been urged by the president's chief domestic adviser Stuart Eizenstat and Budget Director James McIntyre to accept a recent ruling by the independent Postal Rate Commission concerning ECOM, the Electronic Computer Originated Mail system. The Commission criticized the Postal Service's attempts to severely restrict the number of electronic carrier services available to the public for their anticompetitive effects.

• Unconstitutional Regulations. A ruling by US District Judge Glen Williams prohibits the federal government from enforcing the regulations of the 1977 Surface Mining and Reclamation Act in Virginia. Williams said that regulations "effectively prohibit the mining of a person's private property."

• The Government Paperweight. The Small Business Administration has issued a study that estimates the cost of government paperwork on small business to be $12.7 billion a year. Besides the average $1,270 cost to each small business, the SBA cites significant psychological costs such as confusion over required data, anxiety over possible penalties, and frustration because of the doubtful usefulness of the gathered data.

• Too Close for Comfort. The House Ways and Means Committee voted to forbid the Internal Revenue Service from extending taxation to employee fringe benefits before June 1,1981. The IRS and the Treasury were also prevented from ending deductions for commuting as a business expense.

• In Praise of Outlaws. Economist Arthur Laffer says that the underground economy serves as a safety valve—an economic escape hatch that relieves pressures caused by a bad tax structure. He says "The underground economy is a human response to incentives. When you provide incentives for illegal activities, you're going to get illegal activities."

• Confiscation on Trial. The Supreme Court has agreed to hear the landmark California Agins case that challenges the right of land-use planners to down-zone properties without compensating owners for the loss in value caused by the zoning restrictions. The outcome has significant implications for landowners and land-takers all over the country.