Utility Deregulation Forecast

Last year in this column we reported historical research revealing that around the turn of the century electric utilities were granted competitive franchises (see "Utility Revisionism," Aug. 1979, p. 14). In those days relatively orderly competition took place, only to be replaced by state regulatory commissions. The result, as documented by economist Gregg Jarrell, was higher prices and higher profits for the now-monopoly utilities.

Today's rapidly changing energy picture is causing some analysts to reconsider a competitive marketplace in electricity. Roger Sant of the Mellon Institute, for one, dismisses the idea of electric utilities as natural monopolies. In a recent Mellon study, The Least-Cost Energy Strategy, Sant points out that there's a wealth of competition for central-station electricity: gas for cooking and heating, oil for heating, cogeneration (production of on-site electricity) from industrial process heat, and compact total energy systems, to name just those commercially viable today (let alone the solar cells and windmills suitable for special cases today and perhaps more widespread use in the future). Sant forecasts a competitive energy economy in which local electrical distribution systems would select among suppliers of power for their customers.

But why stop there? How about competition in the distribution networks? Probably not by duplicate sets of lines, but by one firm underbidding the existing distributor and buying up its lines—that is, competition over time, rather than within territory. Something of this sort is taking place in North Carolina right now. Oil-burning Virginia Electric & Power Co. (Vepco) serves 22 counties in the northern part of North Carolina, charging residential customers $58.59 per 1,000 kilowatt hours (kwh). Just to the south, coal-burning Carolina Power & Light charges only $43.51. As a result, the chambers of commerce in 12 communities have created Operation Overcharge to lobby for Vepco to sell its North Carolina lines to Carolina P&L. The group has prepared a stockholders' resolution to that effect, for consideration at Vepco's annual meeting. The Carolina firm isn't supporting the petition but is negotiating with towns in Vepco territory and has won over several. Vepco, meanwhile, is fighting to preserve its monopoly.

Utility firms ought to realize that regulation can be contrary to their long-term best interests, argues Sant. And he's supported by economist Kenneth Lehn of Washington University. For his doctoral dissertation Lehn examined the effects of differences in prevailing ideology among states on the cost of capital to utilities. He found that in states with a high degree of political liberalism—as measured by either 1972 voting for McGovern or 1975 ratings of House members by the Consumer Federation of America—the result could be higher interest rates on 30-year utility bonds amounting to as much as 163 basis points—a differential of over 15 percent in the average yield. Evidently, purchasers of bonds can discern that their risks are greater in states with a liberal political climate. One wonders what valuation those same investors would place on an openly competitive environment for electricity.

New Country Progress

One of the fondest dreams of many libertarians and other freedom seekers has been to set up a new country beyond the sovereignty of existing States, where true liberty would be the rule. Many such efforts have come to naught, but three more are under way at this time.

As we reported last October (see "Islands of Freedom," p. 32), a libertarian-oriented foundation has been assisting the indigenous Na-Griamel movement in the New Hebrides islands in the South Pacific. Last November the soon-to-depart colonial powers there—Britain and France—supervised elections for an independence government. The elections were won by the socialist Vanuaaku party, amidst charges of irregularities that have not been investigated. As a result, the free-enterprise Na-Griamel movement, with the tacit support of the French, declared the independence of its main territory, the island of Espiritu Santo, largest in the archipelago.

The new country calls itself Vemarana. According to a report in London's Financial Times (Mar. 19), it has kicked out the district commissioner, opened an office, and hoisted its own flag. Na-Griamel radio broadcasts for an hour each day, with "community service messages, threats to the Vanuaaku government, and sermons from [President] Jimmy [Stevens] to his followers." There are also passports, gold coins, and a free-enterprise-oriented constitution. All may come to naught, however, once the British/French pullout occurs (it was scheduled for May). Whether the new socialist government will leave Vemarana in peace is an open question.

The other two projects are closer to home. One is Herbert Williams's island in the Rio Grande River: Cherokee Nation. The part-Cherokee retired Air Force colonel plans a free-enterprise tax haven, complete with gambling casinos, banks, a shipping registry, and retirement condominiums. The uninhabited 183-acre island was created in 1967 by Hurricane Beulah. Williams obtained title from the Mexican government in 1974 and is currently negotiating to obtain sovereignty. His negotiators include Arnold Burns, head of a Washington law firm that has drafted new constitutions for Namibia and Uganda, and former Washington, D.C. mayor Walter Washington. Williams plans a July 4 flag-raising celebration on the island.

Another idea for a new country has been to create an artificial island. The ill-fated Minerva project in 1971 had planned to build a concrete island on the semi-submerged Minerva Reefs, but the huge costs (as well as the King of Tonga's intervention) scuttled the project. Now, however, it looks as if the cost problem has been solved. A 31-year-old University of Texas architecture professor, Wolf Hilbertz, has developed a way to "grow" structures under water. The concept involves creating a framework out of wire mesh or reinforcing rods and running an electric current through it; minerals dissolved in the seawater are attracted to the negatively charged metal and aggregate on it, after some months forming a solid, load-bearing structure.

Thus far Hilbertz's largest structure, in the Virgin Islands, is an underwater building 20 feet high and 30 feet square at the base. He has also created two artificial reefs off the Texas coast. But the dream of his Marine Resources Company is to grow an entire island, independent of any existing State. Hilbertz searched for likely sites in international waters and found one—Alice Shoal—convenient to St. Croix, several hundred miles south of Cuba. He has secured permission from the US Coast Guard to use unoccupied Navassa island as a supply base while growing the island. It looks as if Minerva was only a decade ahead of its time.

And Now, a Private Freeway

Those enterprising folks in Houston have done it again. Defying generations of economists who consider roads to be "public goods" that only governments will supply, they've gone ahead and built a $10 million, 10-mile, four-lane freeway, entirely in the private sector (no tax money, no use of eminent domain).

The "they" in question is the West Houston Association, a group of land developers, financial interests, and major corporations. The rapid growth of West Houston has left the area short of roads and mired in traffic. Rather than wait for government to get around to doing it, the association members decided to build the needed roads themselves. Their freeway runs parallel to Interstate 10, linking Texas 6 to the town of Katy. In addition to the freeway, they have built new roads within their industrial areas bordering the freeway.

Although land acquisition and construction are costing $1 million per mile, the association will not be charging a toll. The way they see it, their businesses will benefit greatly from improved transportation, and the value of their land will increase accordingly. And that is apparently enough of an incentive for them to shoulder the full costs themselves.

"If we didn't have government, who would build the roads?" runs an old refrain. Well from now on, don't you believe it.

Moves Toward Self-Defense

The days of the US government as the protector of the non-communist world seem to be numbered. Other Western governments are both talking and taking action to provide more of their own defense.

The Australian government, for example, has awakened from a decade or more of defense lethargy. Between now and 1985 defense spending will be increased from 2.6 percent of GNP to 3 percent. The army will be increased several-fold from its present 32,000 soldiers, the air force will replace its aging Mirage fighters with US F-16s or F-18s, and three or four new frigates will be added to the navy.

Japan, too, is under increasing pressure to up defense spending from the present miniscule 0.9 percent of GNP. Adding to the call has been Hosai Hyuga, president of the Kansai Economic Federation, Osaka's leading business organization. In a February speech Hyuga pointed out that even neutral Switzerland spends 1.9 percent of its GNP on defense. Citing a study of Japanese defense by the Research Institute for Peace and Security, he argued that Japan needs to spend at least $3.3 billion more (beyond the present $8.9 billion) to build a credible deterrent. A Soviet invasion would take but a week to overrun Japan, at its present level of defense, contends Hyuga—hardly enough time for allies to come to its aid.

Even Western Europe may have to take on more of its own defense burden. A Pentagon study by Adm. Henry Train and former Deputy Defense Sec. Robert Ellsworth suggests that America's long-term strategy should aim for "an autonomous European defense and deterrent capability." Or, as columnist Jack Anderson summed it up, "our best bet would be to force Western Europe to fend for itself, instead of depending on Uncle Sam's protective umbrella." Train and Ellsworth argue that decades of dependence have significantly weakened European capabilities and willingness. The withdrawal of all but a "small US force," coupled with a promise of quick military backup in the event of Soviet attack, would lead to a renewal of Europe's own commitment to defense—not to mention major savings for long-suffering US taxpayers.

Property Rights Versus Conservation

Sen. Alan Cranston (D-Calif.) and photographer Ansel Adams are finding little support for their advocacy of large-scale federal involvement to "protect" California's Big Sur from development, a sign of the growing disillusionment with federal "solutions." Cranston is plugging enactment of his bill to authorize $100 million for the purchase of a 700,000-acre Big Sur Coast National Scenic Area to be supervised by the US Forest Service. Sen. S.I. Hayakawa (R-Calif.) and local Monterey County officials have criticized the action, calling the protection of Big Sur a local responsibility. Besides, the inimitable Hayakawa added, "They wouldn't have a McDonald's within 500 miles," referring to the "hippies" who live there.

One property owner who is definitely not a hippie and who is being burned by state and regional red tape is Viktoria Consiglio, who bought a two-acre parcel with her husband four years ago and has since been unable to build on or sell the lot (she has, of course, been allowed to pay taxes on the property). The Consiglios made the down payment on the $67,000 property in 1976 and planned to do most of the carpentry and wiring on their dream home themselves.

In 1978 they hit the first bureaucratic snag: the Monterey County Planning Commission denied them a building permit because the home might obstruct the view of passing motorists. Consiglio won her appeal to the County Board of Supervisors, but the regional Coastal Commission authority voted seven in favor and six against the Consiglios at a time when the required majority was of the entire 16-member commission. It has since been changed to approval by a majority of members present, which must have the Consiglios gritting their teeth. And then, in January 1980, the state Coastal Commission refused to hear her appeal.

Why are the Consiglios being denied a permit to build a home on their property? Well, the regional commission says the house would "seriously compromise" the view; it would block "potential shoreline access opportunities"; and the home would not be "subordinate to the character of its setting." Viktoria Consiglio is dismayed that her rights could be so seriously tampered with in a country that, as her father told her when they left Germany in 1956, "has the best Constitution in the world." She says she will surround her home with cypress trees to screen it from the view of motorists who choose to look downward rather than straight at the ocean, and she will even grant the public access through her property.

But Consiglio's chances are slim when the Monterey County Superior Court hears her case. In the meantime, she has not been able to sell the property since it cannot be built on, and the state has not responded to her offer to sell it for use as a recreational preserve. The State has decided it likes the view from the Consiglio's property—but not enough to buy the property to keep as a wilderness area. The Consiglios are stuck with that job now.

And, as if to further taunt the Consiglios, the owner of an adjacent two-acre parcel has received permission to build a home. It's just that much less visible from the road to please the commissioners.

Is Animal Testing Relevant?

A recent Science article (Apr. 18) has called into question the human relevance of animal test data on carcinogens, as well as the no-risk policy of the Delaney clause on food additives.

Written by Gio Batta Gori, who recently resigned the post of deputy director, Division of Cancer Cause and Prevention, of the government's National Cancer Institute, the paper cites especially the "deliberate bias" built into animal experiments designed not to assess real-life human risk but only to study carcinogenesis and its possible mechanisms. With the latter as the goal, "positive" results—finding that something is carcinogenic—are more "fruitful" than negative ones—not showing harm. And as others have suggested, they are also more dramatic and more publishable.

The bias cited by Gori is evident in many ways. Only species that are most susceptible to tumors and cancer are selected. Gori argues that commonly used mice are from 30,000 to one billion times more cancer-prone than humans. Routes of administering the chemical are selected for their "convenience" rather than for their relationship to real-life metabolic processing. Nearly toxic "maximum tolerated" doses are used even though they "cause metabolic overloads that may unpredictably promote or retard a carcinogenic process, with outcomes that differ from species to species," and are "likely to derange normal homeostatis and create physiologic conditions with no real-life counterpart."

While some may regard this "deliberate bias" merely as prudence, Gori maintains that the results obtained have validity only for that experiment and are not generalizable to humans. He also notes that it is "impossible to prove safety beyond doubt." His answer to this, however, is not to ban "potential" carcinogens, since—to put doomsayers like Samuel S. Epstein in perspective—age-adjusted cancer rates are generally remaining the same or even decreasing. Rather, he argues that the "zero tolerance policy" of the Delaney clause either "ignores" or precludes from consideration many examples of "no-effect thresholds," so that this policy should be replaced by a "risks-benefits analysis" for each compound or class of compounds. Under the latter policy, scientists would no longer be "forced to produce clear-cut statements that, however convenient for the regulator, may not have scientific justification." Regulation could then be directed at improving "the quality of life for the living, not merely to extend life expectancy."

Senate Cuts Truck Regs

By a vote of 70-20 the US Senate has passed Sen. Howard Cannon's (D-Nev.) bill to partially deregulate trucking. It eases restraints on entry and on expansion of service, gives new freedom to raise or lower rates without approval by the Interstate Commerce Commission, and ends much of the industry's antitrust protection for collusive rate setting. Industry lobbyists attempted to water down the bill, but to no avail.

Even before the Senate action, the American Trucking Associations and their member firms had begun to see the handwriting on the wall. Business Week (Mar. 24) reported that "many trucking companies are quietly positioning themselves so that they can leap from the starting gate if Congress throws the industry open to competition." Although no major trucking firm has publicly supported deregulation, companies known to be doing strategic planning on pricing and route acquisition include Consolidated Freightways, Yellow Freight System, Roadway Express, and Delta California Industries. In addition, a number of nontransportation firms that have purchased trucking companies—such as ARA Services and Pepsico—don't share the traditional truck industry hostility to competition. These firms are likely to welcome a deregulated environment.

Thus, truck deregulation is beginning to resemble airline deregulation. As D-Day actually approaches, status quo rhetoric is starting to give way to realistic planning for the new opportunities ahead.

Income Tax Suspended

The Alaska legislature has voted to suspend indefinitely its personal income tax for residents who have lived in the state for more than three years since statehood in 1959. Aside from that, it has also voted to refund one-half of 1979 income taxes, and to adopt a law that requires the state to pay dividends to all residents from its Permanent Fund. (The Permanent Fund was set up in 1976 to hold the state's oil royalty money, which will exceed $5 billion in mid-1981.)

The suspension of the income tax was an issue created almost single-handedly by Alaskan Libertarian representative Dick Randolph. Randolph sponsored an initiative to repeal the income tax (it will still be on the November ballot) and followed up by introducing a "radical" measure into the House to eliminate income taxes. Popularity and media exposure—resulting both from Randolph's own iconoclastic style and from the withdrawal of Alaska Governor Jay Hammond from a proposed debate between them—subsequently forced the legislature to take up the issue.

The present measure is a compromise that does not satisfy Randolph. He is challenging the "discriminatory" nature of the bill (since it taxes residents who have not lived in the state for more than three years at a gradually decreasing rate) and the fact that it does not remove the tax laws from the books.

Meanwhile, Alaskans will get not only their 1979 refunds but an additional $50 oil dividend for each year they have lived in the state since 1959. Thus, a 10-year resident will receive $500 this year, $550 next year, and so on for the next four years, after which the $50 base dividend may be changed. Reports in the Los Angeles Times and Wall Street Journal point to an increased base dividend because of the Fund's growing earnings. Each of the state's estimated 400,000 residents will have at his or her disposal this year an extra $2,000 on the average from the tax refunds and oil-wealth plan.

Nationalizing Charity

There is no easy answer to sticky questions concerning who would care for the truly needy and handicapped if government welfare programs were repealed. But one could always point to the billions of dollars donated through private philanthropy as proof that charity need not be legislated. In 1978, total contributions hit a level of almost $40 billion, despite inflation and tight budgets.

That bounty is diminishing, a new study warns, and is gradually being replaced by government aid. Dr. Stuart Butler of the Heritage Foundation points out that changes in US tax laws since 1969 as well as new regulations governing foundations and inhibiting private charity are paving the way for government to sneak in through the back door. When adjustments are made for inflation since 1960, Dr. Butler observes, what seems to be a trend for increased charity is misleading. "Between 1960 and 1970 total real giving increased by 64 percent," he says. "In the eight years between 1970 and 1978, however, real giving increased by only 20 percent, despite the 106 percent rise when measured in current dollars."

Despite the tax inhibitions, public opinion polls show that people still believe in private charity. A Sindlinger survey commissioned for the study revealed that 7 out of 10 of those polled think that private organizations do a better job than government at providing charitable services, including welfare; 7 out of 10 also feel that the private sector, not government, should provide these services.

Butler further notes that tax laws make it more difficult for lower-income persons to donate to private charity, leaving tax incentives to those with higher incomes. This incentive is then criticized as a "tax loophole for the rich" and used as a rationale for further replacing voluntary support with state aid.

The study was published jointly by the Heritage Foundation and the Institute for Research on the Economics of Taxation.

Thinking about Gun Control

While it may seem at first glance that to be pro-gun control is to be anti-violence, recent trends are showing that this piece of popular wisdom is being eyed with increasing skepticism. A 1979 Decision Making Information poll showed 88 percent of the respondents agreeing that they had a constitutional right to keep and bear arms. An earlier (1978) DMI poll found that when asked "What is the best way to deal with the problem of violent crime?" only one percent of those polled mentioned gun control. A Gallup poll asking a similarly open-ended question—"What do you think is responsible for the increase in the crime rate? "—came up with not one single mention of firearms.

Furthermore, a glance at the results of Gallup polls over the past 20 years shows that an increasing number of Americans oppose the restriction of gun ownership. In 1959, 59 percent favored gun confiscation and 35 percent were opposed. By 1975, however, the number opposed had grown to 55 percent, and the latest (1980) poll has 65 percent opposed to banning handguns.

But this same Gallup poll also has 59 percent of those surveyed in favor of stricter gun control. How does one explain the discrepancy? The Second Amendment Foundation criticizes the Gallup survey for asking questions designed to elicit anti-gun sentiment, such as "Do you favor stricter gun control?" The SAF says this method "assumes that the respondent knows what laws are presently in existence…[and] are inclined to think that such laws are directed against criminals, never stopping to consider the likelihood that criminals will neither register nor turn in their handguns."

To back this up, the SAF has released a study on Massachusetts's mandatory sentencing law (the Bartley-Fox Act) which requires a year in prison for carrying a firearm without a license. The study by SAF Research Director Bill Garrison notes that the Massachusetts homicide rate has not decreased significantly since the law went into effect five years ago; in fact, "for the first three quarters of 1979, the six Massachusetts cities with over 100,000 population experienced an increase in the rate of homicide which was twice the national average," according to FBI statistics.

Garrison adds that the number of defendants convicted of illegally carrying a firearm has actually decreased since Bartley-Fox, with plea bargaining continuing at its former rate. In addition, out of 12,000 robberies and 4,000 aggravated assaults involving firearms, a mere 120 of the defendants in those cases were imprisoned under the terms of Bartley-Fox.

Antigovernment Zeitgeist

Five different sources on the prevalent mood of the American people indicate a leaning toward more libertarian ideas today than in the recent past. The common denominators are taxes and intrusive government.

A poll conducted by Opinion Research, Inc., for the Ed Clark for President campaign of 1,200 persons between the ages of 18 and 40 had these results:

• 71 percent believe Social Security is not financially sound,

• 69 percent favor a constitutional amendment to balance the federal budget,

• 63 percent favor educational tax credits,

• 69 percent consider military spending on the defense of other nations excessive,

• 57 percent are against US involvement in the affairs of other nations, and

• 8 percent would support Clark versus Carter or Reagan.

A second poll commissioned by Union Carbide Corporation and done by Roger Seasonwein Associates on 2,000 respondents showed that:

• 80 percent endorse economic growth as beneficial despite added pollution, taxes, or price hikes,

• 56 percent consider increased union power harmful,

• 45 percent consider increased corporate power harmful,

• 54 percent consider increased government power harmful, and

• 86 percent favor tax cuts for business if half of the reduction would go toward jobs, while 51 percent favor tax cuts unconditionally.

Meanwhile, a Harvard conference of 150 experts in business and taxes recommended tax-reduction legislation in 1981, with accelerated depreciation as the number-one priority. This would allow businesses to deduct from taxable income more of the cost of new plants and equipment. A poll commissioned by one of the cosponsors of the conference, New York Stock Exchange, and conducted by Garth & Associates found that 66 percent of the respondents were more likely to vote for a candidate favoring less government interference in business and 51 percent would vote for a candidate advocating business tax incentives.

Lastly, a current Wall Street Journal series on the federal income tax observed that 7 out of 10 Americans today believe that the income tax is too high, compared to 5 out of 10 two decades ago. The article attributed this decline to two main developments: inflation and lagging investment.

Legislating Equality

The Equal Employment Opportunity Commission, created to enforce the equal-pay-for-equal-work mandate of Title VII of the Civil Rights Act, is attempting to legislate sex discrimination out of existence, this time through an equal-pay-for-work-of-comparable-value doctrine. The theory seems to be that equal pay for equal work doesn't go far enough, because some occupations are primarily staffed by women and are therefore lower paid as a whole. So the idea now is to mandate that equal wages be paid for jobs requiring similar levels of skill, training, effort, and responsibility—for example, secretary and electrician.

Although the facts show that this is true (on the average, women earn two-thirds of what men earn), most proponents of the doctrine fail to recognize the complex market forces that determine wage rates. This is the problem that Prof. Cotton Mather Lindsay addresses in his paper, "Equal Pay for Comparable Work," published by the Law and Economics Center of the University of Miami. Basically, Lindsay upholds the validity of basing expectations on sex: women in the past have proven to be less reliable workers in terms of continuity because of childbirth, greater responsibility for the home and children, and transfers due to a husband's job relocation. Because of socialization, he adds, women have been less willing to invest time and money in developing nondomestic skills, thus lowering their market productivity and crowding them into less-prestigious occupations.

With more women moving out of such lower-paying jobs due to discontent and a more career-oriented lifestyle, Lindsay contends that forcing up the wages in the traditionally lower-paying jobs would make them even more attractive to women workers and thus retard the current exodus of women into male-dominated fields.

Heredity vs. Environment

The long-standing controversy over the relative influences of heredity and environment on human development has entered a new phase. An extensive new study of identical twins raised separately sheds new light on the strong influence of genetic heritage.

The study, begun in 1979, is the most exhaustive to date, utilizing the services of five doctors (three psychologists, one psychiatrist, and a behavioral geneticist) as well as outside professionals to guard against a bias toward certain conclusions. Although several fraternal twins are being used as controls, the main emphasis is on pairs of identical twins who were separated at birth and brought up in different environments. Nine pairs have been studied thus far, with eleven more already located. The study asks 15,000 questions over the week-long examination, as well as giving physical and psychophysiological tests.

Psychologist David Lykken, one of the doctors involved in the study, says that there are traits that may be inevitable given certain gene combinations—and since identical twins share the same gene combination, even traits other than native intelligence show up in both. While intelligence (IQ) still shows the highest correlation between identical twins separately reared, the scores of such twins on most psychological and ability tests are "closer than would be expected for the same person taking the test twice," Science magazine reports in an article on the study (March 21). Some of the similarities were the recurrence of the same names in the lives of the twins (spouses, children, pets), almost identical taste in terms of lifestyle, clothing, and amount of jewelry in some cases, and closely related medical histories.

The strong evidence surfacing from this study on the influence of heredity should help squelch some of the outrage directed at Robert Graham's sperm bank for Nobel Laureates. Graham has come under heavy attack from the media for suggesting that intelligence could have a genetic basis. Most of the protest is from egalitarians who cannot stomach the idea that people are simply born different. So far, five sets of parents and offspring have been awarded the Nobel prize, though this has been attributed to the presumably illuminating presence of the Nobel-winning parent.

Drugs Here to Stay, Report Says

The privately funded Drug Abuse Council has released a national report stating that more Americans than ever are using drugs and the trend is not likely to let up in the near future. The report criticizes drug laws and law enforcement agencies for their unrealistic expectations about the use of law to eliminate drug use, saying that, for example, "Beyond a doubt…use of criminal law to deter marijuana use results in more harm to society than is warranted by present knowledge regarding its potential harm with moderate use." One obvious harm is the $6 billion in federal funds that has been spent since 1971 to control drug use, to no avail.

The council noted that the "failure to distinguish between recreational drug use and harmful misuse" has been a serious mistake, pointing out that although from 2 to 4 million people use heroin casually, inflated government statistics themselves confess to only 500,000 to 600,000 drug addicts. Marijuana, which is still illegal, has been used at least once by 50 million Americans, with an estimated 16 million current users.

The report concludes with the idea that "treatment for drug dependence should be available chiefly because people need help, not as a behavior or crime control measure." In other words, if drug users do not commit crimes other than perhaps harming themselves with the drugs, the law has no business interfering to enforce "social objectives such as reducing crime, increasing employment, or restoring family cohesion."

One law enforcement officer who has taken this message seriously is John McHale, Jr.—the new police chief in Prince George's County, Maryland—who has publicly stated that he supports the legalization of marijuana, much to his colleagues' dismay. McHale argues that laws against marijuana have caused more problems than they have solved. "Who takes [the law] seriously now?" he asks. "We've got 35 million people out there smoking marijuana." He adds that "there are a lot worse things in life than marijuana, and alcohol is just as bad." McHale's statements have shocked the county's police union officials (though some of the officers themselves have expressed support), the state attorney, the city council members who voted to hire him, and assorted politicians who would rather "solve" the problem than admit it really doesn't exist.

Options Ahead For TV Consumers

By 1981, television viewers may have the option of sticking to regular VHF and UHF transmission (the current major networks and public television) or using cable and satellite-to-home pay-TV transmission. Confusing as this variety may be, it promises a wider range of programming and the demise of major network-controlled news and shows based on the lowest common denominator in public taste.

Moreover, Frank Mankiewicz, president of National Public Radio, predicts that the growth of cable-TV spells doom for public television. "Congress ought to think about phasing it out," he said. "There's no reason to think that a smart cable operator won't pick up 'Masterpiece Theatre' or 'Live from Lincoln Center' if that's what some people want."

At the same time, the rapid expansion of satellite-to-home ventures may mean the end of movie theatres as we know them—or at least a boom in the output of filmed entertainment. While the proposed contract between Comsat and Sears, Roebuck & Co. (Trends, Apr.) has fallen through, the television industry is rocking from an announced deal between Getty Oil and four motion picture companies to form an all-movie network next June, using satellite transmission to cable-TV stations. The movie companies are Columbia Pictures; MCA, Inc.; Paramount Pictures; and Twentieth Century-Fox Film Corporation. Getty presently operates an all-sports cable network, ESPN.

The movies made by the four movie companies will not be made available to any other satellite-fed pay network for nine months following their appearance on the proposed network, a plan that has the dominant pay-cable-TV wholesaler, Home Box Office, extremely irate. HBO is rashly appealing to the antitrust division of the Justice Department to do something about its potential competitor, charging that the venture is "illegal." HBO itself services 63 percent of the 6 million pay-TV subscribers in the United States. One entertainment industry analyst for Paine Webber, Lee Isgur, commented that the venture may simply be self-defense on the part of the movie companies. "They felt that by letting HBO go without any competition, HBO could set its own prices" and make the profits the movie companies feel they, too, deserve.

School Privatization

A California company is carving out a new role for the private sector in elementary and secondary education. The firm, American Learning Corporation, began by operating specialized centers for problem readers and has branched out into summer school classes. Both types of program are paid for only by their customers—no tax money is involved.

The summer school operations began last year. After passage of Proposition 13 in 1978, California public schools virtually eliminated their summer school operations. To fill the demand, a variety of private groups, community agencies, and a few universities rented public school classrooms to operate tuition-charging summer classes. But in 1979 many eyebrows were raised when American Learning became the first for-profit company to rent classrooms for summer schools. Although ALC had contracts in 25 elementary schools last year, it was frozen out of the Los Angeles school system (largest in the state) on grounds that it was "inappropriate" to lease space to a for-profit firm. But in March the Los Angeles School Board reversed this policy, after Deputy County Counsel Steven J. Carnevale advised the board that its position was probably unconstitutional.

ALC's reading improvement centers were started two years ago in Huntington Beach. Each center is called The Reading Game and offers individualized instruction for problem readers; the center's reading specialists have access to $9,000 worth of specially designed reading materials and aids, making use of both technology and psychology. In order to make money, the Reading Game must offer good enough results to keep parents paying the $15-per-hour price. Judging from the firm's growth rate, they appear to be doing just that. ALC expects its revenues to increase by 66 percent this year. It has 12 centers in operation in California and is in the process of opening five more. It plans to go nationwide next year, aiming for 50 centers and including such locations as Boston, New York, Philadelphia, Washington, and Dallas. Given the quality of public schools generally, ALC would seem to have a huge potential market.

Private Broadcasting Proliferates

The urge to broadcast alternative news and music and to meet consumer needs seems to be just too powerful to keep down, even in countries like Ireland and Italy, which have state-supported stations.

Ireland's private radio stations are actually outlawed by the Department of Posts and Telegraphs. There is a national radio and television network, RTE, that is supposed to provide all the broadcasting service anyone could ever want, but the pirate stations just keep proliferating. At least five pirate stations operate in Dublin, and an estimated 20 more around Ireland, openly defying the law because of high advertiser and community support. The maximum fine is presently 50 pounds for the first offense, but a proposed measure now in Parliament would levy a 10,000-pound fine and/or two years' imprisonment for illegal broadcasting. Some predict that the government will soon hand out broadcast licenses to a favored few to defuse deregulation sentiments—and fine the rest.

Unlike Ireland, Italy's private stations are not illegal, although they face the state-run Radiotelevisione Italiana (RAI). Legal restrictions on broadcasting were lifted by court decision between 1974 and 1976, leaving the field open to competition. A report in the Economist (Mar. 15) estimates 2,000-3,000 private radio stations in Italy, which collectively claim half the total listening audience. Private television stations also abound, with an estimated 676 in 1978. The article says that perhaps 300 of these offer regular services and account for a third of the national audience.


IRS Insurance. Home-delivery subscribers to the Las Vegas Sun who are up for IRS audit are entitled, along with their newspapers, to two hours of legal counsel, the aid of a lawyer, and a reporter with a tape recorder. About 20 readers a week take advantage of the service, the brainchild of Sun publisher Hank Greenspun, who has tangled with the IRS himself.

Safety Inspections Unsafe. Mandatory state auto safety inspections actually reduce safety by making drivers think their cars are safer than they really are, claims economist Mark Crain of Virginia Polytechnic Institute's Public Choice Center. Crain estimates that the annual cost of these inspections is $200 million in resources diverted into obtaining inspection licenses. While 23 states do not have mandatory inspection, there is some lobbying for federal inspection.

Stripping off the Armor. Local governments do not enjoy immunity from civil rights lawsuits under any circumstances, the Supreme Court ruled, saying this "should create an incentive for officials who may harbor doubts about the lawfulness of their intended actions to err on the side of protecting citizens' constitutional rights."

It Pays to Advertise. Law firms receive an average of $7.93 in fees for each dollar spent on ads, a National Resource Center survey shows.

Free Trade Haven. Singapore has decided to emulate its neighbor, Hong Kong, and become nearly a free port by eliminating all tariffs and removing taxes and restrictions hampering the finance industry there. Trade Minister Gok Chok Tong has also promised to reduce personal taxes by an average of 16.1 percent within the next three years.

REASON Story in Real Life. Britain's finance minister Sir Geoffrey Howe has announced the creation of "free enterprise zones," the subject of a REASON article (Apr.), out of 500-acre zones in selected urban areas. Incentives to industrialists are exemption from local taxes, simple development permission procedures, the elimination of development land taxes, and freedom from various bureaucratic controls. Howe estimates that the zones will be in operation by the year's end.

Scientific Moratorium. Another group of scientists has pledged to boycott professional cooperation with the Soviet scientific community, this time from May 12 to November 11, 1980. Scientists for Orlov and Shcharansky, a group formed last year to protest Soviet treatment of the two scientists, has added Andrei Sakharov's exile to its protest; it announced that last year more than 2,400 American scientists, as well as nearly 1,000 French and Australian scientists (Trends, May), pledged to restrict their activities with the Soviets.

None to Share. The House has voted 225-192 to kill the federal government's program of "revenue sharing" with state governments. Rep. Robert Gaimo (D-Conn.) argued that the government is being asked to share revenue it does not have. The decision will save taxpayers $1.7 billion next year. Unaffected by the move is the far larger program of revenue sharing with local governments.

Fire Department Fired. Georgia Rural/Metro has lost the contract to provide fire service to Hall County, Georgia. Despite cost savings and good service, political considerations led to the second-year contract being awarded to a competitor, Fire Suppression Management Consultants, Inc. Rural/Metro president Lou Witzeman commented that the concept of private fire protection "may be more important than any individual firm involved—and the concept lived even if we didn't."

Genetic Engineering. A microorganism with the built-in ability to produce the hormone thymosin has been created by Genentech, Inc., in South San Francisco. Thymosin helps stimulate the body's immunity system and could be useful to cancer patients whose natural immunities have been weakened by chemotherapy.

Laetrile Persecution. A California doctor sentenced to six months' imprisonment for conspiring to make Laetrile available to cancer patients was released March 21, two months before his sentence was up. Dr. James R. Privitera told a press conference he would work to legalize Laetrile. His parole specifically forbids him from treating patients with Laetrile or helping them obtain the drug.

Medical Freedom. GOP frontrunner Ronald Reagan has told the National Health Federation that he is in favor of both (1) repealing the 1962 amendments to the Food and Drug Act (which require that drug firms prove the efficacy, not just the safety, of new drugs and which economists think have markedly cut back on drug innovation) and (2) permitting freedom of choice in therapy, obviously applicable to unproven treatments like Laetrile.

Rail Progress. By an overwhelming vote of 91 to 4, the Senate voted in April to pass a bill that allows railroads to raise rates and increase profit margins to cover increased costs. The bill—a step toward railroad deregulation—was sponsored by Senate Commerce Committee chairman Howard Cannon (D-Nev.).

The Joy of Indexing. Taxpayers in five states this year—Arizona, California, Colorado, Iowa, and Minnesota—saved a total of about $500 million because of the passage of tax-indexing laws in those states. Income-tax-indexing laws adjust tax brackets proportionately with inflation, thus leaving taxpayers with more of their higher income in their pockets. Most of the laws don't completely offset inflation—in Colorado, for example, tax brackets were adjusted 7 percent, half of the 13.3 percent rise in the Consumer Price Index—but may help harried consumers cope.