Trends

RAILING AGAINST REALITY

Every eight-year-old capitalist with a lemonade stand and an ounce of horse-sense knows that to sell a product or service, it's vital to keep a close eye on where the market is. The successful entrepreneur does not set up a lemonade stand on a street with little traffic and certainly doesn't pour customers a glass of milk or Dom Perignon when lemonade is what they ask for.

The point is simple enough, but it has evidently escaped many of the nation's mass-transit planners, virtually all of whom are, of course, on government payrolls. For many people, mass transit is quite a valuable service—yet the Census Bureau reports that the number of people riding mass transit to work (commuters make up 40 percent of mass transit's customers) declined from 8.9 percent of the working population in 1970 to 6.3 percent in 1980.

Why such a dramatic decline? A big reason is that during the '70s, people and jobs in northern cities, where most mass transit systems are, moved to outlying areas. Mass-transit systems, however, are not flexible enough to meet the newly created transportation needs. This inflexibility is especially great in systems that have relied on rail transportation rather than buses: buses can change routes overnight, a feat for which subways and trolleys require millions of dollars and years of construction.

That, however, apparently doesn't bother local pork-barrel merchants too much. The Los Angeles Times reports that city fathers and downtown businesses in both Houston and Los Angeles are competing for federal money to build rail systems in their cities, each system with an estimated price tag of $2 billion. The Times implied that Houston had the edge, not because its proposal was peculiarly meritorious but because the Texas congressional delegation is more united than California's and thus has more clout. In any case, it's likely that one of the cities will soon be blessed with a rail system at taxpayer expense, and it's just as likely that 20 years after the system is completed, the city where it is built will have changed in ways that the transit system's designers couldn't possibly have imagined.

Part of the rationale for train systems hinges on the assumption that mass transit doesn't really have to worry about its market: the system will give customers what it wants them to have and where it wants them to have it, dispensing milk and Dom Perignon to lemonade buyers. Census Bureau analyst Paul Fulton was quoted in the New York Times making the point more elegantly: "It has long been a fundamental assumption of planners that mass transit would provide the ultimate remedy to the urban transportation problem by reshaping urban form and by modifying consumer behavior." But this assumption, he noted, is contradicted by actual census data.

Or, as Census Bureau director Bruce Chapman admitted, "People will live and work where they desire. Planners have to take that into account." Lemonade-stand wisdom is not without its occasional defenders.

UP, UP, AND AWAY WITH PRIVATE ATC

As noted recently in these pages (see "Private Control?" May, p. 28), several proposals for privatizing the air traffic control (ATC) system have been made to the Federal Aviation Administration. All have been given the cold shoulder by the agency. But what if—instead of trying to convince the FAA to turn over its obsolescent system to private enterprise—somebody instead built a superior system in parallel and offered it on the market to aviation users?

Just that scenario seems to be unfolding. In April, physicist Gerard K. O'Neill of the Space Studies Institute in Princeton announced the formation of Geostar Corporation. On April 15 the company closed the first of several private stock offerings and announced that it had filed an application with the Federal Communications Commission for what it described as a position locator system using three high-power geostationary satellites.

In fact, as Dr. O'Neill confirmed to REASON, the system is the initial step in implementing O'Neill's satellite-based ATC system. Formerly called Triad (and now renamed Geostar), the system would use a computer-controlled form of triangulation to enable any vehicle's operator to know its position to within three to six feet in latitude and longitude and 15 to 30 feet in altitude. The basic system concept was described in some detail in an article last year in AOPA Pilot (July 1982, pp. 51–63).

If all goes well, the system will become operational in 1987, according to Geostar Corp. officials. So let the FAA go ahead with its multibillion-dollar "next-generation" ground-based ATC system. And let's watch Geostar launch its satellites, set up its computers, and sell its $400 transceivers to airlines and private pilots. Initially, pilots will indeed use them as a supplemental device for position location. But once use of the transceivers has become widespread, and the inadequacies of the FAA's system more painfully obvious, a private alternative will be there, ready to take over.

WINDOW OPENED FOR DEPOSIT INSURANCE REFORM

In the last few years, the heavy government regulation that has been a firm fixture of banking ever since the early days of the New Deal has begun to recede. Now, there are signs it may be receding even further.

Even the role of the Federal Deposit Insurance Corporation (FDIC), an operation that benefits the banks at taxpayer expense, is being questioned publicly by William Isaac, its own chairman. As the Wall Street Journal reports, "Since the 1930s chiefs of the staid old regulatory agency have calmly reassured lawmakers that all is well with the nation's banks. They believed [that] such soothing words, backed by tight regulations that kept banks and thrift institutions out of most risky activities, maintained confidence in the banking system."

But no longer. When Isaac testified at a Senate hearing in March, his message was very different from his predecessors'. "Our regulatory and insurance systems weren't designed to deal with the financial system as we know it today," he said. "They are in need of a major overhaul."

Isaac's view, as described by the Journal, is that the current insurance system "is flawed because it frees everybody but the government from responsibility for the health of financial institutions. Depositors have little incentive to scrutinize their financial institutions because the government effectively guarantees all deposits."

The remedies the FDIC formally proposed in a mid-April report (Deposit Insurance in a Changing Environment) clearly reflect a refreshing free-market orientation. They include:

• changing the fixed-rate premiums that banks pay for insurance to a variable-rate system (thus, banks that engaged in financial hot-dogging would be considered greater risks and accordingly have to pay larger FDIC premiums);
• ending the practice of de facto 100 percent insurance for deposits over $100,000, which would give large depositors a strong incentive to look closely at a bank's portfolio before trusting it; and
• increasing disclosure by banks of information on insider loans, foreign loans, and enforcement action by regulatory agencies.

And these reforms, valuable as they would be, are only a harbinger of Isaac's more ambitious goals—radically limiting the coverage the FDIC provides and opening the way for privately provided deposit insurance. The Journal says that Isaac, along with Federal Home Loan Bank Board chairman Richard Pratt, has been trying to persuade private insurers to consider offering deposit insurance, but "private insurers haven't so far shown great enthusiasm for the idea. Some say they'd need the right to end coverage for misbehaving banks—something the government fears would alarm the public and lead to bank collapses." An FDIC spokesperson, however, told REASON that a group of individuals is investigating the formation of a consortium to offer such insurance.

For most of Isaac's reforms to be implemented, they would need to wend their way through Congress and the White House. That is a long and tortuous path, and their success is problematic.

ARBITRATION ACCELERATION

Last year, tens of thousands of lawyers did not reverentially observe the 300th anniversary of a law enacted by the colonial Assembly of West New Jersey. More's the pity. The law provided that "for the preventing of needless and frivolous Suits, Be it Hereby Enacted…that all Accounts of Debt…of Slander…and Accounts whatsoever not exceeding Twenty Shillings,…Arbitration of two [neutral] Persons of the Neighbourhood, shall be tendered by some one Justice of the Peace who shall have the Power to summon the Parties."

"Preventing of needless and frivolous suits" is as laudable a goal now as it was then, and certainly as timely. From 1940 to 1981, federal civil cases increased almost six times as fast as the US population. The Associated Press estimates that each year, roughly one of every ten adults either sues someone or is sued.

Moreover, going to court is normally not a pleasant experience. Physicians have observed a high incidence of "litigation neuroses" in otherwise happy and well-adjusted people. As the late Judge Learned Hand commented, "I must say that, as a litigant, I should dread a lawsuit beyond almost anything else short of sickness and of death."

So what is to be done? If you're a lawyer, you're the direct beneficiary of a booming industry. But if you're not a lawyer, it's good to know that there are private alternatives to the governmental court system, and they're becoming more frequently available.

One is private complaint bureaus set up by industries for their consumers. Within the auto industry, for example, the National Automobile Dealers Association and almost all auto manufacturers—including foreign companies—now maintain "some kind of local umpire system," as Business Week reports, to handle warranty, product, service, or sales problems when a customer is dissatisfied with the company or dealer.

Avoiding legal costs is only part of the incentive for auto makers to make these mechanisms work. As Business Week observes, "The bottom line for auto makers is to build up repeat business—customers who every few years trade in their car at the local dealership for a shiny new model. Conciliation is one way to keep these buyers coming back.…[A Washington consulting firm] estimates that improving customer service may be worth as much as $400 million in new-car sales annually."

Even such auto-industry critics as Clarence Ditlow III of the Center for Auto Safety speak favorably of the manufacturers' mediation panels. "If you get only 10 percent more happy customers, it's worthwhile," he says.

Examples of industry-sponsored complaint bureaus outside the auto industry abound. They include the Chicago-based Major Appliance Consumer Action Panel and, for funeral homes, an organization called THANACAP. In addition, the venerable Better Business Bureau has been mediating consumer complaints for 71 years.

Meanwhile, for private resolution of disputes between individuals, there is often the option of binding arbitration. Eight states already recognize "rent-a-judge" programs that permit people to settle their differences in private, unofficial courts, with the results binding in regular courts. And the Associated Press reports that there are 170 various "dispute resolution centers" and "neighborhood justice centers" in 40 states, all aimed at helping people stay out of court. Chief Justice Warren Burger, an outspoken foe of court congestion, has championed binding private arbitration for complex commercial disputes, also.

Abraham Lincoln once said, "Discourage litigation. Persuade your neighbors to compromise whenever you can. Point out to them how the nominal winner is often a real loser—in fees, expenses, and waste of time." It was sound advice, especially coming from a lawyer.

PRIVATIZATION PLEASES PUBLIC

The streets of Wandsworth—a borough of London—haven't been so clean in years. And the borough boasts the least-expensive and most-efficient garbage collection in all of London. Welcome privatization.

In February of last year, the Wandsworth Council contracted with a private firm to sweep the borough's streets, saving 25 percent over the cost of using borough employees. So successful was the arrangement that one month later the council decided to contract out the borough's garbage-collection service. Under the contract—in effect since October—the contracted private firm employs 133 collectors (in contrast to the 216 on the borough's crew) and will annually save the borough 40 percent in costs for garbage collection.

Moreover, the private firm is legally bound to perform specific services adequately or pay penalties and lose the contract. The firm also must bear any cost overruns. So pleased with these arrangements is the Wandsworth Council that it now has plans to privatize parts of its parks service—at a 30 percent savings—and is looking for other services to privatize as well.

The borough council opted to go the privatization route after it had learned that, during the previous decade, its costs for garbage collection had escalated to unacceptable levels—the municipal crew had been overmanned and absenteeism was high—while the quality of service declined. Borough residents and merchants had even reported instances of extortion—some collectors threatened sloppy or irregular service to those on their routes who wouldn't make extra payments to them.

Throughout Britain, union opposition to such privatization moves has been vigorous. In an effort to rally public opinion to its side, Britain's National and Local Government Officer's Association (the 800,000-member public-employee union known as NALGO) recently conducted a poll of citizens' attitudes toward cutbacks and privatization. The Economist reports that NALGO polled only "potential sympathisers," yet received unexpected—to say the least—results.

According to the poll, the public feels that NALGO is "overly bureaucratic, wasteful and mismanaged." Trade unions, believe many citizens, "had become selfish, greedy and destructive." Moreover, the public agreed with the claim that "private industry operated more efficiently than nationalised." And to the notion of government cutbacks, there was this response: "it was time public services were cut.…If cutting back involved depleting an overmanned workforce and top-heavy administration, this was to be welcomed." NALGO, the Economist reports, is working quietly to bury the poll's results.

DELIVERING THE GOODS

Perhaps some future Trends column will report that the Postal Service has become a nirvana of efficiency, wondrously responsive to consumers' needs, and economical. If present circumstances are any indication, however, that will be a Trend in the month that rivers run uphill and cattle write poetry.

There is efficiency in mail and package delivery, and there is responsiveness to consumers' needs—but it's occurring almost exclusively in the private sector. It's no surprise, then, that private mail-handling and delivery services continue to prosper and expand.

Aviation Week recently reported that Federal Express is responding to competition from other small-package and overnight-letter delivery companies with a $100-million aircraft acquisition program. With its new wings, the company will expand geographic coverage in the next few years from 74 percent to 95 percent of all US communities. Federal Express already provides direct service to 17,000 communities—more than double the 8,000 communities it served only four years ago.

Even in the midst of a recession, the company has been doing quite well financially. The firm owes a great deal of its success to the Overnight Letter, introduced in June 1981. Within a year after Overnight Letters were first offered, Federal Express delivered more than 27,000 of them daily (compared to about 550,000 pieces of certified, registered, special delivery, and express mail delivered daily by the Postal Service, which has been in business for about 200 years). The service generated $56 million in revenues in the first year.

Another reason for the company's success has been its openness to technological innovation. For example, the capacity and reliability of its tracing and billing systems have been increased by connecting customer service centers with the largest existing private satellite network using earth stations. Before long, the network will carry voice, data, and video-image transmissions and link 4,500 Federal Express computer terminals with the company's primary computer system in Memphis. There are even plans to link the company's delivery vans to the network.

There are, of course, other businesses involved in other stages of mail handling and delivery. Mail-receiving agencies, for example, "offer confidentiality and convenience to thousands of customers who do not want mail delivered to their homes or offices," as the New York Times wrote. Storefront agencies are springing up in Manhattan, and Jim Baer of the Association of Commercial Mail Receiving Agencies estimates that there are as many as 1,500 such businesses in operation around the country doing $100 million worth of business annually. (The association, a trade group, has 212 members after 16 months of operation.)

The big operators like Federal Express as well as the smallest mom-and-pop mail-receiving agencies have to circumnavigate the private-express statutes, which give the Postal Service a monopoly on first-class mail service. But even with that burden, many if not most of these companies are thriving. It may be too much to imagine the quality of service they could provide if they were permitted to compete with the Postal Service in first-class mail service as well.

FLYING HIGH IN MIDDLETOWN

For as long as there was serious discussion of airline deregulation, opponents warned that if deregulation came to pass, the airlines—with their devotion to making a profit—would abandon air service to small towns, concentrating on the more-lucrative air routes to larger cities.

Their arguments fell on deaf ears. Congress passed, and small-town resident Jimmy Carter signed, the Airline Deregulation Act in 1978. And the workings of a freer market have not been nearly as terrible as doomsayers were warning. Passengers are very aware of how increased competition has lowered fares on major air routes, but there have been some interesting developments in service to small-town markets, also.

In the East and Midwest, in several communities where service was cut by major airlines after deregulation, Piedmont Airlines has pursued an unconventional strategy of bypassing the large traditional hubs and focusing service instead on those underserved communities. Piedmont has developed a "hub-and-spoke" strategy: operating out of "hub" cities—Charlotte and Dayton and, beginning in August, Baltimore—Piedmont serves small and middle-sized "spoke" towns. Maintaining a well-coordinated bank of connecting flights at the hubs, the firm boasts of minimal ground delays and short walks for passengers between connecting flights' gates.

Aviation Week reports that "Piedmont has thrived" with this strategy. Operating profits rose from $7 million in 1978, the first year of deregulation, to $57.2 million in 1981. And over the past 18 months, Piedmont has added new facilities at Dallas-Ft. Worth, Boston, Charlotte, Raleigh-Durham, Greensboro, Miami, Orlando, Tampa, Dayton, Denver, and Houston, largely with internally generated funds.

Meanwhile, on the West Coast, financially troubled Pacific Express Airlines—which had its first full year of operation in 1982—is following Piedmont's lead and shifting from the highly competitive Los Angeles–San Francisco market to smaller cities with less service. The airline reduced service in the California corridor from eight to three daily round trips and is now moving into thinner but less competitive markets such as Fresno, Bakersfield, Sacramento, and Modesto. The result? Pacific Express's passenger load factors rose to 60 percent in February—the first month under the route realignment—from 51 percent in January and a 1982 average of 52 percent.

Piedmont president William Howard admitted to Aviation Week that Piedmont had opposed deregulation at first, but now he says, "Deregulation can work, though it has been traumatic for many airlines." And as Piedmont and Pacific Express's experience shows, it can also work for small-town markets.

INSURING DEBATE OVER MEN AND WOMEN

Consider this fact: men under age 25 pay two to three times as much for auto insurance as do women drivers in the same age bracket. Is this just? Sen. Robert Packwood (R–Ore.) and Rep. John Dingell (D–Mich.) apparently don't think so—even though men in this age group cost insurers comparably more in claims paid out than do women of the same age. They are pushing for legislation that would force insurance companies to charge all customers so-called "unisex" rates—that is, rates that are not based on statistical liability differences between men and women.

The unisex debate has largely focused on the issue of pension plans: because women as a group live longer than men, many plans pay women smaller monthly benefits. Thus, on average, women and men receive the same total benefits for equal amounts paid. Backed by President Reagan himself, the Justice Department construes this as sex discrimination and plans to challenge an Arizona government practice of paying variable-rate annuities based on the sex of the beneficiary.

Lending strong support to unisex legislation are a number of women's groups, including the National Organization for Women (NOW), the American Association of University Women, and the ACLU Women's Rights Project. Indeed, NOW claims that due to "discriminatory" insurance rates, typical coverage costs women about $16,000 more, over their lifetimes, than men.

But James Auger, an actuary with Aetna Life Insurance, disagrees with NOW'S calculations. In a letter to the editors of Business Week, Auger writes: "Our figures indicate that a representative working woman will pay between $5,600 and $3,300 less during her lifetime for [insurance] coverage than the equivalent working man." The rates for auto and life insurance are lower for women, and these are the two policies that women most often buy individually, Auger explains. For other insurance, women are typically covered through employer-sponsored group plans, in which rates for men and women are identical. "Ironically," concludes Auger, "men will be the principal beneficiaries" of proposed unisex legislation.

Unsurprisingly, the market is already testing the "unisex" insurance that Packwood and Dingell would impose on it. Writes Los Angeles attorney Douglas Hallett in the Wall Street Journal, "Nothing prevents [insurance] companies from going unisex." In fact, he reports, "Competitive factors already have led at least three major auto insurers to offer policies that don't use sex as a rating variable."

Even the New York Times, normally a bastion of unbridled egalitarianism, has some reservations about mandatory unisex insurance. In an April editorial, the Times wrote: "The good reasons to eliminate sex discrimination in insurance do not justify reckless damage to the insurance industry, existing pension systems or present policyholders."

GORILLA IN SPACE?

You remember the riddle asking where an 800-pound gorilla sleeps? (Answer: anywhere he wants to.) Well, to the fledgling private firms developing space launch vehicles—companies like ARC Technologies and Space Services, Inc.—NASA takes on all too many of the gorilla's attributes. It's not that the National Aeronautic and Space Administration has it in for private enterprise. The problem is that the tax-funded space agency can make or break a private firm, depending on how it prices its own subsidized facilities and services.

Looming very large is NASA's space shuttle. Although the highly subsidized prices will be going up in 1985, they still won't fully cover even operating costs, let alone any share of the huge vehicles' development costs. Yet private rocket companies must charge prices that cover all their costs—or go broke. Even more worrisome is language that has been slipped into the current NASA bill by the House Science and Technology Committee. It would amend the agency's charter to allow it to operate a "space transportation system." Heretofore, NASA has been limited to research and development, and the assumption has been that, once proven out, the shuttle would be privatized. The new policy risks creation of an "Amtrak for space," in the words of economist Stuart Butler.

Then there's the matter of commercialization of expendable (nonreusable) launch vehicles. As reported here last March, several companies have announced plans to buy quantities of Atlas, Delta, and Titan rockets from their manufacturers and use them to launch satellites for commercial customers. Since taxpayers' money paid for development of these rockets, what price would be charged to the launch-services companies? Will one set of private firms end up engaging in subsidized competition with the firms that are developing entirely new vehicles? And what price will the government charge for use of its launch facilities?

These knotty questions are being addressed by the White House's Space Interagency Group. At press time, the word from Washington was that SIG would give the green light to commercialization of expendable rockets and would make available government launch facilities at "very nominal prices." But SIG is also in favor of continuing heavily subsidized shuttle pricing, despite strong opposition from the Office of Management and Budget. Thus, there will be some private space operations—but not necessarily on a level playing field. The 800-pound gorilla will probably be playing quarterback.

RENT CONTROLLERS' GRIP WEAKENED

There were elections on April 12 in Santa Monica, California. The results were generally better than expected.

Most significant was the defeat of incumbent mayor Ruth Yannatta Goldway and her two city council running mates. The three were candidates of Santa Monicans for Renters' Rights which, along with Tom Hayden's Campaign for Economic Democracy, is responsible for one of the nation's most-restrictive local rent-control laws. The Renters' Rights majority on the city council was thus reduced from 5-to-2 to 4-to-3.

The mayoral race was a photo finish—the victorious All Santa Monica Coalition candidate David Epstein had only a 269-vote lead over Goldway. But the All Santa Monica Coalition also elected a four-member slate that will control the new Santa Monica College Board of Trustees as well as a three-person slate to the seven-member Santa Monica–Malibu School District. This all may signify a sea-change in Santa Monica politics.

It is too early to tell whether the April 12 winners will actually change Santa Monica's rent controls. Goldway herself said that Epstein and his slate had "played both sides, saying they were for rent control and for homeowners,…They also were effective in running on our issues, like rent control"—which can be interpreted as a backhanded insult or ambiguous compliment. But one positive indication is that Epstein's coalition had given strong support to a measure called Proposition A.

The proposition would have modified the rent-control laws by giving tenants a chance to buy their own apartments. Tenants would have been permitted to make purchases in buildings where such transactions were agreed upon by the landlord and tenants in 60 percent of the units. The apartments then could have been converted into condominiums, stock cooperatives, or limited-equity cooperatives. Proposition A failed, but only narrowly.

Even if it had passed, Proposition A would hardly create a free market in housing, but it would have been a substantial improvement. As the Orange County Register observed, "The amazing thing is that government control is so tight in Santa Monica that a vote of the people was considered necessary to make such a modest idea legal.…If a landlord wants to sell and a tenant wants to buy, why should they have to run to the government to get permission?"

MARKET MURMURS FROM MOSCOW

Some recent developments in the Soviet Union are surely not enough to create an economic Eden on the Volga. They do suggest, however, that the USSR's economic orthodoxy is being seriously questioned.

Specifically, the Soviet press and scholarly journals have recently published a number of critiques of the central-system planning. And through the emerging debate, authorities have posed the possibility of significant changes.

Moreover, Soviet leader Yuri Andropov has openly criticized the performance of the nation's economy. With reforms possibly in mind, Andropov designated a commission to study the more market-oriented Hungarian economy, whose performance has stood out among the East Bloc nations. The Soviets appear particularly interested in Hungary's decentralized and semiautonomous agricultural sector, which has kept the country's food shops well stocked.

Conspicuous in the debate are recurring criticisms of Soviet planners' emphasis on quantity of production rather than quality. Indeed, in April Aviation Week & Space Technology reprinted an extensive critique of this system by Soviet aircraft designer Oleg Antonov. The article had originally appeared in the Soviet labor journal Trud.

What is most remarkable about Antonov's criticisms are his oblique references to various free-market principles. For instance, Antonov refers to "quality" as "the relationship of consumer value to cost." He suggests that prices "be established according to an agreement between the manufacturer and the customer." And he urges reforms that would "bring all enterprises face to face with consumers." The echoes are more of Adam Smith than of Karl Marx.

DECOMMUNIZING CHINA

After the death of Mao Tse-tung in 1976, China's new leadership experimented with rural reforms that abolished a number of Mao's forced agricultural communes. Farmers were allowed to grow and sell their goods in open markets, either individually or in voluntary cooperation; and cooperatives replaced state-run rural industries. The results were near-miraculous: By 1981, the output of grain and other crops had risen 22 percent. Meat production had increased 62 percent. Rural industries had increased production by 56 percent. Many farmers' incomes had increased two- or threefold and generally had risen at least 50 percent.

Buoyed by the success of the reforms, China—now under the leadership of Deng Xiaoping—plans to spread the reforms throughout the countryside and may abolish all 50,000 rural communes within the next year. Enthusiasm for the reforms among China's media and many of its leaders—including Vice Premier Wan Li, the nation's agricultural overseer—runs high.

In general, the principles of individual enterprise and voluntary cooperation are increasingly replacing the Maoist doctrines of central planning and forced collectivization throughout China. In the cities, for example, private entrepreneurs are being given more and more latitude in setting up businesses. Since 1980, China has allowed the establishment of licensed private businesses in cities. And now that the state is having difficulty finding jobs in state-run enterprises for many citizens, restrictions on private businesses have been further relaxed. As a result, in Shanghai alone, private businesses will double in number this year to 50,000. Currently, there are about 1.5 million licensed businesses in China nationwide.

Moreover, businesses will soon be permitted to trade commodities, such as grain, that state-run stores now monopolize and to establish independent prices on some items. Also under the new rules, they'll be allowed to form trade associations and pension plans.

Marking an additional step away from central planning is the government's recent decision to cut back its subsidies on food, clothing, housing, medical care, and recreation from 30 percent of the national budget to 20 percent. Because the cuts will mostly affect rural areas, where reforms have allowed farmers and workers to produce and earn more, little hardship is expected to result.

MILESTONES

Price is righted. A California law requiring wholesalers of distilled spirits to post with the state the prices they charge retailers—and forbidding the wholesalers to sell below their posted price—has been struck down by the First District Court of Appeals in San Francisco as a violation of antitrust laws, and the decision was sustained by the California Supreme Court. California's attorney general is now requesting a hearing by the US Supreme Court.

Medical vouchers? The Reagan administration's 1984 Medicare budget includes $50 million to launch a program that would offer the elderly vouchers as an alternative to direct government subsidy of health care. With the vouchers, people now eligible for Medicare could shop for a private plan that fits their needs with an amount equal to 95 percent of Medicare's average per capita cost.

Privatizing coin sales. The US Mint has awarded a contract to J. Aron & Company for marketing and sales of the government's one-ounce gold medallions. The Postal Service's marketing of the coins had been a crashing failure—only 600,000 ounces had been sold in three years—and Treasury Secretary Donald Regan predicts that Aron will be able to boost that figure to 3 million ounces in the first three years of the contract.

Fluoridation down the drain. The town of Hempstead, Long Island, has stopped fluoridating its water after a mail referendum showed 54 percent opposition to fluoridation. Some 41 communities held fluoridation referenda in 1981, and of these, 33 said no to fluoridation and 8 said yes.

Land grab crash-lands. Hawaii's Land Reform Act of 1967, which empowered the state to condemn land owned by the state's large landowners and sell it to the people leasing it (a common arrangement in the state), has been struck down by the US Circuit Court of Appeals. "It is not a public purpose," said the court, "to take the property of one person in order that it may become the private property of another."

Ashes to ashes. In a Business Week poll of corporate executives conducted by pollster Louis Harris, 95 percent disapproved of direct federal subsidies to keep failing industries alive. As Harris put it, "The prevailing wisdom is to let these industries go down the drain."

Felon fines finally fly? California's Democratic attorney general, John Van de Kamp, has announced legislation that would aid crime victims by requiring felons to pay restitution fines between $100 and $10,000. The amount of the fine would be based on the victim's loss, the seriousness of the crime, and any economic gain that accrued to the felon. "It is a debt that will last until it is paid," Van de Kamp said.