The Bureau of Business Research The University of Texas atAustin November-December 1979 U.S. Agricultural Policy as a Weapon against OPEC 173 Nuclear Power: An Exchange of Views 177 Petroleum and Politics: The Texas Railroad Commission 181 Mexican Illegal Aliens in the San Antonio Labor Market 187 The Fiscal Health of Medium-Sized Cities: A Regional Perspective 192 Texas Planning Regions: An Economic Summary 197 The Future of Business Regulation 203 Rate Deregulation in the Airline Industry: A Panel Discussion 206 Our Future Selves: Aging in America 211 Inflation and the Young College Consumer 215 Texas BUSINESS The Bureau of Business Research The University of Texas at Austin Vol. 53, No. 6, November-December 1979 U.S. Agricultural Policy as a Weapon against OPEC 173 George A. Thoma Nuclear Power: An Exchange of Views 177 E. Linn Draper and Ruth Weiner Petroleum and Politics: The Texas Railroad Commission 181 David F. Prindle Mexican Illegal Aliens in the San Antonio Labor Market 187 Gilbert Cardenas The Fiscal Health of Medium-Sized Cities: A Regional Perspective 192 Joseph E. Pluta Texas Planning Regions: An Economic Summary 197 Charles P. Zlatkovich The Future of Business Regulation 203 Murray L. Weidenbaum Rate Deregulation in the Airline Industry: A Panel Discussion 206 Robert Frank, Sam Coats, and Herbert D. Kelleher Our Future Selves: Aging in America 211 George L. Maddox Inflation and the Young College Consumer 215 Sue Alexander Greninger, Vickie Hampton, and Karro! Kitt Index to Volume 53 218 Cover design: Eje Wray Bureau of Business Research Charles C. Holt, Director Review Staff Joseph E. Pluta, Editor Lois Glenn, Publications Manager Charles F. Dameron, Jr., Managing Editor Mary Jo Powell, Editorial Assistant Mildred Anderson and Jean Hall, Data Compilation Daniel P. Rosas, Printing Coordinator Joan Farnham and April L. Caruthers, Compositors Subscription rate: $15 .00 per year. Single copy: $2.50. Pub­lished six times a year. Second-class postage paid at Austin, Texas. Publication number 540-400. ISSN 0040-4209. Copyright © 1979, Board of Regents, University of Texas System. Address manuscripts and communications to Texas Busi­ness Review, Bureau of Business Research, P.O. Box 7459, Austin, Texas 78712. Telephone: 512-471-1616. Texas Business Review is indexed in Marketing Information Guide and Public Affairs Information Service and is avail­able on microfilm from University Microfilms. U.S. Agricultural Policy as a Weapon Rising prices and reduced availability of gasoline and other petroleum products have led to a variety of proposals for dealing with the energy crisis. Among the more dra­matic and apparently popular proposals, one focuses on the cartel of the Organization of Petroleum Exporting Coun­tries (OPEC) and suggests that the United States use its power as a major exporter of grain and other food products to exert pressure on OPEC members for lower prices and greater supplies of petroleum (for example, see "Now, Food for Crude," Newsweek, May 21 , 1979, p. 28). While public support for such an idea may be growing, the reali­ties of international patterns of the production and con­sumption of agricultural products suggest that such pro­posed policies would be either ineffective or detrimental to U.S. welfare. As an important agricultural area, the South­west would be significantly affected by any such change in export policy. To control the price and output of agricultural goods to OPEC members, the federal government would have to have much greater control over the production and distribution of agricultural commodities than is now the case. Even if the United States could control the price and output of agricultural goods to world markets, significant costs would be imposed on both the domestic agricultural sector and the general consuming public. There is little evidence to suggest that such control would be a particularly effective weapon against OPEC members. In short, the costs of attempts to use agricultural export policy against OPEC outweigh any potential benefits. The International Market for Agricultural Products While it is clear that the United States is a major pro­ducer and exporter in world grain markets (see table 1 ), the markets for agricultural products are international. Because the prices and quantities of agricultural goods reflect overall world conditions of supply and demand, a policy of raising prices and restricting the output of agricultural goods to OPEC members is much more com- George A. Thoma is Assistant Professor of Economics, Elmhurst College, Elmhurst, fllinois. against 0 PEC George A. Thoma plex than is commonly realized. If the United States uni­laterally attempted to raise the price and restrict the out­put of agric1dtural goods to one group of countries, such as OPEC, potential buyers of grain and other agricultural products in OPEC countries would simply turn to such grain suppliers as Canada or Australia. Moreover, as long as the United States did not restrict sales to countries that are . not members of OPEC, international grain traders would find it profitable to buy U.S. grain at the low world price and resell it to the OPEC members at a price near the world price. In this manner, given free trade among countries out­side of OPEC, the U.S. policy of restricting the sales of agri­cultural goods to OPEC members would be ineffective. Analysis of the above argument may lead to the counter­argument that, while unilateral efforts of the United States would be ineffective, the major exporters of agricultural goods could form a cartel in order to raise prices and re­strict output to OPEC members. While in theory this argu­ment may be true, the history of attempts to form compre­hensive agricultural cartels and the nature of the commodi­ties involved make such an eventuality unlikely. Agricul­tural goods consist of a variety of particular commodities with significant production widely dispersed among many countries. In contrast, petroleum is basically a single com­modity with a significant portion of production concen­trated in relatively few countries. More importantly, even if an effective world cartel in agricultural goods could be formed, the potential costs to the United States and other members would outweigh the benefits. The Costs of an Agricultural Cartel Since the implementation of an effective cartel in agri­cultural products would lead to higher prices and reduced exports, costs would be imposed both on the U.S. agricul­tural sector and on the general consuming public. During the past several years, 18 percent to 25 percent of U.S. agricultural output has been produced for foreign con­sumers (see table 2). In addition, agricultural exports are a critical component of overall exports. A reduction of such exports would impose both immediate and long-term costs on the U.S. economy. A decrease in food exports implies NOVEMBER-DECEMBER 1979 a contraction in the production of agricultural goods and, in the short run, will cause the unemployment of resources in the agricultural and related sectors. In the longer run, the contraction of the agricultural sector implies additional costs as resources are shifted away from one of the areas of production in which the United States is comparatively more efficient and into areas of less efficient production. Specifically, a reallocation of resources into relatively less Table 1 efficient areas of production ultimately would lead to a fall in the total world output and a decline in standards of living. Implications for the Southwest For any given region of the United States, the implica­tions of an international agricultural cartel depend in part Production and Exports of Selected Agricultural Products, United States and World, 1977 Production Exports• Commodity United States (millions of metric tons) World (millions of metric tons) Percentage United States (millions of metric tons) World (millions of metric tons) Percentage Wheat SS 382 14.4 30.3 74.2 40.8 Oats 11 S2 20.9 0.1 1.1 9.1 Corn 162 344 47.0 4S.S 64.2 70.8 Barley 9 164 S.6 1.2 14.S 8.2 Soybeans 3S 61 S7 .S 16.2 19.6 82.7 Rice s 363 1.2 2.2 8.4 26.S *Preliminary figures. Source: The World Almanac 1979 (New York: Newspaper Enterprise Association, 1978), p. 149. Table 2 U.S. Agricultural Output, Exports, and Total Exports, 1973-1978 (In billions of dollars) Agricultural exports Agricultural exports Agricultural Agricultural as a percentage of as a percentage of Year output exports agricultural output Total exports total exports 1973 96.3 17 .7 1974 97.8 22.0 197S 99.S 21.9 1976 101.0 22.0 1977 106.7 23.7 1978 119.0* 29.4 18.4 22.S 22.0 21.8 22.2 24.7 71.3 98.S 107.6 llS.3 121.2 143.6 24.8 22.3 20.3 19.1 19.6 20.S on the importance of agriculture to that region. In 1977, four south western states-Arizona, New Mexico, Oklahoma, and Texas-realized $11.1 billion in cash receipts from farming (see table 3). This amount was 11.3 percent of the total U.S. cash receipts from farming. The Southwest accounted for 10.9 percent of total acreage of prin­cipal U.S. crops harvested. In 1977, farm employment ac­counted for 4.8 percent of total nonagricultural payroll plus farm employment for the United States as a whole and 5.2 percent for the Southwest. In the same year, 392,600 people were di­rectly employed in agriculture in the Southwest. Given the simi­larity of the percentages of agricultural employment for the Southwest and the United States as a whole, the data suggest that the impact of a restrictive agricultural policy on the South­west would approximate the average impact on the country as a whole. A specific state like *Preliminary figure. Oklahoma, with a relatively high Source: Agricultural output from Shelby W. Herman, "The Farm Sector," Survey of Current Busi· percentage of employment in ness, November 1978; other data from Survey of Current Business, various issues. the agricultural sector, could be expected to bear an above­Table 3 average share of the costs of a restrictive agricultural cartel. Selected Agricultural Data for the Southwest, 1977 Farm employment Lack of Power as a percentage ofCash receipts Harvested acreage Farm employ· nonagricultural from farming• of principal U.S. Percentage U.S. agricultural goods consti­ ment (thousands payroll plus of persons) farm employment tute only a minor portion of (thousands of crops (thousands of total of acres) U.S. acreage total OPEC imports from the Area dollars) 0.4 22.8 2.7 Arizona 1,203,112 1,1 82 United States (see table 4). In 0.4 24.8 s.s 1,313New Mexico 80S,901 96.0 8.8 1972, 17 .3 percent of OPEC im­ Oklahoma 2,009,947 10,323 3.1 249.0 4.8 7,067,739 23,267 7.0 ports from the United States Texas Southwest 10.9 392.6 S.2 were agricultural goods. The pro­ total 11,086,669 36,08S 100.0 4,1 S2 .0 4.8 portion rose to 24.2 percent in U.S. total 97,902,913 331,338 1974 but dropped to 12.l per­cent by 1977. (For Saudi Ara­ *P~e~~~ei;a~a~~~:~~ipts from farming and farm employment data from U.S. Department of Agricul­S ture, Agricultural Statis!fcs 1978; nonagricultural payroll empl°Jm,e;~1!~an!~0r/;1t(~~~ ~~~~~ bia, the dominant OPEC pro­ Report, various recent issues; and harvested acreage from The or ducer, imports of agriculturalNewspaper Enterprise Association, 1978). TEXAS BUSINESS REVIEW Texas Just Released Metropolitan Area Economic profiles of all twenty-five standard Profiles metropolitan statistical areas in Texas are now available in a single volume. These profiles are reprinted from Texas Business Review and are accompanied by updated statistics. Paper. $6 plus tax. ISBN 87755-263-3. Bureau of 8 . U81nt>ss Rf>8f:"ar<'h Bureau of Business Research University of Texas at Austin Box 7459 Austin, Texas 78712 goods were less than 5 percent of total imports from the United States in 1977 .) In contrast, U.S. imports of petro­leum from OPEC members as a percentage of total U.S. world imports have increased steadily, from 3 .8 percent in 1972 to 21.2 percent in 1977 (see table 5). There is no obvious historical or theoretical basis for concluding that the implementation of a punitive agri- Table 4 U.S. Exports to OPEC Members, 1972-1977 (Millions of dollars) Total Agricultural Year exports exports Percentage 1972 2,74 7 4 7 5 17.3 1973 3,60 1 7 15 19.9 1974 6,693 1,553 23 .2 1975 10,7 11 1,4 33 13.4 1976 12 ,4 80 1,34 5 10.8 1977 13,886 1,67 8 12.1 Source: C. L. Bach, "OPEC Tran sactions in the U.S. International Accounts, 1972-77," Survey of Current Business, April 1978. cultural policy toward OPEC would achieve its desired goal. Rather than lead to a more moderate policy, an attempt to use agricultural policy as a weapon against OPEC might instead lead to retaliatory price increases and output re­strictions in world petroleum markets. Table 5 U.S. Total World Imports and Petroleum Imports from OPEC, 1972-1977 (Millions of dollars) Imports of petroleum Year Total imports from OPEC Percentage 1972 5 5 ,5 83 2 ,130 3.8 1973 69,476 3 ,746 5.4 1974 100,2 51 14,365 14.3 1975 96,116 1 5 ,945 16.6 1976 120 ,6 78 23,613 19 .6 1977 147,685 31,240 21.2 Source: C. L. Bach, "OPEC Transactions in the U.S. International Accounts, 1972-77," Survey of Current Business, April 1978. NOVEMBER-DECEMBER1979 BBR Publications on Latin America Atlas of Mexico Arbingast, Stanley A., et al. Revised 1975. 164 pp., some maps in color. $20.00. ISBN 87755-187-1. An economic atlas of Mexico. Credit Systems for Small Scale Farmers: Case Histories from Mexico Williams, Simon, and James A. Miller. 1973. 260 pp. $5.00. ISBN 87755-153-7. Studies in Latin American Business No. 14. An examination of those credit operations touching the Mexican campesinos. A Spanish edition is available from Editorial Diana, Mexico. Economic Integration in Latin America: The Progress and Problems of LAFT A Mathis, F. John. 1969. 112 pp. $3.00. ISBN 87755-076-X. Studies in Latin American Business No. 8. The study is con­cerned primarily with the Latin American Free Trade Asso­ciation as the organization expected to determine the suc­cess or failure of the common market in Latin America. A Spanish edition is available from Editorial Diana, Mexico. Industrial Polarization under Economic Inte­gration in Latin America Garbacz, Christopher. 1971. 101 pp. $3.00. ISBN 87755­138-3. Studies in Latin American Business No. 11. The focus is the tendency for an economic union of countries with widely divergent levels of development to result in further extreme concentration of economic activity at a few industrial poles. Industrialization and Employment in Puerto Rico, 1950-1972 Holbik, Karel, and Philip L. Swan. 1975. 82 pp. $3.00. ISBN 87755-208-8. Studies in Latin American Business No. 16. Although de­velopment programs dating from the 1940s have made pos­sible the emergence of Puerto Rico as an industrialized economy, the economic changes have resulted in certain problems, problems that are a major focus in the book. International Tourism and Latin American Development Krause, Walter, and G. Donald Jud. 1973. 74 pp. $3.00. ISBN 87755-176-6. Studies in Latin American Business No. 15. The central ques­tions in the work are (1) What is the potential for tourism in Latin America? and (2) What must Latin America do to realize the potential? Mexican Migration and the U.S. Labor Market: A Mounting Issue for the Seventies Briggs, Vernon M., Jr. 1975. 37 pp. $3.00. ISBN 87755­214-2. Studies in Human Resource Development No. 3. An analysis of the effects of U.S. labor, immigration, and border poli­cies on employment and labor problems of the seventies. The Mexican Migration Numbers Game: An Analysis of the Lesko Estimate of Undocu­mented Migration from Mexico to the United States Roberts, Kenneth, Michael E. Conroy, Allan G. King, and Jorge Rizo-Patron. 1978. 33 pp. $4.00. ISBN 87755· 228-2. Research Report 1978-1. A detailed account of methods used to enumerate illegal aliens in this country and a critical assessment of this approach. The Mexico-United States Border: Public Poli­cy and Chicano Economic Welfare Briggs, Vernon M., Jr. 1974. 28 pp. $3.00. ISBN 87755­200-2. Studies in Human Resource Development No. 2. A dis­cussion of the effects of U.S. immigration policies. Monetary Accommodation of Regional Inte­gration in Latin America Ziegler, Lawrence F. 1971. 83 pp. $2.50. ISBN 87755­154-5. Studies in Latin American Business No. 12. The author's focus is the monetary side of the Latin American move­ment toward market integration. Social Class and Consumption Behavior in Sao Paulo, Brazil Cunningham, Isabella C.M., et al.1976.177 pp. $4.00. ISBN 87755-258-4. Studies in Marketing No. 23. The authors examined the shopping and consumption behavior of individuals in vari­ous social classes in Sao Paulo. Trade and Industrialization in the Central American Common Market: The First Decade Holbik, Karel, and Philip L. Swan.1972. 67 pp. $3.00. ISBN 87755-167-7. Studies in Latin American Business No. 13. The authors trace the development of the Central American Common Market and evaluate its results. The United States and Latin America: The Alliance for Progress Program Krause, Walter. 1963. 35 pp. $2.00. ISBN 87755-070-0. Studies in Latin American Business No. 2. A discussion of the political and economic involvement of the United States with Latin America through the Alliance for Progress. Wage Differences between United States and Guatemalan Industrial Firms in Guatemala Maddox, Robert Casey. 1971. 57 pp. $2.00. ISBN 87755· 143-X. Studies in Latin American Business No. 10. The wage levels and factors accounting for differences are analyzed. Nuclear Power: An Exchange of Views Draper: Coal and uranium are the only large-scale alterna­tives to oil for meeting the growing demand for electric­ity over the next twenty-five years. Electricity generated by nuclear plants is less expensive than that generated by coal plants. Conservation will ease the current energy crisis somewhat, and solar power may become attractive for water and space heating as conventional energy sources become more expensive. There have been no radiation-related fatalities associated with the operation of public nuclear power plants. Although serious accidents associated with nuclear plants can be expected eventually, the fatalities per unit of electricity generated by nuclear plants will probably be fewer than they would be for the alternative sources. Decisions regarding nuclear power policy should be made by society rather than by technical experts who may be endowed with special knowledge rather than with special wisdom. Nuclear power has an important role to play in future energy production. Although there are some risks, they are smaller than for the alternatives and seem worth the taking in order to have the benefits of electricity. Weiner: Most of the current problems faced by nuclear power are the result of its development in a semi-free­enterprise environment that did not separate promoters from judges and regulators. Even the first chairman of the Atomic Energy Commission, David Lilienthal, pointed out that entrusting the same agency with pro­moting and regulating nuclear power might result in insufficient critical review. These two functions were not separated until the formation of the Energy Research and Development Administration and the Nuclear Regu­latory Commission in 1974. As a result, nuclear power has developed more rapidly than knowledge of safety E. Linn Draper is Technical Assistant to the Chairman ofthe Board, Gulf States Utilities Company. Ruth Weiner is Professor of Envi­ronmental Studies, Western Washington University. This discussion was held at the Third Annual Conference for Teachers of Free Enterprise at the University of Texas at Austin on June 5, 1979, and was sponsored by the Chair of Free Enterprise. The speakers' com· ments were summarized by Robert D. Smith. E. Linn Draper Ruth Weiner systems, public health effects, and radioactive by­products has warranted. This overemphasis on nuclear power and central-station electrical generation has Jed to a Jack of emphasis on other energy options. There have been many unwarranted developmental assumptions about some of the adverse side effects of nuclear power. I question, for example, whether avail­able waste management will, in fact, isolate waste for the required time periods. There may be harmful public health effects related to nuclear power that are so subtle that they will only be apparent when statistics on decades of health effects are available. We must move more cautiously in the development of nuclear power and must allow the public rather than technical experts to make the necessary decisions. Reactor Safety Draper: The nuclear power issue of greatest public concern is reactor safety. Decisions regarding nuclear power must be made with the recognition that benefits almost always incur risks. There are risks associated with nu­clear power, but these risks must be evaluated in the same light as risks from such alternative energy sources as gas pipeline ruptures, oil tanker groundings, dam fail­ures, and coal mine accidents. The nuclear power indus­try safety record has been outstanding to date-absolutely no radiation-related fatalities at power plants since the industry began twenty-two years ago. Today seventy­two nuclear fuel plants supply 13 percent of the elec­tricity generated in the United States. There have been significant accidents, such as those at Three Mile Island and Brown's Ferry; but these have been controlled, and, more importantly, they have helped the industry at large to correct problems and improve safety. Weiner: As early as the mid-1940s the potential benefits and risks of nuclear power had been recognized. Many experts said at that time and have continued to say that the risks should be accepted since we will eventually run out of fossil fuels and must turn to substitutes for the generation of electricity. These risks have never been NOVEMBER-DECEMBER1979 accepted by the public, however, and, in the wake of the accident at Three Mile Island, the public has begun to insist that questions of nuclear power safety be seriously addressed. Three Mile Island has even made the experts realize the need to address these safety questions in pub­lic forums. My primary safety argument involves the potentially insidious public health effects of radioactive emissions from nuclear plants. These effects may take decades to become apparent and may even be amplified by the ever­increasing average life span. I am not attempting to apply more stringent standards to nuclear power than to other potentially hazardous industries and products; I am equally skeptical about some of them. Although I support more cautious development of nu­clear power, I do not think that it would be feasible or realistic to shut down all nuclear plants now in opera­tion. We should recognize, however, that in the construc­tion of nuclear power plants the contractors and workers may have cut corners. In the case of nuclear plants, the results of these shortcuts may be much worse than they would be in most other types of construction. Perhaps a dam failure could result in consequences as disastrous as a nuclear plant accident, but widespread consequences from a coal-fired power plant accident are not probable. Improper construction, human error, mechanical failure, and inadequate inspection all contributed to the Three Mile Island accident. Waste Disposal Draper: The radioactive waste disposal issue is overplayed. Technology for waste management is now available, but the necessary political and administrative action has not been taken. The relative volume of fission-producing waste from a large nuclear plant is small-about six pounds a day or one ton a year. This annual waste when reprocessed, separated, and solidified in a glass-like ma­trix would occupy a volume of about one cubic yard. A coal-fired plant of comparable capacity would require about one hundred train carloads of coal a day and would generate about ten carloads of ash. Radioactive waste declines in hazard because of decay until after about seven hundred years, when it is only about as toxic as the original mined ore. Although this period is long with respect to social and political insti­tutions, it is short relative to our ability to engineer safe structures to house the waste in stable water-free geolog­ical formations perhaps three thousand feet below the surface of the earth. I can support this assertion with the example of the Oklo phenomenon, which occurred 1.8 billion years ago in what is now Gabon. This phenome­non was a natural criticality event in a deposit of ura­nium. The uranium was approximately 3 percent ura­nium 235 (the fissile isotope), and the site remained critical for about ten thousand years generating energy and fission product wastes. Recent examination of the surrounding soil has shown that very little of the most hazardous radioactive material migrated significantly from the site even though the geology would be con­sidered extremely unfavorable by current waste disposal standards. Based on the above observations, I feel that it is incum­bent upon the federal government through the efforts of the Department of Energy to construct a waste dis­posal facility to be licensed by the Nuclear Regulatory Commission. These actions would rectify public mis­conceptions about our ability to handle nuclear power plant wastes. Weiner: Since large amounts of radioactive waste have al­ready been generated, some kind of waste management program is necessary. I do, however, question the advisa­bility of generating more waste at ever-increasing rates when the effectiveness of the current technology is unproven. Several problems, including radiation damage to glass media and disposal site selection, deserve further consideration. I suggest referring to the U.S. Geologic Survey's Circular 779, Geologic Disposal of High Level Radioactive Waste: Some Earth Science Perspectives, for more detailed information on this matter. By the year 2010, today's fission-product inventory will have decayed to the point of consisting of 99 percent strontium 90 and cesium 137. The half-lives of these isotopes are about thirty years long so that after six hundred years (twenty half-lives) their hazard will be reduced by a factor of about one million. This figure is the one generally accepted for a safe length. If, how­ever, these isotopes were to be released into the general environment before six hundred years had passed and if they entered the food chain, they would concentrate in living organisms because of their chemical properties. Any isotope of strontium, for example, will concentrate in mammalian milk and bone. The particular fission­product species generated cannot be selected or limited in variety. This heterogeneity and the quantity of waste generated pose an especially serious problem. Is nuclear alteration (transmutation) of the waste to less hazardous materials possible? In such an operation two problems arise. First, the wastes would have to be chemically separated before they could be transmuted, and the separations pose industrial hazards. Second, the energy required for transmutation would be enormous. Draper: The most serious hurdle to actual transmutation of radioactive waste is the lack of a copious supply of cheap neutrons. There may be no such supply before nuclear fusion devices are available. Weiner: A serious drawback to the construction of more nuclear power plants at this time is that the spent fuel must be stored at the power plant since there is, in fact, no current waste management program. The plant sites typically are not the best available sites for storage of radioactive wastes. Alternatives to Nuclear Power Draper: The major energy sources used in the United States today are natural gas, oil, coal, hydroelectric power, and nuclear energy. The 1973 oil embargo and subsequent price increase have clearly illustrated the imprudence of further dependence on imported oil, and domestic oil and gas reserves are dwindling. Most of the sites available for hydroelectric power have been ex­ploited. For electrical production, therefore, coal is the only current major alternative to nuclear power. Elec­trical generation using coal is more expensive and more sensitive to inflation than is generation using nuclear power. Nevertheless, expansion of both of these sources is more prudent than total dependence on either. Addi­tional central-station electrical generation is proposed since the equipment and infrastructure for transmission, distribution, and use of electricity are already available. Solar power will become more attractive as energy costs continue to rise but for the next few decades will prob­ably be appropriate only for water and space heating. Assuming that all new construction relies on solar energy for water and space heating but that no old buildings are retrofitted for solar applications, only about 5 percent of the total U.S. energy demand will be met by solar power by the year 2000. Two final observations may be offered. First., because the United States is not an efficient consumer of energy, conservation can help mitigate the impact of the energy crisis. Second, the easier-to-use fossil fuels should be reserved for use by developing nations of the world since they may lack the technological base for using such sources as nuclear energy. Weiner: I take issue with Dr. Draper's statement that only about 5 percent of the total U.S. energy demand will be met by solar energy. The figure will be much higher since substantial solar retrofitting will probably occur. By concentrating on central-station electricity genera­tion, people discussing these problems tend to ignore distributed sources such as solar heaters. Vigorous pro­motion of solar energy, especially for water and space heating, is needed. Most of the barriers to widespread solar energy use are institutional and result from the interrelation of utilities and regulatory agencies. Although it is frequently said that solar energy is a new, untried technology, passive solar heating was used in such primitive architecture as the cliff dwellings of the U.S. Southwest. In the more recent past, solar water heaters were common in parts of the southern United States until the advent of "all-electric living" in the mid-l 950s. Modern technology in the 1970s includes improvements in efficiency, storage, and heat distribu­tion, but no radically different technology. The use of solar energy for direct heating, rather than esoteric, high­technology schemes for direct conversion of solar energy to electricity, is the real hope for easing energy shortages in the near future. About one-fifth of the energy used in the United States today is used for space heating. In most cases, electric space heating has been used because it has been cheaper to construct than other heating methods. In the Pacific Northwest, for example, electric space heating is com­mon because inexpensive federally subsidized hydro­electric power has been available. There is a widespread misconception that solar heating is only feasible in parts of the country that are obviously very sunny. In both the Northwest and the Northeast, solar hot-water heaters and solar space heaters can be used with some auxiliary heat and can drastically reduce dependence on fossil fuels or electricity. One does not have to use a single heat source exclusively, and any fuel not used for heating can be used for something else. Heating homes through solar power requires a consider­able capital investment from the individual homeowner. The same mortgage policies should be applied to this investment as are applied to investing in the house itself; only institutional bias stands in the way. If we are ready, as a nation, to give tax incentives for energy conserva­tion to businesses and industries, surely we can extend them to the individual homeowner. California is cur­rently leading the way in this effort. The real barrier to widespread use of solar heat in the next five years is not technological lag, but institutional and societal inertia. Additional energy production capacity, furthermore, may not really be necessary. The growth rate in national energy consumption during recent years has only been 3 percent a year, and much of that can be attributed to demands created by electric companies. We can reduce our energy consumption by 13 to 15 percent without noticeable effect on our lifestyle. In Sweden the per capita energy demand is only two-thirds of that in the United States. Draper: The difference between Sweden and the United States is largely the result of the greater distances be­tween population centers in the United States and conse­quent demands for transportation energy, substantial U.S. energy consumption for the production of food for export, and lower per capita electrical demand in the United States than in Sweden. Weiner: May I also point out that the energy demands of the rest of the world will soon force the United States NOVEMBER-DECEMBER 1979 to reduce per capita consumption. Another area in which enormous savings could be realized is mass transit. The train systems in Europe are magnificent compared to the ancient system in use in the United States today. Closing Statements Draper: The basic decision on nuclear power will be a poli­tical decision. I hope that the decision will be based on an assessment of what nuclear power has to offer and a comparison of the risks that it incurs with those of the alternate ways to do the same job. Weiner: The recent accident at Three Mile Island has per­mitted questions to be asked publicly that have been swept aside by the nuclear industry for the past thirty years. These questions must now be examined publicly: What are the real chances for waste disposal, and what are the real public health effects? How does nuclear expansion compare with other options, when all factors are considered? Bureau of Business Research The University of Texas at Austin Box 7459 Austin , Texas 78712 Petroleum and Politics The Texas Railroad Commission For almost fifty years, the Railroad Commission of Texas has been one of the most important government agencies in the United States. Although it is only a state agency, the railroad commission's control of the oil and gas industry within Texas and its decisions regarding the pro­duction of these resources, exploration for them, and the number of people who will do the producing and their relations to one another have made it a national power fully as influential as such federal agencies as the Interstate Commerce Commission or the Federal Communications Commission. Texas has long been the pivotal petroleum-producing state. From the early 1930s until about 1970, the state sup­plied between 35 and 45 percent of the national total each year. Alaska now competes with Texas as the top oil­producing state, and each is responsible for about 30 per­cent of the U.S. total. The increasing national reliance on foreign supply has further diminished Texas' importance as a source of oil. As oil production has fallen, however, natural gas pro­duction has risen in importance. Because Texas produces over a third of domestic natural gas and because the rail­road commission regulates natural gas as well as oil, the commission will be nearly as important in the 1980s as it has been in the preceding decades despite the decreasing importance of Texas oil in the national scene. David F. Prindle is Assistant Professor ofGovernment, University of Texas at Austin. While partial support for this study was provided by the Center for Energy Studies, University of Texas at Austin, the conclusions are solely those of the author. Much of this material will appear in Prindle 's forthcoming book, "The Texas Railroad Commission: 1930-1980. " ©Copyright 1979, David F. Prindle. David F. Prindle The commission is also of interest to students of poli­tics because commissioners are elected. The occupants of virtually every other important regulatory agency, state or federal, are appointed. Railroad commissioners are answer­able to the voters at six-year intervals. What the Commission Does As its name implies, the railroad commission was origin­ally created to regulate railroads. It also oversees other as­pects of transportation within Texas, such as commercial trucking and bus lines, but its regulatory powers over the petroleum industry dwarf its other duties. The commission oversees the oil and gas industry in four major ways: setting conservation standards and policies, prorating production, protecting producers' correlative rights, and regulating the rates of gas utilities. Some of these matters are inherently controversial. Setting Conservation Standards The conservation aspects of the commission's work are important but not controversial.1 Oil does not flow to a well by itself; it must be pushed, either by the natural gas trapped with it or by water pressure. If the oil is produced too quickly, these natural "drives" can be dissipated and much of the oil lost. Using engineering data and expert testimony, commission staff members set the maximum efficiency rate (MER) of production for each reservoir to prevent the wasting of oil. Moreover, commission field inspectors oversee the drilling and plugging of wells to protect land and underground water from pollution. NOVEMBER-DECEMBER 1979 Prorating Production The prorating of production is a much more controver­sial activity than the commission's conservation activities. From the early 1930s to the early 1970s the commission suppressed each field's oil production well below its MER and would allow only as much oil to be drawn out as would fulfill the current consumer demand at the current price. This policy encouraged exploration for new oil fields far in excess of the number that were needed at the time to satisfy the country's requirements. Texas, therefore, main­tained a surplus production capacity so that when there was a sudden increase in the demand for oil, as during World War II and the Middle East crises of 1956 and 1967, production could be expanded quickly. Prorating also restrained the supply of oil during most years so that ex­cess production did not make prices fall. This stabilization of prices benefited the petroleum in­ dustry, but it meant that U.S. consumers, especially those living outside Texas, paid more for their gasoline and heat­ ing oil-in the short run-than they would have otherwise. Protecting Producers' Correlative Rights The commissioners attempt to referee the production of Texas oil and gas in such a way that no one feels cheated. Owners of underground petroleum want to make sure that they realize the fullest possible reward from their owner­ship. Because petroleum is out of view beneath the ground and can flow across property lines, the determination of ownership, and thus the determination of rewards, is largely speculative. In the slant-well case of 1962, protection of correlative rights was largely a matter of identifying pro­ducers who were stealing their neighbors' oil and overcom­ing these producers' considerable power to delay investi­gation. In most cases, however, correlative rights have involved less tangible problems. Commissioners have normally favored the interests of the petroleum industry as a whole over the interests of consumers as a whole. To protect correlative rights, the comm1ss10n has at­tempted to ensure that owners of pipelines buy and trans­port from producers in a manner that guarantees every producer a market instead of in some discriminatory, but more profitable, manner. Since pipelines are legally com­mon carriers in Texas, they must serve all potential cus­tomers, and the commission has ordered that they must therefore buy and move oil rateably from all producers in a relevant field. 2 Because natural gas was not particularly marketable until the 1950s, however, the commission failed to develop a consistent policy requiring rateable take for that fuel. Commissioners are still struggling with the prob­lem of developing a consistent policy on rateable take for natural gas. Having the responsibility for adjusting correlative rights has forced the commission to deal with the problem of allo­cating production quotas among producers with tracts of varying potentials. If a producer's land holdings are small or if the wells are close to property lines, profitable produc­tion might be possible only if petroleum is drained from neighboring holdings. For many years, the commission discriminated in favor of the small producers in setting its well-spacing rules and production allowables and, thus, encouraged production on even very small tracts. This pattern changed in the early 1960s because of court decisions3 and personnel turnover on the commission. Allocation and spacing rules are now much less discriminatory. The commission has been forced to consider the prob­lem of conflicts between the interests of individual owners, who want to develop their properties to bring in maximum revenues, and the interests of society at large, which would be best served by developing oil fields as undivided entities. This problem of unitization has never been resolved by the railroad commission or by any other Texas institution. Regulating Utility Rates Commissioners regulate the rates that natural gas utilities may charge their customers and sometimes oversee their business practices as well. In particular, the inability of one such company, Lo-Vaca, to meet its contracts with many Texas cities presented the commission with a difficult and highly controversial problem in the 1970s. Patterns of Decision Making As with any human institution, the Railroad Commis­sion of Texas has been much affected by the personalities and talents of the individuals who have served as commis­sioners. Nevertheless, there are clear policy patterns in the commission's decisions. Broadly stated, four generalizations seem valid. First, commissioners have been genuinely concerned with the conservation of petroleum and the protection of the environment and have usually attempted to prevent the physical waste of natural resources. Second, commissioners have normally favored the inter­ests of the petroleum industry as a whole over the interests of consumers as a whole, at least in the short run. They have made decisions that tended to foster a healthy state industry and to support prices above a level they would have attained in a free market. In particular, the prorating of oil production before 1973 and, to a lesser extent, the prorating of gas production in the 1970s have tended to benefit producers by restricting supply and thus supporting higher prices. Over the years there has been a great contro­versy among economists and political scientists about whether prorating is in the national interest, but it is clear that, in the short run, prorating works in favor of producers and against consumers. Third, the commission has a clear history of favoring small, independent producers and small landowners at the The candidate Jor railroad commissioner with the largest war chest has always won the Democratic primary and the general election. expense of large producers and large landowners. Until the 1960s it was the policy of the commission to encourage drilling by anyone who could scrape together enough capi­tal to invest and to allow anyone with even a small patch of land to possess a well on his or her property. This policy led to the drilling of tens of thousands of wells that were unnecessary from an engineering or economic point of view. Wealth was thus spread around within Texas, and the state prospered. In the process, however, United States oil became relatively expensive (until, of course, the advent of OPEC in 1973) because such heavy investments required high prices to maintain profits. Fourth, the commission's decisions have evolved over the last generation so that, while the basic tone of its deci­sion making is still recognizable after fifty years, many of its specific policies have been considerably modified. Be­cause it has had to adjust to judicial decisions, because its political environment has changed somewhat, and because of turnover among its members, the commission has a per­spective now that is different from the one it had thirty, or even ten, years ago. Commissioners in recent years have been more aware of the problems of consumers and less sympathetic to the petroleum industry than were com­missioners in the past. Both the patterns of policy making evident in the commission's history and its changing atti­tude in the present can be explained by exploring its poli­tical environment. The Politics of the Railroad Commission The politics of the railroad commission are part of the politics of Texas and are affected by the state's size and fragmented media network and by the historical dominance of the Democratic party. Texas' dispersed population centers make for an unusu­ally fragmented media network. The state contains fifteen daily newspapers with a circulation of fifty thousand or more in twelve cities, as well as sixty-four television stations in thirty cities. Access to these media markets is not cheap, and the state has long had a reputation for demanding huge expenditures of its campaigning politicians. Candidates must spend impressive sums to run success­fully for the railroad commission. Table 1 illustrates the large amounts normally spent by winning candidates in the Democratic primary. It is clear from this table that the candidate with the largest war chest has always won and that the candidate endorsed by the industry can expect to enjoy an overwhelming advantage in contributions. Throughout much of the history of the railroad com­mission, the only election that has counted has been the Democratic primary. This one-party tradition has affected the political environment of the commission. Primary Table 1 Campaign Contributions to Industry and Nonindustry Candidates* Railroad Commission, 1962-1978 Democratic Primaries (Industry candidate was always winner) Total contribu tions to Year · Tot al contrib ut io ns (in d ollars) industry can didate (in d ollars) Percentage of total to industry candidate Number of no n ind ust ry candidates 197 8* • (includes run-off election) 197 8 1976 (includes run-o ff election) 1974 ** 1974 1972 1970 1968 1966 1964 ** 1964 1962 406,969. 18 12 6,350.00 4 39,353.5 8 6 1,449.00 50,720 .00 4 8,957 .3 5 40,12 5 .00 3,5 50 .00 114,127.49 164 ,966.4 7 5,950 .00 90 ,96 1.00 393,764 .18 126,3 50.00 341,118.59 6 1,4 34 .00 50,720.00 47,34 9 .35 40,12 5 .00 3 ,550 .00 109 ,7 54 .50 141 ,53 5 .22 5,9 50 .00 90,961.0 0 96.8 100.0 77 .6 99 .9 100.0 96 .7 100.0 100.0 96 .2 8 5.8 100.0 100.0 3 0 6 1 0 2 1 0 2 1 0 1 *The "industry" candidate is defined as the candidate receiving 70 percent or more of the total contributions from people associated with the oil and gas-producing industry. **Election was held to fill unexpired term. So urce: Compiled from data sup plied by the Texas Secretary of State. NOVEMBER-DECEMBER 1979 campaigns in one-party states are more often dominated by personality factors than by public-policy debates. System­atic discussion of public policy is made difficult by the turbulent disarray of the partyless campaign.4 Although the one-party pattern is now changing at the senatorial and gubernatorial levels, one-party politics continues to shape the context in which the commissioners make deci­sions. Because public discussion in a one-party environment tends to be either trivial or muted, private persuasion be­comes correspondingly more important. In particular, the politics of the railroad commission has, until the last decade, been largely the politics of face-to-face encounters. Commissioners not only have become acquainted with many people in the oil business; in many cases, they have also developed close friendships with them. relatively friendly to the industry, he has time to become known and gather support before the next primary. In 1976, however, Commissioner Ben Ramsey chose to serve out his term before retiring rather than to resign and allow the governor to name his successor. The 1976 pri­mary was therefore a contest between nonincumbents. In the 1976 campaign two candidates were hostile to the industry, and three were generally favorable to it. Both of the candidates considered hostile to the industry­Jerry Sadler, a colorful East Texas populist who had been a railroad commissioner thirty years earlier and has since been a state legislator and Texas Land Commissioner, and Lane Denton, a former state legislator-were fairly formi­dable opponents. Oil men took the vote-drawing potential of Sadler, in particular, very seriously. Part of the authority of the commission can be attributed to the power of individual commissioners to command respect from individuals whose interests they arbitrate daily. Some scholars who have studied the process of interper­sonal relationships between regulators and those they regu­late have suggested that commissioners often become "cap­tured" or co-opted by the industry they are supposed to regulate. 5 Journalists occasionally charge that railroad commissioners are so close to individuals in the oil and gas industry that they serve, rather than regulate, the indus­ try. 6 While there is truth to this claim, it ignores the fact that in addition to being influenced by their friends in the petro­leum industry, railroad commissioners also influence those friends in return. Part of the authority of the commission can be attributed to the power of individual commissioners to command respect and affection from individuals whose interests they arbitrate daily. Personal Influence and Elections Not only are interpersonal relations important when people attain the office of commissioner, they are also vital to the procedure of putting them there. Politically active members of the oil and gas business are aware that a united industry can have a decisive impact on an electoral campaign; the problem lies in achieving industry unity. There is no single trade journal or newspaper, no one inter­est group, and certainly no individual who speaks for the state industry as a whole. During most elections, this group decision is made easier by the presence of an incumbent on the ballot. For a vari­ety of reasons, most sitting commissioners have left the agency in the midst of a term, thus allowing the governor to appoint a successor. Since this new individual is usually The three candidates with considerable initial industry support were David Finney, a state legislator from Fort Worth; Terence O'Rourke, a Houston lawyer; and Jon New­ton, a member of the Texas House of Representatives. Late in 1975 a number of state politicians and prominent private citizens independently began researching the background, opinions, and character of each of the proindustry candi­dates. The members of this group decided that Jon Newton was the acceptable candidate most likely to be able to beat Sadler and began calling their friends in the industry, ex­plaining the electoral situation and recommending the sup­port of Newton. The men they called would arrange infor­mal get-togethers in which Newton was presented to other prominent oil men, who could form their opinion of his character and politics. Newton's support snowballed, and he began to receive large campaign contributions from throughout Texas. In the May primary Sadler received more votes than any other candidate. Newton was in second place, and the large number of candidates split the vote in so many ways that Sadler failed to get a majority. A run-off was scheduled for June, and the informal network of Newton supporters redoubled their efforts. While Newton's advisors had been fearful that Sadler might actually win a majority of the vote in the first pri­mary, they were confident about their man's chances in the run-off because marginally interested voters, who might recognize Sadler's name, would not turn out for the run­off and because Newton's media campaign would be more effective without the competition of other electoral races. This confidence was justified, for Newton received almost two-thirds of the small run-off vote. Although there were many factors that caused Newton to win, including superior finances, the story of the 1976 election is the story of per­sonal influence. Gubernatorial Appointments Personal influence is also an important element in gubernatorial appointments. For reasons of health, higher ambition, or personal convenience, most railroad commis­sioners have chosen not to serve out the allotted six years of their final terms and have resigned with a year or more remaining in their terms. Of the last ten commissioners, going back to 1940, only two did not attain the office originally through gubernatorial appointment. Since 1960, industry spokesmen, especially those personally close to the governor, have always been ready with suggested appointees whenever there has been a vacancy on the commission. Yet apparently, Texas gover­nors have never chosen any of these proffered individuals Governors have invariably picked men who were friendly toward the industry but had not been suggested by the industry. While the oil industry does not dominate the appoint­ ment process, all observers agree that the industry could veto a choice. In the first place, it is doubtful than any recent Texas governor would have attempted to appoint anyone opposed by the oil industry. Additionally, however, people in the industry are confident that if a future gover­ nor were to try to appoint a hostile commissioner, they could stop the confirmation in the state senate. Elections Regardless of how much the governor and the petroleum industry have to say about who becomes a railroad com- Table 2 Correlation between Per Capita Oil Production and Turnout Vote for Railroad Commission Democratic Primaries, 1956-1978 Year Correla ti on 1978 0.76 197 6* 0.47 1974* 0.42 1974 0 .30 1972 0 .37 1970 0 .37 1968 0 .37 1.966 0.44 1964* 0 .33 1964 0 .26 1962* 0 .37 1962 0.22 1960 0 .28 19 58 0 .21 19 56 0 .20 *Election was held to fill unexpired term. Sources: Production data supplied by Mid-Continent Oil & Gas Association; voting data supplied by Texas Secretary of State. missioner, however, commissioners must still be elected. A newly appointed member of the railroad commission must run for election within two years after being appointed and must then again face the voters at the normal end of the resigned predecessor's term, which may be another two, four, or six years away. Since the commission has generally discriminated in favor of the smaller independents and royalty owners, it stands to reason that the independents are favored because they dominate railroad commission elections. There are two ways that independents might influence elections: they and their supporters might vote as a bloc, and they might help finance commission races. Independent oil producers tend to be concentrated in the smaller cities, where they support a huge industry one step removed from the actual production. Drillers, geolo­gists, engineers, transporters, and a number of other small businesses exist in Kilgore, Luling, and other small Texas cities because independent oilmen exist. Thus the number of potential voters who would support candidates favored by independent producers increases. Given Texas' historically low voter turnout, we might expect the bloc voting of independents and their allies to be able to sway elections. If this supposition is true, turn­out in railroad commission elections (Democratic primaries) should be high in counties where oil production is more important to the local economy and lower in counties where oil less important. Similarly, the proportion of the total vote won by the industry candidate should be high in counties that are more dependent on oil and lower in counties that are less dependent. In a comparison of turnout and candidate choice in Democratic primaries from 1956 to 1978 with oil produc­tion and population figures for each county, correlations showed that there is a relation between per capita oil production and voter turnout. (A correlation is a statistic that measures the closeness of the relation between two variables: in other words, how much of the change in one­in this case, turnout-can be accounted for by the change in another-per capita oil production. A correlation of 0.00 means no relation ; a correlation of 1.00 means perfect correspondence.) Table 3 Correlation between Per Capita Oil Production and Percentage of the Vote Given to Winner Democratic Primaries, 1962-1978 (Contested elections onlyI Year Correlation 1978 -0 .1 1 1976 -0 .16 1974 0 .06 1972 0 .01 1970 -0 .14 1966 -0.16 1964 0 .03 1962 -0.24 Sources: Production data supplied by Mid-Continent Oil & Gas Association; voting data supplied by Texas Secretary of State. NOVEMBER-DECEMBER 1979 Counties that produce more oil tend to have higher turn­outs (see table 2). These correlations are not large, but they are substantial. There is almost no correlation, however, between per capita oil production and the percentage of the vote won by the industry candidate (see table 3). In fact, counties with higher oil production actually have had a slight tendency to support losing nonindustry candidates. This finding strongly suggests that independents do not affect railroad commission elections by bloc-voting. Commissioners are becoming more sensitive, through political necessity, to the concerns and interests of the general public. Independents might also dominate commission elections by financing them. If a given candidate possessed over­whelming financial resources, he could purchase so much campaign advertising that he might win the election on the support of voters who are not connected with the industry. If independents are responsible for contributing most of a winning candidate's money, that candidate can be expected to be grateful to them after the election. In fact, indepen­dents do account for most of the contributions given to successful commission candidates (see table 4 ). Change The general pattern of railroad comm1ss10n policy making will probably persist into the 1980s, but the com­missioners have been caught up in changes during the past two decades that may give the agency's decisions a different flavor. In the first place, a series of court decisions, begin­ning in the early 1960s, forced the commission to modify its policy of favoring small producers. Second, the increased public awareness of the costs of energy since 1973 has forced commissioners to give the interests of consumers greater weight. The Lo-Vaca decision of 1977 (in which the commission ordered the gas utility to honor its contracts to supply cheap natural gas to cities and towns in South and Central Texas, despite the fact that this action would probably ruin the company) is a major ex­ample of this new mood. Commissioners are still favorably disposed to the oil industry, but they are becoming more sensitive, through political necessity, to the concerns and interests of the general public. Notes 1. General information for most of what follows comes from inter­views. 2. Stephen L. McDonald , Petroleum Conservation in the United States (Baltimore: Johns Hopkins University Press, 1971); and John Young, chief counsel, Texas Railroad Commission, "A Chron­ological Listing of Important Historical Events, Legislative Acts, Judicial Decisions, Orders, and Other Relevant Data, Regarding the Railroad Commission of Texas," internal memo (Austin: Railroad Commission of Texas, n.d.). 3. Atlantic Refining Co. et al. v. Railroad Commission, 346 S. W. 2d 801; and Halbouty v. R. R. Commission of Texas et al. 357 s. w. 2d 364. 4. V. 0. Key, Jr., Southern Politics (New York: Vintage, 1949), pp. 298-311. 5. Marver H. Bernstein, Regulating Business by Independent Com­mission (Princeton: Princeton University Press, 1955), pp. 86-92, 157-60, 170, 184-85, 254-55; and Louis M. Kohlmeier, Jr., The Regulators (New York: Harper and Row, 1969), pp. 69-82 passim. 6. Jim Hightower, "The RRC and Big Oil," Texas Observer, April 13, 1979, pp. 10-11. Table 4 Sources of Contributions of $500 and More to Winning Railroad Commission Candidates, Democratic Primaries, 1962-1978 Tot al con tributio ns Percentage of those traceable Candida te (year) of $5 00 and more (in dollars) Percentage of$ 500 contrib utio ns tracea ble In depen de nt o il and gas producers Major co mpanies Attorneys Poerner ( 1978)* 288,576 92 59 2 7 Wallace (1 978) 77,7 50 97 67 1 6 Newton ( 1976)* 28 5,01 2 83 7 3 0 5 Langdon (1974) Wallace ( 1974) 41 ,965 37,0 38 86 95 63 0 63 4 18 9 Tunnell ( 1 972 ) 22,2 50 92 59 7 24 Ra msey ( 1970) 33,2 50 73 73 3 3 Langdo n (1 968) 1,500 67 so 0 0 T unnell (1966) 22,400 89 89 0 0 Ramsey ( 1964 ) 4 ,000 88 43 0 43 Langd on (1 964) 97 ,57 0 39 80 0 16 Ra msey ( 1962) 65,500 9 1 70 4 1 *Election was held to fill unexpired term. Source: Compiled from data su pplied by the Texas Secretary of State. TEXAS BUSINESS REVIEW Mexican Illegal Aliens in the San Antonio Labor Market For many years, the extent and use of Mexican labor, both legal and illegal, has been associated with the nature of labor market conditions in the United States. Mexican workers have been courted, and their migration encouraged, during periods of labor shortage, but they have been dealt with as unwanted aliens when the shortage has disappeared. Traditionally, Mexican illegal aliens in the United States have migrated to rural labor markets. In the 1970s, with the increase in mechanization and the decrease in the demand for cheap labor in the agricultural sector, the illegal alien problem has shifted from rural to urban settings. The influx of illegal aliens is now concentrated in such large metropoli­tan centers as Chicago, Dallas, and San Antonio. Very few studies have documented the problem in a specific labor market, and none has provided any basis for comparing the labor force characteristics of Mexican illegal aliens with the characteristics of other socioeconomic groups. Consequently, in 197 5 I conducted a number of interviews with Mexican illegal aliens and with representa­tive portions of Mexican-Americans, blacks, and Anglos in the San Antonio labor market. Most of the Mexican illegal aliens in San Antonio are married men whose families still live in Mexico. About half of the illegal aliens have had no formal education in Mex­ico. Unemployment among these workers runs about 20 percent. Most of the illegal aliens work in small firms (fewer than twenty-five employees) in construction, whole­sale and retail trade, and personal services, and few of them are members of labor unions. The average hourly wage for Mexican illegal aliens in 1975 was $2.15, considerably less than the average hourly earnings for blacks, Mexican­Americans, and Anglos who worked in similar occupations. Over the years, there has been concern in this country that the presence of Mexican illegal aliens may have adverse effects on federal, state, and local public services. In fact, although Mexican illegal aliens spend the majority of their incomes within the United States and usually have taxes deducted from their wages, they are rarely able to collect unemployment compensation, workman's compensation, or Gilbert Cardenas is Associate Professor ofEconomics, Pan American University. He is cu"ently on leave and is a Brookings Institution fellow with the Southwest Border Regional Commission in Washing· ton, D.C. Gilbert Cardenas social security. Furthermore, none of the interviewed illegal aliens was enrolled in any of the government-sponsored manpower and training programs. Surveying Illegal Aliens in San Antonio Conventional research tools are not adequate for study­ing Mexican illegal aliens, since people in fear of deporta­tion do not fill out questionnaires. At the same time, a col­lection of the anecdotes on illegal aliens that are the basis for various magazine articles does not provide the necessary support for forming a rational public policy. I chose to gather data directly from 100 illegal aliens who live in low­income areas of San Antonio. For purposes of comparison, I also interviewed 288 people from three other socioeco­nomic groups-Mexican-American, black, and Anglo. These latter respondents were not chosen in a strictly random fashion; all were members of the low-income labor market in San Antonio. Mexican-Americans, blacks, and Anglos are represented in the survey in the same proportion as the composition of the total population of the San Antonio standard metropolitan statistical area (SMSA). Thus, the data on Mexican illegal aliens are generally comparable to those collected on the rest of the population in the area. Because it was not possible to randomize the survey population in a way that is compatible with sampling theory, I have also drawn upon a U.S. Immigration Service survey in order to minimize any biases. The San Antonio district office of the U.S. Immigration Service collected data on 7 4 7 Mexican illegal aliens between the months of 1anuary and May in 197 5. These data are based on illegal aliens who were in the process of being deported to Mexico, and consequently the findings may be somewhat less useful than those of the interview survey with respect to the work experiences of the illegal aliens. Illegal Aliens in the San Antonio Labor Market The population of the San Antonio SMSA, estimated at 1,024,900 in July 1977 (the most recent provisional esti­mate from the Bureau of the Census), is predominantly Mexican-American. Mexican illegal aliens have represented an additional supply of labor in San Antonio for many years. Historically, the flow of Mexican illegal aliens can be NOVEMBER-DECEMBER1979 traced back to the 1900s. Many ancestors of the current Mexican-American population came to San Antonio as illegal immigrants. Often, the current illegal aliens can easily blend into the Mexican-American population regard­less of their illegal status. Origins and Length of Stay About half of the Mexican illegal aliens in the San Antonio labor market come from the rural areas of north­eastern states of Mexico like Coahuila, Nuevo Leon, and Tamaulipas, where they have worked in agriculture . With the exception of Monterrey in the interior and several labor markets along the U.S.-Mexico border, northeastern Mexico contains a large rural population. About one-third of the Mexican illegal aliens come from the poorest areas in Mex­ico, which include Guanajuato, Durango, and Zacatecas in north central Mexico . Many illegal aliens come from remote villages in Jalisco and Michoacan-states that are adjacent to Zacatecas and Guanajuato. Extensive rural pov­erty, lack of industrial development, and limited employ­ment opportunities enhance migration from these areas. According to data collected from the interviews, the Mexican illegal aliens in San Antonio travel to the United States with friends or relatives who are somewhat familiar with the geography of border regions and cross into the United States illegally by boat, car, or train. Before crossing the border, the majority of the Mexican illegal aliens spend less than 48 hours in the Mexican border towns. After they have crossed the border, their trip to San Antonio is usually by foot and takes as long as five days. Many observers con­ tend that illegal aliens use smugglers ("coyotes") to come to San Antonio. Data collected from the interviews show that 94 percent of the Mexican illegal aliens did not use smugglers to reach San Antonio. The smuggling business may be more common among illegal immigrants seeking employment in northern cities like Chicago or Detroit. The Mexican illegal aliens in the San Antonio labor mar­ ket can be divided into three categories. The first is com­ posed of those who enter the United States without inspec­tion by immigration authorities. These aliens, called EWis (entry without inspection), usually cross the Mexican bor­der at night and wade across the river. According to data collected by immigration authorities, EWis constitute 85 percent of the Mexican illegal alien population in San Antonio. The other two categories include students who abuse visa privileges and aliens who may obtain visitors' permits and stay beyond the expiration date. A majority of the illegal aliens are relative newcomers to San Antonio. Their length of stay in the United States varies from seventy-two hours to more than four years. According to data collected from the interviews, 22 percent of those in the sample had been in San Antonio for less than six months. However, 36 percent had been in San Antonio for more than four years. According to data collected by the immigration authorities, over two-thirds of the illegal aliens apprehended over the given period had been in San Antonio for less than six months, and only 4 percent had been there for more than four years. Demographic Characteristics Most Mexican illegal aliens live in low-income areas in San Antonio and are highly concentrated in low-paying and low-status occupations. Mexican illegal aliens find jobs only in the secondary labor markets, which are often character­ized by poor working conditions, instability, lack of ad­vancement opportunities, and high labor turnover. The Mexican illegal aliens in San Antonio are mostly men. About two-thirds of the illegal aliens interviewed were married; of those, 7 8 percent were married to residents of Mexico, while 22 percent were married to legal residents, such as Mexican-Americans. Among the married illegal aliens, the mean number of children was 2.3. The mean age for the illegal aliens was 29.1 years. Most Mexican illegal aliens live in shacks or rooms located behind their land· lords' houses. Such housing usually lacks indoor plumbing, adequate lighting, water, and gas. About half of the illegal aliens interviewed had no for· mal education in Mexico. Contrary to allegations that illegal Table 1 Employment of Sample Population in San Antonio by Major Industry, 1975 Mexican illegals Mexican-Americans Blacks Anglos Industry Number Percentage Number Percentage Number Percentage Number Percentage Agriculture Construction Ma nufacturing 2 32 12 2 .7 42 .7 16.0 2 19 20 1.5 14 .2 14.9 0 4 4 0 .0 11.4 11.4 2 2 1 14 1.9 20 .2 13.5 Transportation, communication, and public utilities Wholesale and retail trade Finance, insurance, 0 14 0.0 18.7 4 36 3.0 26;9 0 12 0 .0 34 .3 3 2 7 2 .9 26.0 and real estate 0 0.0 5 3 .7 1 2 .9 5 4 .8 Business and repair services 1 1.3 3 2 .2 2 5.7 5 4 .8 Entertainment and recreation Personal services 7 2 9.3 2 .7 9 18 6 .7 13.4 2 7 5.7 20.0 2 10 1.9 9 .6 Public administration Self-employed 2 3 2.7 4.0 16 2 12.0 1.5 3 0 8.6 0 .0 14 1 13 .5 1.0 Source: Data collected from field interviews. aliens have been availing themselves of educational services, the data indicate that 91 percent of the Mexican illegal aliens in San Antonio have had no educational training in this country. labor Force Characteristics The dual labor market theory divides labor markets into two categories-primary and secondary. According to the theory, the primary labor market of jobs is characterized by high wages, good working conditions, employment sta­bility, and job security. In the secondary labor market, jobs are less attractive and tend to be characterized by low wages and fringe benefits, poor working conditions, high turnover, and little chance for advancement. In San Anto­nio, poor Mexican-Americans and blacks are confined to secondary labor markets. An additional supply of labor­Mexican illegal aliens-is also concentrated in the secondary labor market. Among the major problems of the Mexican illegal alien in this labor market is the rate of joblessness. About 94 percent of the Mexican illegal aliens interviewed were in the labor force as employed or unemployed. The unemploy­ ment rate of the sample population was 20 percent, while data collected by immigration authorities indicate that 28 percent of the apprehended illegal aliens were unemployed and actively seeking employment. Much of this unemploy­ ment results from temporary difficulties in matching avail­ able workers with available jobs. Some Mexican illegal aliens experience structural unemployment problems. A number of illegal alien farmworkers who have been dis­ placed by mechanization and automation in agriculture have sought employment in urban labor markets like San Antonio. Some of the illegal aliens in San Antonio experi­ ence seasonal unemployment associated with bad weather, particularly in the construction industry. In San Antonio, the Mexican illegal aliens are concen­ trated in construction, wholesale and retail trade, and per­ sonal services (see table l ). Over 42 percent of the Mexican illegal aliens interviewed were working in construction, while about 19 percent were working in wholesale and retail trade. Illegal workers in the construction industry are usually employed as laborers. In wholesale and retail Table 2 Employment of Sample Population in San Antonio by Occupational Category, 1975 Mexican illegals Mexican-Americans trade, they are usually employed as cooks, dishwashers, and gasoline attendants. About 16 percent of the employed illegal aliens held manufacturing jobs in tortilla factories, with canning and meat-packing firms, and, in several cases, with steel foundries. Practically none of the illegal aliens interviewed or ap­prehended by immigration authorities worked in profes­sional and managerial occupations (see table 2). Many of the illegal aliens work with blacks and Mexican-Americans in similar industries but hold basically different jobs. Mexi­can illegal aliens are much more highly concentrated than blacks and Mexican-Americans in the occupations of laborer and operative, which offer little opportunity for advancement. About 69 percent of the illegal aliens in the sample worked in these occupations, while 37 percent of the Mexican-Americans and 23 percent of the blacks in the sample worked in similar occupations. Mexican-Americans and blacks, who usually hold the better jobs, represent the prime labor force in the secondary labor market. In the construction industry, for example, Mexican illegal aliens are usually hired as laborers, while Mexican-Americans and blacks are usually employed as craftsmen or foremen. In the meat-packing industry, Mexican illegal aliens work in occupations that Mexican-Americans, blacks, and Anglos rarely want. Working conditions in such occupations as laborer and operative are often dirty and dangerous. Nevertheless, Mexican illegal aliens are also represented in the better-paying occupation of skilled craftsman. About 12 percent of the illegal aliens worked as craftsmen, while about 13 percent of the Mexican-Americans and 11 percent of the blacks in the sample worked in similar occupations. On the whole, however, the economic progress of Mexi­can illegal aliens is generally unfavorable. Their chances for advancement and promotion are practically nonexistent, because firms in the secondary labor market have few jobs that are filled through promotions. If promotions are avail­able, they will usually go to Mexican-Americans or blacks. In the secondary labor market, the illegal aliens find em­ployment in dead-end jobs that are otherwise filled by teen­agers or other members of minority groups. Because of their illegal status, Mexican illegal aliens have little bar­gaining power for achieving better working conditions and higher wages. Blacks Anglos Occupation Number Percentage Number Percentage Number Percentage Number Percentage Professionals and managers Salesworkers 0 1 0 .0 1.3 6 3 4 .5 2.2 1 0 2 .9 0 .0 11 10 10.6 9.6 Clerical 0 0 .0 4 3.0 10 28.6 19 18.3 Craftsmen 9 12.0 18 13.4 4 11.4 23 22 .1 Operatives 13 17 .3 31 23.1 7 20.0 8 7 .7 Laborers 30 40.0 19 14.2 1 2 .9 10 9.6 Farm managers 0 0 .0 1 0 .7 0 0 .0 0 0 .0 Farm laborers 0 0.0 1 0 .7 0 0 .0 0 0 .0 Service workers 22 29.3 51 38 .1 12 34.3 23 22.1 Source: Data collected from field interviews. NOVEMBER-DECEMBER 1979 Wages, Hours, and Earnings In the San Antonio labor market, average hourly earn­ings are much lower than in most other SMSAs across the state and nation. In 197 5, for example, average hourly earnings for production operators in manufacturing were $3.51 in San Antonio, $5 .30 in Houston, and $4.85 in Cor­pus Christi. A highly competitive industrial mix and a lack of unionization have helped to create a low-wage labor market in San Antonio. The large supply of illegal labor may also have a bearing on the low wages in this labor market. In 197 5, aveFage hourly earnings for Mexican illegal aliens ($2 .15) were lower than those for blacks ($2.68) and Mexican-Americans ($2.55) in all occupations (see table 3). Average hourly earnings for Mexican illegal aliens amounted to about 58 percent of the average hourly earnings for Anglos in similar occupations. About 49 percent of the Mexican illegal aliens earned less than the minimum wage of $2.10 an hour. Nevertheless, very few aliens reported hourly earnings of less than $1.00 an hour. The highest average hourly earnings for illegal aliens were in manufac­turing ($2.54), and the lowest were in personal services ($1.81). The typical illegal alien reported gross weekly earnings of between $50 and $100. In most cases, income taxes and social security were deducted from the paychecks of illegal aliens who worked for employers who were subject to federal regulations. Thus, the typical illegal alien grossed earnings after taxes of about $70 weekly, of which $25 went for rent, $10 went for food, clothing, and personal expenses, and $15 was saved for the family in Mexico. About 58 percent of the Mexican illegal aliens worked in firms that employed fewer than 25 employees. While 70 percent of the illegal aliens worked a regular forty-hour week, the remainder were employed less than full time. Manpower and Welfare Implications The fact that Mexican illegal aliens may directly or indirectly affect the delivery of social services should not be ignored , but such impact should not be exaggerated either. Because of their illegal status, Mexican aliens are rarely able to collect unemployment compensation, work­man's compensation, or social security, although most have taxes deducted from their wages. None of the illegal aliens interviewed reported ever receiving any form of welfare assistance or food stamps. Welfare officials reported that illegal aliens rarely apply for food stamps and other welfare services, and, if they do apply, they are denied the services because they are not legal residents. On the other hand, about 10 percent of the Mexican-Americans and 6 percent of the blacks said they were receiving welfare and food stamps. About 5 percent of the Mexican illegal aliens, however, indicated that they received limited assistance from health services. Usually these people were aliens who had married legal residents and whose children were born in San Anto­nio. Much higher percentages of Mexican-Americans (41 percent) and blacks (25 percent) had received health services. Many of the illegal aliens in San Antonio receive training for their present occupations on the job, since most of them worked in different occupations before they came to San Antonio. Their general and specific skills upon their arrival in the labor market are usually limited during their stay in San Antonio. None of the illegal aliens interviewed were enrolled in any manpower programs; most had never heard of such programs. Manpower planners and admini­strators in San Antonio claim that orders from the U.S. Department of Labor strictly require that manpower recipi­ents have to show proof of legal residency in order to qualify for such services. Public Policy toward Illegal Aliens According to employment data on San Antonio, the manpower impact of illegal immigration may not be as seri­ous as many make it out to be. The impact of illegal immi­gration may vary from labor market to labor market, how­ever. In areas like the lower Rio Grande Valley, which is located along the U.S.-Mexico border and is characterized by high unemployment, the illegal alien problem may have more serious consequences than it does in San Antonio. Table 3 Hourly Wage Rates of Sample Population in San Antonio, 1975 Hourly rate (in dollars) Mexican illegals Number Percentage Mexican·Americans Number Percentage Blacks Number Percentage Anglos Number Percentage Less than 0.60 1 1.3 1 0.7 0 0.0 0 0 .0 0.6 1-1.00 3 4.0 3 2 .2 0 0 .0 0 0 .0 1.0 1-1.25 1 1.3 2 1.5 0 0 .0 1 1.0 1.26-1.75 2 2.7 5 3.7 2 5.9 2 1.9 1.76-2.00 30 40.0 18 13.4 7 20.6 6 5.8 2. 01 -2 .50 29 38.7 48 3 5 .8 14 4 1.2 2 6 25 .0 2.5 1-3.00 7 9.3 24 17.9 4 11.8 12 11.5 3.01 -5.00 More than 5.00 2 0 2.7 0 .0 28 5 20.9 3.7 6 1 17 .6 2 .9 3 8 19 36 .5 18.3 Source: Data collected from field interviews. Mexican illegal immigration will continue to be a major issue in the 1980s unless efforts are undertaken to alter manpower and immigration policies in the United States. The Mexican illegal alien problem continues to be largely a problem of employment. The solution of the problem has been the subject of major discussion at the national, state, and local levels, but no serious effort has been made to alter current public policy. At the local level, the public views the problem as being national or international and expects solutions to come from these levels. On the other hand , the issue has lingered at the federal level because many have viewed the matter as a local problem that requires local action. It is now time for the development of a viable pub­lic policy toward the illegal alien problem in this country. ANNOUNCEMENT The University of Texas Graduate School of Business is offering four kinds of management development programs for 1979-1980. Advanced Management Program (February 3-March 6) A five-week program designed for senior management executives. This extensive program, now in its twenty­sixth year, has five components: • The Basics: Brushing Up • Keeping Abreast • Managing Human Resources • Strategic Planning: The Future • The Relationship of Business to Its Environment Two-Week Management Development Program (December 3-14) A new program designed for middle managers. Topics for the program include decision making, manage­ment of people, communications, labor relations, business law, computers and management, managerial accounting, profit planning, budgeting, investment appraisal, and strategic planning. Short Courses and Seminars • Managerial Accounting and Finance for Nonfinancial Managers of Smaller Firms (November 12-14 ; repeated April 14-16) • Strategic Planning and Logistics Systems (November 12-14) • Managerial Accounting and Finance for Nonfinancial Managers of Larger Firms (November 19-21) • Management of the Human Resource Function (January 14-16) • Strategic Marketing Planning (March 24-27) • Effective Selling: The Psychology, Process, and Practice (April 3-4) International Management Programs A two-week program designed for foreign-national and expatriate managers who work for international Texas firms and have little or no formal business education. Attention will be focused on the international aspects of such general business topics as accounting, finance, organization and behavior, marketing, logis­tics, and employee relations. • Singapore (May 18-30) • Europe (August 10-22) For further information about these programs, contact Paul T. Nelson, Director Management Development Programs Graduate School of Business The University of Texas at Austin P.O. Box 7337 Austin, Texas 78712 (512) 471 -5893 NOVEMBER-DECEMBER 1979 The Fiscal Health of Medium-Sized Cities A Regional Perspective Joseph E. Pluta There is, on the average, less government involvement in seven medium-sized Texas cities than in a sample of cities of similar size in other parts of the country. For residents of these Texas cities (Irving, Fort Worth, Port Arthur, San Angelo, Amarillo, Galveston, and Austin), this fact may be regarded as a mixed blessing. On the positive side, per capita tax, debt, and interest levels are relatively low in these Texas cities; however, municipally provided services per capita, especially education, also are low relative to other U.S. cities. If rapid economic and population growth continues, the demand for public services will no doubt in­crease, especially in those Texas cities that are growing rapidly. The increasing demand for government services will likely put more pressure on either expenditure levels, tax levels, debt servicing, or all of these. Background In recent years, most of the concern over, and research on, urban fiscal strain has focused on the largest U.S. cities. There is no logical reason to assume that medium-sized cities (containing population of between, say, 50,000 and 500,000) are automatically sound financially and, there­fore, immune to the stresses of fiscal hardship. In fact, as cities of this size grow, the patterns of that growth may resemble what has occurred in larger cities over the past few decades. For example, a major problem in rapidly growing cities is the need for infrastructure investment (such as streets and sewers) before people and businesses move in. Increased demand for publicly provided services and for the means of financing them may accompany the rise of con­gestion, crime, inadequate housing, and other urban prob­lems. In some medium-sized cities there has been a popula­tion decline, which may result in central-city fiscal prob­lems not unlike those of their larger counterparts. In addition to differences in rates of population growth or decline, there are other differences in economic perfor­mance among medium-sized cities. Changes in personal in­come levels, in the amount of private investment, in manu­facturing employment levels, and in other economic indica­tors are not identical (or even similar) among a large num- Joseph E. Pluta is Editor, Texas Business Review. ber of cities of any one size. Yet these economic factors all have some bearing on the fiscal health of cities, although the precise influence of each factor is difficult to determine. Efforts to isolate the chief causes of fiscal pressure, especially when the largest U.S. cities are excluded, have been hampered for a number of reasons. Because account­ing techniques differ among cities and because some cities do not even collect some types of important financial infor­mation, researchers often have not had adequate data for use in comparing cities. Some comparative data, however, are available for selected medium-sized cities. These num­bers enable some general comparisons of economic and fis­cal performance for Texas and across regions of the United States to be made. The sample consists of fifty-seven cities, seven of which are in Texas. Because of the time involved in their collection, comparison, and interpretation, all city budget data reviewed here are for the fiscal year 1975. General Economic and Social Conditions According to selected indicators, the seven Texas cities possess similar social characteristics but generally different economic characteristics (see table 1 ). Population density and the percentage of the population that is dependent are two useful measures of social characteristics. All seven Texas cities have low population densities. Crowded living conditions generally contribute to the growing demand for such municipal services as sewage and police protection. The relative lack of overcrowding in Texas cities suggests that pressure on city budgets from this source may not have been as severe in Texas cities as elsewhere. Except for Port Arthur and Galveston, the Texas cities also have small dependent populations (people who are either over 65 or under 18). Consequently, labor force participation is high. A large dependent population draws heavily on such public services as education and retirement and health benefits, whereas an economically active population contributes to the tax base. Population change results from migration and natural increase (births minus deaths). Since people frequently move in response to perceived employment opportunities, population change may be thought of as an economic vari­able. Austin is by far the fastest growing of the seven medium-sized Texas cities, although Amarillo, San Angelo, and Irving also have had healthy population growth rates since 1970. The central cities of Fort Worth, Port Arthur, and Galveston, however, all registered population declines between 1970 and 1976 because of outmigration. Per capita personal income levels in 1975 ranged from a high of $5,443 in Irving to a low of $4,353 in Port Arthur. Between 1969 and 197 5, per capita personal income grew most rapidly in Amarillo and San Angelo. When the fifty-seven medium-sized cities are compared on the basis of private investment levels, the seven Texas cities can be put into a number of different categories. Ir­ving is classified as a high private investment city and Fort Worth as above average; Port Arthur, San Angelo, and Ama­rillo are listed as average; and Galveston and Austin are ranked below average in private investment activity. In part, these rankings are the result of the different economic bases of the Texas cities. For example, although the influx of private firms into the Austin area in recent years has been noteworthy, public sector employment is still a major source of earnings because a major state university and various state, federal, and local government activities are located there. This fact, rather than a sagging economy, accounts for the city's "below average" private investment ranking. On the other hand, the importance of the electron­ics industry, aircraft manufacturing, retail trade, and other forms of industrial activity in the Dallas-Fort Worth area accounts for the relatively high private investment ranking in cities like Irving and Fort Worth. Some Measures of Fiscal Health Fiscal data may be broken down into revenue, debt, and expenditures. All seven Texas cities show signs of fiscal strength according to three commonly used revenue indi­ cators: the ratio of local taxes to local personal income, local taxes per capita, and intergovernmental revenue as a percentage of total local revenue (see table 2). Comparing tax levels to personal income levels indicates something about a city's tax burden relative to its economic strength. Such comparisons may be especially revealing over time if city tax levels grow far more quickly than city per­sonal income. Local taxes per capita are a fairly good mea­sure of the average tax burden for each citizen. Local taxes per capita are nearly identical in Irving, Fort Worth, Gal­veston, and Austin. Urban researchers as well as city offi­cials often pay close attention to the portion of city reve­nue that comes from outside sources. If a city depends heavily on grants from other levels of government (such as state and federal), a number of its programs may be in danger if these revenue sources suddenly disappear or are drastically reduced. Among the Texas cities, the ratio of local taxes to local personal income ranges from a high of nearly 5 percent in Galveston to a low of about 3.5 percent in San Angelo. All seven Texas cities were below the average figure for the fifty-seven medium-sized U.S. cities. A similar pattern exists in the other two revenue mea­sures. Local taxes per capita in the Texas cities ranged between about $211 in Galveston and $142 in San Angelo, while the average figure for the fifty-seven U.S. cities was $263. Fort Worth and Austin were f~r more dependent on outside revenue sources than either Irving or Galveston. Once again, however, all seven Texas cities depended less on intergovernmental revenue than the average of the fifty­seven medium-sized U.S. cities. Most medium-sized Texas cities are not in difficult debt positions, although some caution signs are apparent in a couple of cases. Three measures of debt-total debt per capita, interest per capita, and municipal capital spending per capita over a five-year period-are used to determine these debt positions. Debt per capita reveals the extent of future spending commitments made by each city, and interest per capita illustrates the burden placed on current expenditures by such future commitments. It is difficult to specify what constitutes either a "safe" or "hazardous" level of debt or interest expenses, but both measures may indicate some­thing about the capability of a city to engage in further debt obligations. Municipal capital spending per capita over a five-year period may illustrate the extent to which cities have maintained and replenished their stock of capital. It Table 1 Socioeconomic Profile of Seven Medium-Sized Texas Cities Per ca pita Ranking of personal income Population Population Dependent private density* population* 1975 Percentage change investment Percentage change City (in dollars) 1969-1975 level* 1976 1970-1976 High Low Large Small Irving 5,443 55.2 High 105,133 6.2 • • Fort Worth 5,078 57.0 Above average 367 ,909 -6.5 • • Port Arthur 4,353 69.9 Average 61,362 -5.1 • • San Angelo 4,540 70.7 Average 68,751 7.6 • • Amarillo 5,2 16 73.2 Average 141,484 11.4 • • Galveston 4,844 66.6 Below average 60,347 • • -2.4 Austin 4,893 63.0 Below average 313,009 21.1 • • Sources: Per capita income and population figures are from U.S. Bureau of the Census, Department of Commerce, Current Population Re­ports, series P-25, no. 782, January 1979. Other classifications and rankings are from First National Bank of Boston and Touche Ross & Com pany, Urban Fiscal Stress: A Comparative Analysis of66 U.S. Cities (New York: Touche Ross & Company, 1979). *Classifications are based on the ranking of each city relative to all other cities in the sample of sixty-six cities. NOVEMBER-DECEMBER 1979 may also suggest the degree of future financial commitment that will be required. If a city spent large sums to improve its transportation or sewage facilities, such expenditures may have contributed to high debt and interest expenses. Other cities that may have neglected such capital improve­ments may have temporarily low debt expenses, but they may have to face these needs in future budgets. The seven Texas cities vary considerably from each other in each of these three debt measures. Debt per capita is only about $207 in Port Arthur and about $220 in San Angelo, but it is $657 in Austin and $927 in Irving. Among the fifty-seven medium-sized U.S. cities, Port Arthur and San Angelo are fifth and sixth lowest in debt per capita and Irving is ninth highest. Among the Texas cities, interest per capita is lowest in San Angelo and Port Arthur and highest in Galveston. In three Texas cities (Galveston, Irving, and Austin), interest per capita is higher than the average for the fifty-seven U.S. cities. Among the fifty­seven cities, municipal capital spending per capita over the 1971-1975 period is lowest in San Angelo and fourth lowest in Amarillo. Relatively low debt and interest ex­penses in a number of Texas cities suggests that fiscal con­straints on future capital-spending plans are not severe. One reason that Texas cities, on average, have lower tax and debt burdens than other U.S. cities is that Texas cities tend to spend less. All seven Texas cities had lower per capita fire, education, health, and welfare expenditures than the averages for the fifty-seven cities in each of these expenditure categories. These differences, however, may be in part the result of cost-of-living differences. Although differences in expenditure levels may indicate very little about the quality of the services rendered, they may illustrate something about the degree of commitment each city has to specific expenditure functions. Because Galveston, for example, spends over 50 percent more per capita for fire protection than Irving, city officials in Gal­veston appear to view fire protection somewhat more favor­ably, at least in a budgetary sense, than do officials in Irving. Perhaps the higher proportion of older buildings in Galves­ton requires its city government to take greater note of potential fire problems. One must be cautious in comparing the quality of fire protection services in the two cities. Table 2 Fiscal Data for Seven Medium-Sized Texas Cities, 1975 Debt Revenue Municipal City Ratio of local taxes to personal income Local taxes per capita (in dollars) Intergovernmental revenue as a percentage of total local revenue Total debt per capita (in dollars) Interest per capita (in dollars) capital spending per capita, average 1971-1 975 (in dollars) Irving 4 .09 209.10 5.00 927 .49 29 .52 80.49 Fort Worth 4.52 204.81 32.30 474.75 21.67 67.58 Port Arthur 4.47 172.25 19 .00 206.68 9 .67 35.17 San Angelo 3.52 141.74 20 .10 219.93 9 .23 20.55 Amarillo 3.92 185 .72 14.50 284.92 10.96 25.36 Galveston 4 .96 210.84 8 .20 524.69 36.57 44.09 Austin 4 .72 206.79 29 .30 657 .12 28.17 85 .5 3 Mean values for seven Texas cities 4 .31 190.18 18.34 470.80 20.83 51.25 Mean values for fift y-seven medium-sized U.S . cities 5.55 262.96 33 .29 507 .81 22.57 80.20 Expense City Fire expenses per capita (in dollars) Education expenses per capita (in dollars) Health expenses per capita (in dollars) Welfare expenses per capita (in dollars) Ratio of city full-time equivalent employment to total local employment Average city employee annual income (in dollars) Current operating expenses per capita (in dollars) Irving Fort Worth Port Arthur San Angelo Amarillo Galveston Austin Mean values 14.75 22 .53 22.91 19.15 18.21 23.12 19.03 196.62 197.89 120.45 187.49 185 .29 167.04 189.35 1.73 5.26 3.25 5.42 3.80 6.07 5.74 0 0 0 2.27 0 0 .80 0 1.40 2.44 2 .85 2 .39 2.54 3 .93 4 .07 7 ,027 6,944 6,748 5,316 6,183 6,687 7,147 340.08 382 .87 270.04 317.01 321.51 485 .87 410.73 for seven Texas cities Mean values 19.96 177.73 4.47 1.54 2 .80 6 ,579 361.16 for fifty-seven medium-sized U.S. cities 29.51 236.40 8.81 11 .80 3 .86 7 ,717 478.16 Source: Calculated from data in First National Bank of Boston and Touche Ross & Company Urban Fiscal Stress: A Comparative Analysis of 66 U.S. Cities. ' TEXAS BUSINESS REVIEW Education expenditures per capita are frequently com­pared across governmental units. Of the seven Texas cities examined here, Fort Worth has the highest and Port Arthur the lowest spending per capita on education. Yet, the figure for Fort Worth is still well below the average figure for all fifty-seven U.S. cities. Port Arthur spends less per capita for education than any of the fifty-seven medium-sized U.S. cities surveyed here. Among the fifty-seven cities, only Montgomery, Mobile, St. Petersburg, and Port Arthur spend less per capita than Galveston. Because welfare and health expenditures in some U.S. cities are funded entirely at the state or county level, city welfare and health expenditures per capita are zero in some cases. As a result, it is especially hazardous to compare city expenditures in these categories. With the exception of Gal­veston, operating expenses per capita in the Texas cities are well below the average level for the fifty-seven U.S. cities. The ratio of city employees to total local employees is relatively low in Texas cities as is average city employee annual income. In 1975 the average city worker earned $5 ,316 in San Angelo, $7,147 in Austin, $8,946 in Grand Rapids, and $12,319 in Fresno. Cost-of-living differences account for at least a portion of these wage differentials. Texas Cities and Cities in Other U.S. Regions Meaningful comparisons of the fiscal performances of medium-sized cities may be undertaken in two ways. First, all fifty-seven U.S. cities may be divided into selected regions (with Texas constituting a single region), and average figures for all cities within each region may be Table 4 Table 3 Listing of Fifty-seven Cities by Geographic Region Texas Sunbelt (excluding Texas) Irving Fort Worth Port Arthur San Angelo Amarillo Galveston Austin Mobile, AL Montgomery, AL Tempe, AZ Tucson, AZ Little Rock, AR Daly City, CA Fresno, CA Long Beach, CA Pasadena, CA Hollywood, FL St. Petersburg, FL Tampa, FL West Palm Beach, FL Savannah, GA Louisville, KY Baton Rouge, LA Greensboro, NC Jackson, MS Albuquerque, NM Richmond, VA Northeast Midwest West Bridgeport, CT Hartford, CT New Haven, CT Stamford, CT Cambridge, MA Springfield, MA Worcester, MA Trenton, NJ Buffalo, NY Syracuse, NY Decatur, IL Evanston, IL Topeka, KS Wichita, KS Grand Rapids, MI Bloomington, MN Duluth, MN Minneapolis, MN Rochester, MN Kansas City, MO Lincoln, NB Omaha, NB Dayton, OH Madison, WI Denver, CO Pueblo, CO Eugene, OR Salt Lake City, UT Seattle, WA Spokane, WA Fiscal Data for Medium-Sized U.S. Cities by Region, 1975 Debt Revenue Municipal Ratio of Intergovernmental capital spending local taxes to personal Local taxes per capita revenue as a percentage of Total debt per capita Interest per capita per capita, average 1971 -1975 Region income (in dollars) total local revenue (in dollars) (in dollars) (in dollars) Texas 4 .31 190.18 18.34 470.80 20.83 51.25 Sunbelt (ex­ eluding Texas) 4 .61 221.08 36.07 469.00 20.78 68.22 Northeast 8.59 387 .56 38.43 605.13 29.88 141.40 Midwest 5.36 267 .79 32 .79 526.90 22.71 73.98 West 5.51 268.56 34.05 473.60 18.02 66.40 Expense Region Fire expenses per capita (in dollars) Education expenses per capita (in dollars) Health expenses per capita (in dollars) Welfare expenses per capita (in dollars) Ratio of city full-time equivalent employment to total local employment Average city employee annual income (in dollars) Current operating expenses per capita (in dollars) Texas 19.96 177.73 4.47 1.54 2.80 6,579 361.16 Sunbelt ex- eluding Texas) 27.59 229.00 5.17 11.63 3.47 7 ,1 49 453.49 Northeast 45 .14 250.38 13.44 18.69 7.42 8,111 582.48 Midwest 25.63 268.20 8.66 2.63 2.66 8,370 503.21 West 30.07 231.95 19.18 18.74 3.23 8,754 464.55 Note: Figures are averages for all sample cities in each region. The Texas sample contains seven cities; the Sunbelt (excluding Texas) has twenty; the Northeast has ten ; the Midwest has fourteen; and the West has six . Source: Calculated from data in First National Bank of Boston and Touche Ross & Company, Urban Fiscal Stress: A Comparative Analysis of 66 U.S. Cities. NOVEMBER-DECEMBER1979 compared. Second, Texas cities may be compared with a subsample of U.S. cities that have a number of socioeco­nomic characteristics similar to those in Texas cities. The fifty-seven medium-sized U.S. cities may be divided into five regional groupings (see table 3). Any such division is somewhat arbitrary since more than one standard region­al grouping exists. The Sunbelt, as defined here, combines cities commonly grouped as southern and southeastern and includes four cities in California, the northernmost of which is Daly City (just south of San Francisco). Average figures in each of the revenue, debt, and expen­diture categories are generally lower for the Texas cities than for cities in any of the other regions (see table 4); but other differences between Texas cities and other Sunbelt cities are far less pronounced. Debt and interest expenses per capita are virtually identical when average figures for the seven Texas cities and for twenty other Sunbelt cities are compared. Some Texas items stand out as being consid­erably below levels in all other regions of the country. These items include intergovernmental revenue as a percent­age of local revenue, education expenses per capita, average city employee annual income, and operating expenses per capita. Per capita health and welfare expenses are also rela­tively low in Texas cities, but in many cases funding at Table 5 more than one level of government makes comparison of these categories risky. A subsample of the fifty-seven U.S. cities was selected on the basis of four characteristics: population of less than 300,000, low population density, small dependent popula­tion, and average or below average private investment. These characteristics were similar to those in most of the Texas cities. An effort was also made to get a fairly wide geographic distribution in this subsample. Fiscal and population data for the ten cities in the subsample are presented in table 5. Average figures for the ten cities were higher than averages for Texas cities in all revenue and expenditure categories, but per capita debt and interest expenses were higher, on average, in the Texas cities. Among those cities that grew in population between 1970 and 1976, Austin grew at the same rate as Eugene, Oregon; San Angelo grew at nearly the same rate as Lin­coln, Nebraska; and Irving grew about as rapidly as Greens­boro, North Carolina. Similarities in the fiscal characteris­tics of these pairs of cities are far less obvious. Note I would like to thank Thomas R. Plaut for helpful comments on an earlier draft of this paper. Fiscal and Demographic Data for Ten Medium-Sized U.S. Cities, 1975 Debt City Population 1976 Percentage change 1970-1976 Ratio of local taxes to personal income Revenue Local taxes per capita (in dollars) Intergovernmental revenue as a percentage of total local revenue Total debt per capita (in dollars) Interest per capita (in dollars) Municipal capital spending per capita, average 1971 -1975 (in dollars) Worcester 168,619 -4.5 11.95 530.02 25 .90 371.44 12.85 129.99 Duluth Topeka 94,824 120,196 -5.7 -3.9 4.24 4.36 189.32 219.98 48.30 28.80 714.65 384.59 28.48 16.38 132.01 36.69 Lincoln 164,035 7.5 5.05 245.26 20.80 501.76 8.47 68.85 Greensboro 157,324 6.3 3.55 178.24 37.60 311.61 11.92 88.74 West Palm Beach Little Rock Salt Lake City Eugene Albuquerque Mean 59,73P, 151,649 168,667 97,592 284,617 4 .1 14.5 -4.1 21.1 16.8 4.78 4 .00 5.37 6.18 2.36 5.18 276.36 187.46 218.11 289 .10 107.03 244.09 44.00 4.50 23.10 30.70 56.20 35.99 274.75 312.00 124.59 1,086.76 390.96 447.31 11.08 15.43 5.46 22 .03 21.90 15.40 57 .23 40.32 58.63 48.89 79.44 74.08 City Worcester Duluth Topeka Lincoln Greensboro West Palm Beach Little Rock Salt Lake City Eugene Albuquerque Mean Fire expenses per capita (in dollars) 36.73 33.54 31.23 18.77 24.24 33.85 32.99 21.72 29.96 26.47 28.95 Education expenses per capita (in dollars) 295 .90 298.86 195.36 223.10 219.12 260.64 186.66 185.81 276.99 237 .70 238.01 Health expenses per capita (in dollars) 12.43 0.29 27 .62 5.96 0 1.85 2 .59 0 0 4 .22 7.85 Expense Welfare expenses per capita (in dollars) 19.36 0.11 0 0 0 0 0 .01 0 0.27 0 4.94 Ratio of city full-time equivalent employment to total local employment 8.02 4 .06 2 .29 2 .62 2 .39 2 .37 3.17 3.43 3.5 1 2 .91 3.48 Average city employee annual income (in dollars) 7,777 5,077 6,861 7,691 6,806 7,232 5,799 7,016 8,892 6,599 6,975 Current operating expenses per capita (in dollars) 605.77 627 .59 429.60 380.39 438.59 489.30 374.22 331.86 485 .26 457.48 462.01 Sources: Population figures taken from U.S. Department of Commerce, Bureau of the Census, Current Population Reports, series P-2 5, no. 782, January 1979. Fiscal data from First National Bank of Boston and Touche Ross & Company, Urban Fiscal Stress: A Comparative Analysis of 66 U.S. Cities. Texas Planning Regions The twenty-four state planning regions in Texas logically divide the state into a manageable number of areas. The regions are fairly homogenous in their social and economic characteristics and are generally representative of the mar­ket areas or trade territories of the state. The state planning regions will be used increasingly in the future as a geo­graphic basis for the presentation of economic and other data. The delineation of the state planning regions in Texas is a relatively recent event. The regions were first designated by Governor John Connally in 1968. Between 1968 and 1973, seven counties were transferred from one region to another on the basis of gubernatorial review. No changes have occurred since 1973 and no changes are anticipated in the foreseeable future, although the regional boundaries are subject to periodic review. The state planning regions are not political subdivisions in and of themselves, but the boundaries of the state plan­ning regions are the boundaries for the various regional councils of government in Texas. Regional councils of gov­ernment, or COGS, are associations of local governments including counties, cities, school districts, special districts, and other entities that are involved with intergovernmental activities and the administration of a number of federal programs. Economic Concepts One of the best available measures of overall economic activity for state and local areas in the United States is the personal income data series compiled by the Bureau of Economic Analysis, a component of the U.S. Department of Commerce. The personal income data series provides a basis for comparisons of overall economic activity between geographic areas and provides information on the relative economic well-being of various parts of the country. In addition, the personal income data are available by source of income, that is, the way in which people make their Oiarles P. Zlatkovich is a member ofthe Industrial Economics Group at the Center for Strategic Technology, Texas A&M University. An Economic Summary Charles P. Zlatkovich money. This information facilitates quick comparisons of the economic base of one area with those of other areas. At the national level, total personal income is consis­tently equal to between 77 and 82 percent of gross national product-the total value of all of the goods and services pro­duced in the country. Although comparable state and local product data are not available, the personal income data can be used to calculate a crude approximation of local gross product. A useful procedure for examining differences between the economies of particular areas is to compare the percent­ages that each economic sector contributes to total personal income in each area. For example, if a particular economic sector, such as agriculture, accounts for 6 percent of total personal income in one area and for 2 percent in another area, the relation between the two percentages-in this case 3 to 1-is useful in comparing the economies of the two areas. Economists refer to this relation as the "location quotient." Each of the regional economies of the state planning re­gions can be compared with the overall economy of the state of Texas. The economic sectors discussed as being particularly noteworthy in each region are not necessarily the largest sources of income or employment in those regions; rather, these sectors have been highlighted because of their relative importance in the region in comparison with their overall significance across the state, as measured by relatively high location quotients. The regional compari­sons are based on personal income data for 1977, the latest available at this writing. Fortunately, in most cases the basic regional relations do not change a great deal from year to year. The percentage that each major source of personal in­come contributes to total personal income in the state is shown in table 1. Also shown are the location quotients for Texas in relation to the United States. For the state as a whole, the most notable sources of personal income in relation to the national situation are mining, federal military earnings, and the construction industry. The min­ing sector includes all of the extractive industries, and in Texas about 97 percent of all income from this sector is derived from oil and gas production. Despite the rapid in- NOVEMBER-DECEMBER 1979 dustrialization of Texas in recent years, the manufacturing sector has the lowest location quotient of any of the sectors, even though it is the largest source of income in Texas. The Regions The following discussions of the individual regions focus on the relative economic importance of the regions, the average annual compound growth rate for the population between 1970 and 1977 (the most recent year for which official U.S. Bureau of the Census population estimates are Panhandle The Panhandle region includes twenty-five counties in the Texas panhandle surrounding Amarillo. About 348,000 people, 2. 7 percent of the state population, live in the region, and 3.0 percent of total state personal· income is generated here. About 45 percent of the people live in the Amarillo metropolitan area, which is made up of Potter and Randall counties. The population of the region has been growing at a rate of 0.7 percent a year during the 1970s. Agriculture is particularly important to the economy of the region, accounting for 6. 7 5 times as large a percentage of The personal income data series, compiled by the Bureau of Economic Analysis, provides a basis for comparisons of overall economic activity between geographic areas. available), and the extent to which the population of each region is concentrated in metropolitan areas. Attention is also devoted to the economic sectors that make a notewor­thy contribution to the regional economy in relation to the statewide economy of Texas. The economic sectors that are mentioned each have a location quotient of 1.15 or greater in relation to the state. Highlights of the regions are presented in table 2. Table 1 Percentage of Total Personal Income by Major Sources and Location Quotients Texas, 1977 Percentage of Location total personal quotient Source' income (Texas/U.S.) Agriculture, forestry, fisheries, and other 1.90 0.9S Mining 4 .27 3.S9 Construction 6.44 1.41 Manufacturing 1S.S2 0.77 Transportation, communication, and public utilities 6 .22 1.08 Wholesale and retail trade 14 .94 1.17 Finance, insurance, and real estate 4 .31 1.01 Services 11.77 0 .92 Total private earnings 6S.38 1.03 Federal civilian 3.03 0.96 Federal military 1.94 I.SS State and local government 7 .80 0.90 Total government earnings 12.77 0 .97 Total earnings 78.14 1.02 Property income 14.87 1.09 Transfer payments 11.03 0.80 Total personal income* 100 .00 1.00 *Totals do not add exactly because of rounding and because of the omission of several adjustments to income. Source: Developed from data compiled by Regional Economics Information System, Bureau of Economic Analysis, U.S. Depart­ment of Commerce. personal income as it does across the state. Other earnings sources that make notably large contributions to the regional economy are the mining sector and the transporta­tion, communication, and public utilities sector. South Plains The South Plains region lies to the immediate south of the Panhandle region and includes fifteen counties sur­rounding Lubbock. The region includes about 2.7 percent of the state population and accounts for about 2.5 percent of total personal income in the state. Lubbock County-the Lubbock metropolitan area-includes 58 percent of the total population of 34 7 ,000 in the fifteen-county region. The region has been growing at a rate of about 0.8 percent a year. Agriculture makes the most noteworthy contribu­tion to the economy of the region, accounting for more than five times as large a share of income in this region as it does across the state. Another significant source of in­come in the region is the state and local government pay­roll, influenced by the presence of Texas Tech University. North Texas The North Texas region includes twelve counties along and near the Oklahoma border in the vicinity of Wichita Falls. The Wichita Falls metropolitan area, which includes Wichita and Clay counties, contains 61 percent of the 216 ,000 people in the region. The region as a whole in­cludes about 1.7 percent of the Texas population and 1.8 percent of economic activity in the state as measured by total personal income. The region has been growing less rapidly than most Texas regions at a rate of about 0.3 per­cent a year. Federal military earnings are more than three times the state average; Sheppard Air Force Base in Wichita Falls is the source of most of these earnings. The two other economic sectors that make the most notable contributions to the regional economy are mining and agriculture. North Central Texas The North Central Texas region is one of the two largest Texas regions in population and income. It consists of six­teen counties and includes the eleven-county Dallas-Fort Worth metroplex. The total population of the region is about 2,802,000. About 95 percent of the residents of the North Central Texas region live in the Dallas-Fort Worth metropolitan area. The region as a whole accounts for 21 .8 percent of the population of the state, and its relatively prosperous residents earn about 24.4 percent of all income in the state. The population of the region has been growing at a rate of about l .S percent a year. While no single eco­nomic sector dominates the economy of the region, three sectors-finance, insurance, and real estate; manufacturing; and retail trade-make larger-than-average contributions to the economy of the region. North East Texas The North East Texas region includes nine counties around Texarkana. The Texas portion of the Texarkana metropolitan area-Bowie County-includes 34 percent of the population of the region. The total population of the region-about 218,000-accounts for 1.7 percent of the state population. About 1.4 percent of statewide personal income is earned here. The region has been growing at about 1 percent a year. Federal civilian earnings are the most noteworthy source of earnings in the region largely because of the Red River Army Depot, but the manufac­turing sector also makes a notable contribution. East Texas The East Texas region consists of fourteen counties sur­rounding Longview and Tyler. The Longview-Marshall and Tyler metropolitan areas, which together include three of the fourteen counties, contain 49 percent of the 493,000 population of the region. The East Texas region is home to 3.8 percent of the Texas population, and residents get 3.S percent of total Texas personal income. The growth rate has been about I.7 percent a year during the 1970s. Mining and manufacturing make the most notable contributions to the regional economy. West Central Texas The West Central Texas region is made up of nineteen counties surrounding Abilene. About 45 percent of the 293 ,000 people in the region live in the three-county Abilene metropolitan area. In relation to the state as a whole, 2.3 percent of the population and 2.1 percent of total personal income are found in this region, which has had a growth rate during the 1970s of 0.6 percent a year. Agriculture, mining, and federal military earnings are signi­ficant contributors to regional income. Dyess Air Force Base in Abilene is the major source of federal military earnings. Table 2 Texas Regions at a Glance Number of Population Personal income Notable earnings Region Major cities counties (thousands) (millions of dollars) sources• Panhandle Amarillo 25 348 2,620 AG RIC, MINES, TRANS South Plains Lubbock 15 347 2,221 AG RIC, SLGOV North Texas Wichita Falls 12 216 1,549 FEDML, MINES, AG RIC North Central Texas North East Texas Dallas, Fort Worth Texarkana 16 9 2,802 218 21,385 1 ,270 FINAN, MANUF, TRADE FEDCV, MANU F East Texas West Central Texas Longview, Tyler Abilene 14 19 493 293 3,099 1,846 MINES, MANUF AGRIC, MINES, FEDML Upper Rio Grande Permian Basin Co ncho Valley Heart of Texas El Paso Odessa, Midland San Angelo Waco 6 17 13 6 455 322 118 243 2,304 2,333 776 1,496 FEDM L, FEDCV,TRANS MINES AGRIC, MINES FEDCV Capital Brazos Valley Deep East Texas South East Texas Gulf Coast Golden Crescent Austin Bryan, College Station Lufkin, Nacogdoches Beaumont, Port Arthur Houston, Galveston Victoria 10 7 12 3 13 7 572 152 245 364 2,856 149 3,508 811 1,301 2,647 23,038 930 SLGOV, FEDCV SLGOV AGRIC, MANUF MANUF, CONST, TRANS CONST, MINES, SERVI AGRIC, MINES Alamo San Antonio 12 1,156 6,936 FEDML, FEDCV South Texas Laredo 4 117 425 AG RIC, MINES, SLGOV Coastal Bend Lower Rio Grande Valley Texoma Central Texas Middle Rio Grande Texas total Corpus Christi McAllen, Brownsville Sherman, Denison Killeen, Temple Del Rio, Eagle Pass Houston, Dallas 12 3 3 7 9 254 441 426 132 257 111 12 ,830 2,564 1,713 830 1,5 31 459 87,593 MINES, FEDCV, FEDML AG RIC, SLGOV MANUF FEDML, FEDCV AGRIC, FEDML, FEDCV MINES, FEDML, CONST *AGRIC = agriculture; CONST = construction; FEDCV =federal civilian; FEDML =federal military;_FINAN -finance, insurance,_ and real estate; MANUF = manufacturing; MINES= mining; SERVI= services; TRADE= wholesale and retail trade; TRANS= transportation, com­munication, and public utilities. Note: Data are for t he year 1977. Totals may not add exactly because of rounding. NOVEMBER-DECEMBER1979 Upper Rio Grande The Upper Rio Grande region consists of six counties in far West Texas. All of the counties are large in area, but five of the six are rather sparsely populated. The total popula­tion of the region is about 455 ,000, with 96 percent of the people living in El Paso County-the El Paso metropolitan area. The region accounts for 3.5 percent of the state popu­lation but only about 2.6 percent of total state personal income, and it has been growing at a rate slightly above 2.5 percent a year. The federal government is a major employer in the area, with both federal military and federal civilian earnings contributing larger-than-average percentages to regional income. Fort Bliss in El Paso is the major military installation in the region. The transportation, communica­tion, and public utilities sector is also noteworthy in the region. Permian Basin The Permian Basin region consists of seventeen counties and includes two metropolitan areas-Midland and Odessa­in which about 55 percent of the regional population of 322,000 live. The Permian Basin region accounts for about 2.5 percent of the total state population and for about 2.7 percent of total personal income in Texas and had an annual growth rate of about 0. 7 percent during the 1970s. The mining sector is the basis of the economy, accounting Texas Planning Regions for over 5 .5 times as large a portion of regional income as it does across the state. Concho Valley The Concho Valley region consists of thirteen counties surrounding San Angelo. About 65 percent of the region's 118,000 residents live in Tom Green County, the San Angelo metropolitan area. The region accounts for 0.9 per­cent of both the state's population and its total personal income and has been growing at a rate of 0.9 percent a year during the 1970s. Agriculture plays a major role in the economy of the region, accounting for about three times as large a share of regional income as is provided by agricul­ture across the state. The second noteworthy sector in the regional economy is mining. Heart of Texas The Heart of Texas region is a six-county area in the vicinity of Waco. About 66 percent of the 243,000 people in the region live in McLennan County, which is the Waco metropolitan area. The Heart of Texas region represents 1.9 percent of the state population and accounts for about 1.7 percent of total state personal income. The average annual compound growth rate for the region during the 1970s has been about 0.9 percent. The most notable source of earnings in the region is the federal civilian payroll. Capital The Capital region is a ten-county area with the three­county Austin metropolitan area at its center. About 83 percent of the 572,000 residents live in the Austin metro­politan area, and the region contains about 4.5 percent of the total Texas population and accounts for about 4 percent of the total personal income in the state. During the 1970s the region has had the highest growth rate of the twenty-four Texas regions; its population increased at about 3.5 percent a year, nearly double the state average. State and local government is the most significant contribu­tor to personal income in the region because the state capi­tal and the University of Texas at Austin are both located in Austin. Federal civilian earnings are also a notable source of income. Brazos Valley The Brazos Valley region includes seven counties. The focal point of the region is Brazos County, which is the Bryan-College Station metropolitan area and includes just over half of the regional population. The total population of the region is about 152,000, 1.2 percent of the state population. Only 0.9 percent of state income is earned here, primarily because of the large student population. State and local government is the outstanding source of regional income with much of the payroll attributable to Texas A&M University. The contribution of state and local government to the regional economy is more than 2.5 times the state average, an even higher level than that in the Capi­tal region surrounding Austin. Deep East Texas The Deep East Texas region includes twelve counties in the vicinity of Lufkin and Nacogdoches, the two largest communities in the region. The Deep East Texas region is one of the three state regions that does not contain a metropolitan area. The total population of the region is about 245,000. The region contains 1.9 percent of the Texas population and accounts for about 1.5 percent of statewide economic activity as measured by total personal income. The region has been growing at a rate of about 1.7 percent a year during the 1970s. In relation to their state­wide role, agriculture and manufacturing make the largest contributions to the economy of the region. South East Texas The South East Texas region includes the three counties­Hardin, Jefferson, and Orange-that make up the Beaumont­Port Arthur-Orange metropolitan area. The region has a population of about 364,000, about 2.8 percent of the state total, and residents take home about 3 percent of all state personal income. The region has been growing rather slowly by Texas standards at a rate of 0.6 percent a year. Manufacturing is the dominant source of income in the re­gion, accounting for more than twice as large a share of regional income as it does across the state. The construction sector and the transportation, communication, and public utilities sector are also important to the economy of the region. Gulf Coast The Gulf Coast region is the largest in population of the twenty-four regions with about 2,856,000 residents. Of the thirteen counties in the region, six form the Houston metropolitan area, and one-Galveston County-is the Galveston-Texas City metropolitan area. The two metro­politan areas contain about 95 percent of the population of the region. The Gulf Coast region has 22.3 percent of the total Texas population and accounts for 26.3 percent of total state personal income. The region has been growing at a rate of about 3.0 percent a year, while the state has only been growing at a rate of about 1.9 percent a year. As a result of this rapid growth, the construction industry makes the most notable contribution to regional income in com­parison with its state role. Four sectors-mining; services; transportation, communication, and public utilities; and manufacturing-are all well represented in the regional economy. Golden Crescent The Golden Crescent region includes seven counties sur­rounding the city of Victoria. Victoria County has about 40 percent of the regional population of 149 ,000 and just NOVEMBER-DECEMBER 1979 misses being designated as a metropolitan area by the U.S. Bureau of the Census. The population of the region is about 1.2 percent of the state total and has been increasing rather slowly at about 0.6 percent a year. Residents of the region receive about 1.1 percent of all personal income in Texas. The most notable sources of personal income in the region, in comparison to the rest of the state, are agriculture and mining. Alamo The Alamo region is made up of twelve counties sur­rounding San Antonio. Three of the counties-Bexar, Comal, and Guadalupe-form the San Antonio metropoli­tan area and include about 89 percent of the population of the region. The total population of the region is about 1,156,000, making it the third largest in population of the state's twenty-four regions. The region contains about 9 percent of the state's total population and its residents receive about 7 .9 percent of all income in the state. During the 1970s the growth rate for the region has been just slightly above the statewide average at about 1.9 percent a year. Federal civilian and military earnings provide more than three times as large a portion of personal income in the region as they do across the state. Major federal in­stallations in the region include two U.S. Army installations (Fort Sam Houston and Brooks Army Hospital) and three U.S. Air Force bases (Kelly, Lackland, and Randolph). South Texas The South Texas state planning region includes four counties, the largest of which is Webb County, the Laredo metropolitan area. About 73 percent of the 117 ,000 people in the region live in Webb County. The region suffers from relatively low income levels: while it contains just over 0.9 percent of the state's population, residents receive less than 0.5 percent of the state's total personal income. The popu­lation of the region has been increasing faster than the statewide average with a regional growth rate of about 2.2 percent a year. Agriculture, mining, and state and local gov­ernment are the most notable sources of earnings. Coastal Bend The Coastal Bend region includes the twelve counties surrounding Corpus Christi. Two of the counties, Nueces and San Patricio, make up the Corpus Christi metropolitan area, which contains about 69 percent of the population of the region. About 441,000 people, more than 3.4 percent of the Texas population, live in the Coastal Bend region. Residents of the region account for about 2.9 percent of state personal income. The population growth rate has been about 0. 7 percent a year. The economic sectors that make the largest contributions to income in the region in com­parison to the rest of the state are mining, federal civilian earnings, and federal military earnings. The Corpus Christi and Kingsville naval air stations and Chase Field in Beeville are the major federal installations in the region. lower Rio Grande Valley The Lower Rio Grande Valley region includes only three counties, but two of them are metropolitan. Hidalgo County is the McAllen-Pharr-Edinburg metropolitan area, and Cameron County is the Brownsville-Harlingen-San Benito metropolitan area. More than 96 percent of the people in the region live in these two counties, and the rest live in Willacy, the third county in the region. The region has a population of about 425,000, roughly 3.3 percent of the state total, but accounts for only about 2 percent of statewide income. The region has the state's second highest population growth rate, more than 3.2 percent a year. Agri­culture and state and local government are the most notable contributors to earnings in the region. Texoma The Texoma region includes only three counties, one of which is Grayson-the Sherman-Denison metropolitan area-with 64 percent of the regional population. The total regional population of about 132,000 is about 1 percent of the state population. Residents of the region earn 0.9 per­cent of state total personal income. Of all the regions, Tex­oma has had the lowest growth rate, about 0.2 percent a year, since 1970. Manufacturing is the most significant source of personal income in the Texoma region. Central Texas The Central Texas region consists of seven counties including the two-county Killeen-Temple metropolitan area, which accounts for 81 percent of the regional popu­lation. The total population of the region is about 257 ,000 or 2 percent of the state population. Regional personal in­come is about 1.7 percent of total personal income in the state. The Central Texas region has been growing rapidly, with an annual population growth rate of about 3 percent. Federal military earnings dominate the economy of the re­gion because of the presence of Fort Hood, near Killeen; and the military payroll accounts for almost 33 percent of all personal income in the region, a level more than sixteen times the state average. Middle Rio Grande The Middle Rio Grande region is the smallest in popula­tion of the state's twenty-four regions. About 111,000 people live in the nine-county region. Since Del Rio and Eagle Pass are the largest communities, the region is one of the three that do not contain a metropolitan area. Although the region accounts for almost 0.9 percent of the state's population, the regional share of the state's total personal income is only 0.5 percent. The population of the Middle Rio Grande region has been growing at a rate of about 2.2 percent a year. Agriculture is a major source of personal income in the region. Laughlin Air Force Base near Del Rio accounts for a relatively high level of federal earnings, both military and civilian. The Future of Business Regulation The rapid and pervasive growth of government power over business is inhibiting the ability of the typical business enterprise to meet the needs of the consumer. The rising tide of regulation, despite its noble intentions, has become a major barrier to productive economic activity. In a fundamental way, albeit unintentionally, the in­creasing power assumed by government over business often results in a diminution of business performance. It is not mere coincidence; in good measure, it is cause and effect. Costs of Regulation The costs of government regulation show up in higher prices of the goods and services that consumers buy­ranging from $666 of mandated equipment in the typical automobile to $2,000 of hidden costs in the average new house. Those higher prices represent the hidden tax im­posed on the public by government regulation. In 1979, the costs imposed by federal regulation were estimated at over $102 billion, or almost $500 for each person living in the United States. The secondary or indirect costs of complying with regu­lation may be more severe albeit less apparent. To the ex­tent that management attention is diverted from product development, production, and marketing concerns to meet­ing governmentally imposed social requirements, a signifi­cant but subtle bureaucratization of corporate activity is also taking place. The fundamental negative impact on the business system that results from government intervention is the abandonment of specific activities and entire enter­prises. The ultimate costs of excessive government involvement in the economy can be seen in the factories that do not get built, the jobs that do not get created, the goods and ser­vices that do not get produced, and the incomes that are not generated. A modern, complex society requires a sub­stantial amount of government rule setting. There is no Murray L. Weidenbaum is a resident scholar at the American Enter­prise Institute, on leave from Washington University in St. Louis. This article is based on his new book, The Future of Business Regu­lation (New York: AMA COM, 1979). .Murray L. Weidenhau1n question of eliminating all government regulation, but the extensive exercise of government power raises these key questions: Do its advantages in a given instance outweigh its disadvantages? Do its ends (both economic and social) justify either its means or its unplanned side effects? Since much of the problem originated in business, so might much of the solution. Business Community Response to Regulation Five steps could form the basis of a comprehensive response by the business community. The first and most fundamental response to the wide­spread public dissatisfaction with the business system is for American business to do a better job of "minding the store." There is no more effective advertising or public relations than a satisfied customer. Performance is far more important than rhetoric. The most basic way to satisfy the American people on a long-term, sustainable basis is for the private enterprise system to produce higher employment, a lower rate of inflation, and a rising standard of living for the average family. In a fundamental way, the increasing power of government over business often results in a diminution of business performance. The second step is to curtail and perhaps dismantle what may be called the "imperial presidency" in the private sec.tor. Many members of top management of corporations have acquired perquisites that smack more of the preroga­tives of royalty than of the needs of competitive, profit­maximizing, professional management. It is far too easy for business to ask the rest of society to support sensible NOVEMBER-DECEMBER 1979 actions that will strengthen the market economy-less regulation, elimination of union featherbedding practices, reduced hostility on the part of consumer organizations­so long as the burden of those actions is placed elsewhere than on business. To be truly creditable, business also needs to advocate desirable actions that are difficult for it or even distasteful to it. The third step is to give the public a better understand­ing of the full impact of government involvement in busi­ness. This step does not mean an uncritical attack on all few suggestions to start a dialogue in developing new ap­proaches to business-government relations. •The individual should have maximum opportunity for personal choice. Consumers do not wish the govern­ment to protect them against every conceivable hazard. Even in the highly emotional area of cancer, a recent survey revealed that most Americans prefer to make their own decisions regarding the benefits and risks of using substances suspected of causing cancer. Government regulation of business has benefits that need to be acknowledged, but government intervention in the economy also entails great costs and often does not achieve its objectives. government regulation. The balanced educational message that is needed is simple: government regulation of business has benefits that need to be acknowledged and identified, but government intervention in the economy also entails great costs and, despite those great costs, often does not achieve its objectives. The fourth step is to set sights on some reasonable, attainable objectives. Business needs to avoid adopting obviously self-serving positions that may be expedient in the short run but that damage the central role of the enter­prise system over the long run. No amount of posturing will convince the public that business truly believes in the private enterprise system if individual companies run to Washington for subsidies every time they encounter some rough competition. Here business could follow a simple pair of goals: to support government activities that, on balance, benefit society and then improve government's ability to carry them out; and to identify government activities that, on balance, harm society and then reform or eliminate them. The fifth step requires business to attempt to alter the external environment in which it operates by entering the arena in which public policy is developed. It is neither necessary nor desirable to advocate that business take a passive role of automatically agreeing to every demand on the part of each interest group, public or private. Demands that do not make sense should be opposed-lawfully and strongly-and more sensible alternatives should be devel­oped and presented. There is no substitute for companies taking an activist attitude toward public policy matters. That includes legitimate ways in which business can exer­cise its historical right to petition for redress of grievances. Business-Government Relations We can also try to develop principles to guide legislators and regulators in their dealings with business. Here are a • Whenever possible, the government should provide information rather than commands. A very large per­centage of the consumers surveyed favored readable information on packages outlining the possible dan­gers involved in the use of the products. Then, they said, they could make their own decisions intelligently. • Wherever possible, the government should provide in­centives rather than directives. This approach would work through, rather than against, the price system and the market mechanism. • Good public policy should avoid the simplistic notion that all shortcomings originate in business. Business is, of course, an inviting target for criticism because of its size and visibility. Yet many of the problems with which makers of public policy deal arise from shortcomings in other parts of society. After all, federal standards can control the way a commodity is made, but not the way it is used (or abused) by the consumer. • Government should set an example and not put itself above the law. Some of the worst polluters, for ex­ample, are government installations that-unlike private factories-cannot be closed down by environ­mental agencies. • The vast power of government should not be aimed at trivia. Whether government concern is for a healthier environment or safer products, policy makers should realize that not all hazards are equal. Government policy needs to distinguish between hidden and visible hazards, voluntary and involuntary hazards, easily avoidable and hard to avoid hazards, remote and commonplace hazards, and negligible and severe hazards. Such distinctions would help to focus government actions on the important segments of private activity that government can constructively affect. • Government should learn that its decisions often can produce long-term and unexpected consequences. In the process of trying to reduce health and safety hazards to very low levels, for example, regulation can inflict grave damage not only on the economy, but ultimately on the health of the citizenry as well because of the devastatingly depressive effect that ex­cessively stringent regulations can have on the devel­opment and marketing of new and improved pharma­ceutical products. Let us also focus on the role of self-styled public interest groups. Their claim to represent the public is not based on their knowledge of what the public wants or their account­ability to the public. Instead, they explicitly assume that they know what is best for the consumer. The business system, in contrast, constitutes the front line of defense for consumers, homeowners, motorists, investors, employees, and taxpayers. Each of these groups can be adversely affected by government action against business that is advocated by "corporate activists," who view the business firm as an instrument for achieving their social objectives. The fiction that business does not care about people because profit comes first should be exposed for the errant nonsense that it is. Business has all the incentives to take actions that result in improving human welfare because more purchases by willing consumers do tend to generate more profits. The social activists do not understand the ultimate consequences of their actions. They would use the accumulated wealth of our society as their intellectual plaything. Basic improvements in business-government relations in the United States also will require attention to the critical role of the media. There continues to be great variation in media coverage of business and economic affairs. Some journalists have become veritable experts in reporting and analyzing current developments in those fields. Far more writers on business and related topics, however, lack a basic comprehension of the activities that they are reporting. No sports desk would ever assign a reporter who was unfamiliar with baseball rules to cover a baseball game. A comparable level of competence, however, is not a general requirement for covering an annual meeting of a major corporation. Fur­thermore, any criticism of inaccurate coverage more often than not will provoke a diatribe on attempted interference with the freedom of the press. The reporter should be equally suspicious of all advocates in the public policy arena. A contention does not become a fact just because it is uttered or written by a consumer advocate-or even by a college professor. A reversal of the current trend of ever-increasing govern­ment intervention in business is essential not so much to benefit business, but to enhance the welfare of the indivi­dual citizen. ATLAS OF CENTRAL AMERICA $18 plus tax Atlas of Mexico $20 plus tax Bureau of Business Research Box 7459, University Station Austin, Texas 78712 NOVEMBER-DECEMBER 1979 Rate Deregulation in the Airline Industry A Panel Discussion Robert Frank Sam Coats Herbert D. Kelleher Robert Frank My position on airline deregulation is that it is a good idea, that the Civil Aeronautics Board (CAB) should have done it a long time ago, and that good things have hap­pened as a result of it. Although much has happened so far as a result of the deregulation effort, much remains to be accomplished. Influence of Intrastate Carriers The process of restoring the airline industry to the discipline of competition began more than twenty years ago when intrastate carriers, who were not subject to CAB regulation, demonstrated that consumers as a group were willing to accept a reduction in service amenities in ex­change for lower fares. Firms like Southwest Airlines could operate within the boundaries of Texas, and Pacific South­west Airlines within California, without being regulated by the CAB. With these carriers, air services were offered on safe, comfortable terms for about half the price of the com­parable service on interstate markets. It was the favorable experiences with the intrastate markets that gave the impe­tus to airline deregulation. Problems with Regulation Before deregulation the industry was subject to tradi­tional utility rate-of-return regulation. The CAB established a target rate of return and granted or denied requested fare increases depending upon the return actually begin earned. This procedure had a strange effect on the economics of Robert Frank is Director of the Office of Economic Analysis, Civil Aeronautics Board; Sam Coats is Vice President for Governmental Affairs, Texas International Airlines; and Herbert D. Kelleher is Chairman of the Board, Southwest Airlines. This panel was held at the Third Annual Conference for Teachers ofFree Enterprise at the University of Texas at Austin on June 4, 1979, and was sponsored by the Chair of Free Enterprise. The speakers ' comments were summarized by David R. Luhr. the airline industry. During a period when the economy was slow, fewer people would fly. Fewer passengers per flight would diminish the airlines' rate of return and prompt the airlines to ask for a rate increase. Because the demand for air travel is very sensitive to price, the higher prices had the effect of discouraging air travel even more. Airline profits would continue to deteriorate until the economy rebounded and demand increased. What this amounted to was a bust­and-boom cycle for the industry, with the result being fares about twice what the intrastate airlines were charging. Special Fares In 1976, the CAB removed some of the more important charter restrictions that had protected the scheduled car­riers. Before 197 6 people had to belong to an organized group before they could qualify for a charter flight and the lower fare that came with it. After this restriction was re­moved , the charter airlines could offer service that was simi­lar to that offered by the scheduled carriers, but because of their high-load capabilities the charter airlines could offer these services for about half the price charged by the regu­lar carriers. This competition from the charters, especially on the heavily traveled transcontinental routes, such as New York City to Los Angeles, caused the scheduled carriers to offer reduced fares of their own. American Airlines began with the Super-Saver Fare, and the other airlines soon entered with similar special fares. In only about six months every major city in the United States had some kind of special fare service. It has been calculated that if the passengers who flew in 1978 had paid the regular fares that would have obtained in a regulated environment, they would have paid some $2.8 billion more than they actually did with the special fares. In addition, the airlines made record profits with the lower fares because of the dramatically increased ridership. Super Savers and many other discount tickets carry advance-purchase and minimum-stay requirements and are nontransferable. The objective of these restrictions seems primarily to be the segmentation of market demand accord-ing to relative flexibility in traveling. Airlines maintain high fares for many business travelers, whose short trips and fre­quent schedule changes make it difficult to qualify under minimum-stay and advance-purchase restrictions. On the other hand, airlines offer low fares to travelers who have some flexibility in scheduling. In a word, Super-Saver fares are discriminatory. They do, however, represent a welfare improvement-the offering of new options, priced closer to marginal cost, is surely better than what we had-to customers who are able to take advantage of the lower costs. The restrictions they impose, however, have nothing whatever to do with cost savings. The ability to segregate consumers who have little or no flexibility in scheduling and charge them considerably higher prices than consumers who have more flexibility is a clear sign that market power in the airline industry has not yet been eliminated. Now that the CAB has removed the regulatory barriers that once stood in the way of basic-fare competition, why have these discriminatory fares persisted, even on heavily traveled routes where several carriers compete head to head? In the unregulated intrastate markets we saw very low basic coach fares, unencumbered by the discriminatory restrictions of the Super Saver. We expected to see a simi­lar fare structure emerge in competitive interstate markets, but so far this has not happened. To see why, we must ex­amine the role that free entry plays in the dynamics of the competitive process. The discount-fare offerings were the result, primarily, of the pressure created when the CAB expanded the markets in which charter carriers are free to enter. Charter carriers are still sufficiently encumbered by regulatory restrictions, however, that their services are limited primarily to con­sumers who are able to make travel arrangements well in advance of their departure dates. That is to say, charter carriers do not really provide effective competition against scheduled carriers in the market for business travelers. When the threat of new entry in a market is limited, the nature of competition among incumbent firms appears to be much different from what it is when there is an immedi­ate entry threat. Each incumbent firm knows that, by cut­ting basic coach fares, it could divert large quantities of coach-fare traffic from its rivals-which would displace lower-yield discount traffic on its own flights-provided that rival carriers did not match its initial coach-fare reduc­tion. Each incumbent also knows, however, that any coach­fare cut he initiates will be immediately matched by all other incumbents in the market, with the result that no di­version occurs and earnings levels go down for all firms. A prospective entrant into the same market faces a dif­ferent incentive structure. Fare reductions provide the most powerful tool by which entrants can gain a foothold in new m11rkets, and there is some evidence that consumers will favor a low-fare entrant even when its fare reduction is matched by the incumbent firms. The early low fares offered by Southwest Airlines in the Texas intrastate mar­ket were immediately matched by Braniff, for example, but Southwest soon had significantly greater loads than its older rival. Consumers seemed to perceive Southwest's responsibility for the fare reduction and to realize that the continued availability of low-fare offerings depended on Southwest's survival. While carriers were given broad flexibility with respect to pricing decisions very early on in the regulatory reform effort, liberalized entry conditions in markets for scheduled services are only now becoming a reality. It is this lag of entry freedom behind pricing freedom that explains the disappointing persistence of discriminatory rate structures in interstate markets. There are some hopeful signs, however. Entry by new scheduled-service carriers has now produced unrestricted coach-fare reductions in major transcontinental markets, Northeast-Florida markets, and many others. With new entry now taking place at an accelerated pace, we look for the spreading of coach-fare reductions in the months to come. Flexible Charter Flights One of my immediate concerns at the CAB involves trying to convince the board not to use its regulatory energies, which have accumulated over the last forty years of prescribing economic regulations for the industry, in new areas in which it might be tempted to regulate. For example, the CAB recently confronted the following debate regarding charter air-carrier service. In order to deal with the problem of unpredictable demand fluctuations, charter operators proposed to offer contracts that, rather than bind the passenger and carrier to a particular flight, would state alternative dates for the outbound or return flights or alternative cities of origin or destination. At least ten days before the flight the charter operator would choose the actual dates and cities and notify the passengers. In this way the charter operator could adjust flight sched­ules so as to create the desired balance between supply and demand. Because the charter operator would thus achieve a higher load factor on every flight, he would be able to offer fares that were substantially lower than those offered by other charter fares. Passengers who are willing to trade some uncertainty for the fare savings would then benefit from this operator's option plan. In response to this proposal by charter operators, a consumer group petitioned the board to pass a consumer­protection regulation that would deny charter operators the freedom to offer flexible departure times and places. The consumer group's concern was that some consumers might not understand the terms of the new contract offer­ings and might therefore suffer serious inconvenience from disrupted vacation plans. After carefully weighing argu­ments on both sides of the issue, the board decided­correctly in my view-that, while it could not guarantee that no traveler would ever be confused or inconvenienced by the availability of the new type of contracts, it simply could not stand in the way of consumers who were willing to give up some scheduling certainty in return for reduc­tions in air fares. Those consumers who do want fixed departure dates and cities can still obtain that type of ser­vice, and the forces of competition in the open market­place, the board reasoned, are much better able than the NOVEMBER-DECEMBER1979 board itself to determine the mix of the various types of charter and other services that will best serve the public. Modest as it was, the board's action represents a real step forward for a government regulatory agency. There are places where government regulations have to intervene, such as automobile emission standards and other areas that relate directly to public health and safety. There seems to be, however, the urge in Washington to pass a new regulation in response to each new citizen complaint. What is needed-and what we are now beginning to get-is a much more serious examination of proposed regulations to assure that those that ultimately are put into effect really do promise to yield benefits that are greater than the costs they impose. Sam Coats I agree with Dr. Frank's description of the government's urge to regulate at every opportunity and I am very eager for the sunset provisions in the present Federal Aviation Act to take effect and for the duties of the Civil Aeronau­tics Board to be taken over by other government agencies. Deregulation and Texas International My perspective on deregulation is the result of my com­ pany's experience in the past. Five years ago, Texas Inter­ national was a carrier that had accumulated $20 million in losses and had not shown a profit since 1966. We were also in a geographical area that invited competition from new entry carriers, and therefore we viewed deregulation with mixed feelings. On one hand, we could see our Texas-based route system eroding very quickly as new carriers came to share the market; on the other hand, we saw derugulation nationally as an opportunity for small airlines like Texas International to grow and prosper. We believed it was essential that the transition from a regulated industry to a nonregulated industry be gradual in order to give us time to adjust. Fortunately that has happened. For thirty years the American airline industry has been one of the most protected and overregulated of almost any industry in our economy. The status quo has been the rule. Between 1972 and 1978, for example, Texas International did not have a single new route awarded. Then came de­regulation. Since the beginning of 1979 we have had over one hundred new routes awarded, some of which we have no intention of flying. It would appear that the board is trying to create such an inventory of routes that no airline would be able to say it was being restrained from develop­ing new markets. Transition Period in Airline Industry There is a definite transition period now in the airline industry, moving from imperfect heavy regulation to imper­fect competition. No one should be led to believe that there will be no problems as a result of deregulation. As you move from the utility concept to a free-market concept there will be some dislocations, and one of the most apparent of those now is the problem of small-city service. Small com­munities will be seeing in the future a decrease in jet air­craft traffic and more commuter-type third-level traffic. This will occur until a type of jet aircraft becomes economi­cal to use in these areas or until a company like Southwest or Texas International is able to make it economical to serve such communities. Deregulation has not caused the wholesale rush to the major markets that many opponents predicted. Instead it has permitted carriers to evaluate and manage their route systems and deploy their resources more efficiently. As a result, all airlines have been reevaluating their route sys­tems. United, for example, has pulled out of New Orleans, and National has pulled out of Boston and Philadelphia, simply because they were able to evaluate carefully their own operating conditions and determine that these cities did not offer the same profit opportunities for their route systems that other cities offered. Service adjustments, therefore, have affected large cities as well as small towns. At present there are more new markets available than there is equipment to serve them. Consequently, it will be some time before new carriers move into areas of the country that are really desperate for price competition. Deregulation has caused a lot of rethinking about the airline's responsibility to a community. No longer is air service to be viewed as a public utility service. It is diffi­cult to go into a small community and say that the airlines will no longer be providing air service; however, it is neces­sary to have equal freedoms of entry and exit for free mar­ket forces to work. This will be a difficult point in re­writing the Federal Aviation Act. Political pressure, in an effort to close the exit provisions, will continue to fall on the representatives of communities that stand to lose air service. In the future there will be a period of adjustment in the airline industry, with each carrier finding what it can do best and how to do it. At Texas International we have quit trying to copy the big carriers, and we have realized that we can offer our own kind of product-low-cost air transporta­tion-at a profit. We have been able to take advantage of the tremendously high price elasticity in the airline business and take passengers not necessarily away from other airlines but from buses and private automobiles. Our airline now will either succeed or fail based on the type of management and product we can supply. No longer will the government manage the airline industry. Herbert D. Kelleher Deregulation, as it thus far exists under the new legisla­tion, is the heaviest regulation that we have ever experi· enced. One of the major reasons for this, as Dr. Frank re· ferred to, is the irresistible urge to regulate from Washing­ton. Our low fares are the result of Southwest Airline's pro­ductivity, and these very well-meaning rules have the poten­tial of holding up our airplanes and making it more difficult for us to operate efficiently. History of Regulation By looking at the history of U.S. economic regulation, one can see that the authority to regulate is sponsored by the industry affected and is designed and administered for that industry's supposed benefit, rather than for the benefit of the public as a whole. There is a natural, normal ten­dency for the regulators to be protective of the industry that they watch. If an airline or truck line were to go into bankruptcy, it would be a black mark on the regulators; so, they are very careful to make sure those things do not hap­pen. The result, therefore, is that regulation tends to perpe­tuate the worst in the industry. It is designed to preserve the weakest airline, the one that provides the poorest ser­vice, and the one that provides the worst economic reasons for being in existence. For example, look at the effect the CAB has had on the industry for the past forty years. In 1938 there were sixteen trunk airlines in the country, and in 1978 there were ten-a net loss of six under govern­ mental regulation. The only new carriers that came in during this time were those, like Texas International, that were regional or local service carriers whose primary re­ sponsibility was to bring passengers from the smaller cities to feed the trunk airlines in bigger cities. Between 1950 and 1974 there were seventy-nine applications to the CAB by potential new entrants into the airline industry, and not one of those applications was approved . The effect of this regulation was to create an immense concentration in the industry that will not be overcome for a long time. Costs of Regulation The forty years of government regulation of the airline industry cost the consumer untold billions of dollars. There were the direct costs of regulation, the cost to the con­ sumers in paying the higher fares, and the cost to the air­ lines in complying with many nonsensical regulations. There was also the problem of proving to the regulators that there was a high degree of price elasticity in the air­ line industry. The regulators said that if the airlines dropped their prices they would lose money; but it was proven over and over again that this was not true. South­ west could afford to offer lower fares because more people flew more often at those fares, and thus we used our equip­ ment and employees in a more productive manner. Even the way the CAB determined the fare structure was a prob­ lem. They based cost on average industry cost, and even if you were an efficient carrier you could not charge any less money. All of this also had the paradoxical effect of putting the protected existing trunk carriers in a poor financial condition. They had poor earnings, could not get financing, and got themselves into a hole by trying to shut off competition in the industry. A basic characteristic of the former Federal Aviation Act was that it created a Civil Aeronautics Board that was a government of men, not laws. The statutory limitations that governed the board were so broad that the board members could do almost anything they wanted to. No­ body was governing the industry except the people who happened to be appointed to the board by the president of the United States. A general vice of government regula­tion, in my view, is that a regulatory board can usually in­terpret the governing statutes as it desires. Its decisions can be influenced by politics and are not made strictly in consideration of the American consumer. Having one person, or one board, in Washington trying to determine what is best for the entire industry is not the solution. There is only one group that can decide how the nation's resources should be allocated to its satisfaction, and that group is composed of the nation's consumers. There may be some problems with deregulation at first, such as certain cities losing service. There have, however, been a hundred cities that have lost service only to gain it again through another carrier a short time later. People have to wait for the results before they can judge if deregulation is good or bad. Question and Discussion Period Question: Do you feel that regulation is inherently bad? Don't we need some kind of restraint to keep some com­munities of interest from developing into monopolies? What does the increasing scarcity and cost of fuel pose for the airline industry in the future? Kelleher: In answer to the first question : Southwest had problems with the former CAB, which would not allow carriers to lower fares, only to raise them. In a really competitive industry the effect of deregulation will be lower prices and not higher. Frank: If firms abuse the consumer by charging too high a price, it is an open invitation for someone else to enter the market and compete. There is no presumption that firms will be able to conspire and abuse consumer rights. Coats: The absence of the CAB does not create an absence of regulation. There are many agencies and regulations that are still applicable to airlines, and their regulatory influence will continue indefinitely. To touch on the question regarding the fuel situation: Texas International is starting off every month with a 15 percent to 20 percent shortfall from our traditional suppliers. In the future this may make us more selective about scheduling and will probably increase prices as we have to look for fuel on the spot markets. Frank: An example of a need for federal regulation in­volves the noise levels of aircraft. Consumers will not refuse to fly a plane because it is noisy, and other mar­ket forces will not lead to a reduction in noise. In this instance, then, the government must have regulations to protect people who live in the vicinities of airports. Coats: The Congress is considering noise regulations, and here is a good example of what often happens with good government intentions. On our DC-9 aircraft the new NOVEMBER-DECEMBER 1979 noise regulations will require $500,000 an aircraft for certain modifications, will decrease fuel efficiencies by 3 to S percent, will reduce payload, and will reduce the noise level by an amount that no human ear can discern. This is a good example of a very well-meaning regulation that turns out to be very wasteful. Kelleher: A report by the Joint Economic Committee of the U.S. Congress relates very much to what Mr. Coats is saying. The report said that government regulations almost always fail to take into consideration a cost­benefit ratio. Question: It would appear that people in small communi­ties will now have to be satisfied with no service or perhaps with second-class service. Can the airline indus­try make profits in these smaller areas? Coats: Traditionally, airlines have been under a subsidy program to fly into small areas. A big problem comes from the type of equipment. Most airplanes are just too large to provide service to a small area economically. These communities need a smaller aircraft service that can fly frequently to the major hubs of air routes. Question: Why don't the major airlines fly small aircraft into these smaller communities? Coats: Texas International has tried this in the past and not found it successful. First of all, there are labor prob­lems with pay scales when our pilots fly the smaller air­craft. Second, we have more market opportunities for our present aircraft than we know how to fill. We have to recognize our limited resources and capacity. Under the new Federal Aviation Act, however, the CAB will be determining essential levels of air service for some five hundred cities in the United States. These cities will be provided essential service even if it takes a subsidy to get a carrier into the area. Frank: Before the new Federal Aviation Act was passed in Congress, there was a good deal of concern about the loss of service to smaller communities, and had this sub­sidy guarantee not been written into the act it might not have passed at all. In the past government has paid up to $70 million in subsidies. Even at that level the new entries provided may prove more beneficial because of cost savings in reduced fares. Question: Do all of the airlines like deregulation? Coats: A small airline like Texas International views it very favorably . Deregulation has given us the opportunity to do many things we were not able to do under the old system. The traditional carriers, however, view it dif­ferently since they have been subjected to new entries into their markets and more competition. Question: If AMTRAK were made more efficient, who would suffer more, the big or small airlines? Coats: The competition from AMTRAK is related more to surface transportation (buses and automobiles). Research Report Series 1978-3. Major Trends in Population Growth in Texas John A. Burghardt. ISBN 87755-232-0. $4.00. 1978-4. Intercensal State and Local Population Estimates: Methods, Performance, and Texas Applications John A. Burghardt and Vincent J. Geraci. ISBN 8775 5-230-4. $4.00. 1979-1. Net Migration into Texas and Its Regions: Trends and Patterns Thomas R. Plaut. ISBN 87755-239-8. $4.00. Bureau of Business Research • The University of Texas at Austin Austin, Texas 7 8712 The demographic facts about the changing age compo­sition in our population are clear. Nationwide, the propor­tion of older people (conventionally, those 65 and over) in the population has doubled in this century and will increase from the current 10 percent to perhaps 17 percent early in the next century. One-third of the 23 million older people are "very old" (over age 75), and one in ten is 85 or older. If we add to the conventionally old and very old populations the "young old" (those between the ages of 55 and 64), the older population of the nation essentially doubles-46 million people and 20 percent of the total population. By the mid-l 970s, the average life expectancy at birth in the United States was about 72 years-69 for males and 76 for females. This gender difference produces an increasingly skewed distribution of males and females in the later years; for example, at age 85, females outnumber males more than two to one. While average life expectancy is increasing, the maxi­mum length of the life span has increased very little. Actu­aries continue to consider life beyond age 94 as a statisti­cally rare event. The increasing number of older people in our population, therefore, reflects not extensions of the life span but the increased probability of living into the later years. By the mid-1970s, 74 percent of newly born people could expect to survive to age 65 and then live six- George L. Maddox is Professor of Sociology and Director, Center for the Study of Aging and Human Development, Duke University. The article is based on a public address, "The Challenge for Re­search in Texas," given at the Annual Gerontology Research Con­ference, cosponsored by the Committee for Gerontology and the Institute for Human Development and Fam11y Studies, University of Texas at Austin, June 28 and 29, 1979. Our Future Selves Aging in America George L. Maddox teen years longer; 52 percent to achieve 75 years and then live ten years longer; and 23 percent to achieve 85 years and then live six years longer. A Revolutionary Challenge to Social Institutions The consequences of growing old are not altogether benign. An aging population increasingly risks illness, impairment, poverty, and social isolation. About 80 percent of all older people have at least one chronic condition, and about 20 percent have a chronic condition that signi­ficantly impairs their ability to carry out their usual social roles without help. Five percent are in institutions that offer long-term care, and a majority of these are severely impaired and dependent; at least another 5 percent to 8 percent who live in the community are also severely im­paired and dependent. While most older people are not accurately characterized in such negative terms, the fact is that the demand for health services and social services increases with age. The average health cost per capita of people 65 and over in the mid-1970s was $1,360, three times more than the cost for adults in general. Various health and social support pro­grams for older people currently cost $112 billion-or 5 percent of the gross national product-and significant increases in cost are forecast for the decades ahead. Two­thirds of the health costs in later life are purchased with public dollars, although older people contribute to the public funds used. The important points to keep in mind are that the requirements for health and social services change with age; the age composition of our population is shifting dramatically toward the upper range; and a NOVEMBER-DECEMBER1979 challenge to existing social arrangements for meeting our national wants and needs inevitably follows. Income Maintenance The architects of the Social Security system built a politically and economically viable system in 1935 that has served us well; but they never intended for Social Security to provide for all the economic needs of the retired, widowed, and disabled. Nor could they have anticipated the full implications of the increase in older proportions of the population, the high rate of survival of the very old, an economy characterized by inflation and unemployment, and the popularity of early retire­ment. Today, 25 percent of our older people live in or near poverty. In the years ahead, adequately secured income in later life is going to cost a great deal more than we have anticipated, as much as 250 percent to 300 percent more in the next several decades. Health Care Modern, high-technology medicine concentrated in medical center hospitals has performed miracles, but at the same time preventive care, primary care, and community-based care have languished. Less than 1 percent of Medicare funds, for example, are used to purchase community-based services. Long-term institutional care has earned a reputation for high cost and variable quality. In this country there are more than 22,000 nursing homes with over a million beds occupied mostly by older people at a cost of over $10 billion annually. Medical schools have done little to teach students about, much less to motivate them toward, geriatric care. The continuing neglect of gerontological and geriatric training in profes­sional education generally is remarkable in light of the inevitably changing pattern of demand for health care implied by the aging of the population. Transportation When older people are asked to specify their special needs, they place transportation high on the list. We are already aware that getting people in rural areas to the services they require is a difficult and unsolved problem. Soon the "suburban problem" will be added to the "rural problem." A growing number of impaired older people without private transportation live in the suburbs, but health and social services are not located there. Recent research in Cleveland by the U.S. General Accounting Office has documented that impaired older people in the central city are more likely to receive needed services than are equally impaired older people in the suburbs. Changing Ideas and Expectations A less obvious but potentially more important change than that involving social institutions is occurring in our thinking about later life. Science has contributed to this change in important ways. Longitudinal studies at Duke University have documented, for example, the lives of middle-aged and older individuals who experience rela­tively normal, satisfying, and satisfactory lives. This re­search has pioneered in developing a new, realistic image of what it means to grow older. It has stressed that there is no such thing as the elderly-people do not become more alike as they age. In addition, this research shows that middle-aged people who have not been able to cope well with challenges, who have not liked their work or their children, and who have been threatened by illness and death will become older people who do not cope well with challenges, who do not like retirement or their children, and who are threatened by illness and death. Most older people manage the crises of life-retirement, the death of a spouse, illness, and the departure of children from the home-very well. We also found an unused potential among older people. While illness and dependency may be correlates of aging, we found that at least six out of every ten older people are free from impairments. Dementia (a significant loss in orientation to reality) is experienced by only five out of every hundred people over the age of 65 and only twenty out of every hundred of those over 80. Measured physiolo­gical performance decreases by 1 percent a year in later life, but the base from which this decline begins can be improved, and physical capacity can be improved at any age. Children and young people have to have opportunities to grow and to develop their potentials, but the same is also true of older people. What we see in the behavior of older people is probably as much-or more-a commentary on those of us who are responsible for environmental opportunities than a commentary on older people. It is no surprise that disengaged, uninvolved older people tend to be found in communities that provide limited opportunities for older people to be engaged and involved in community life. Older people's changing consciousness about themselves parallels new scientific findings about later life. More and more individuals are arriving at old age with a reasonably secure income, adequate health, a record of political participation, and the expectation of remaining socially active and of having their needs taken seriously. The fact is that older people, on average, are more politically active than individuals in their twenties. Consequently, the needs of older people will probably receive increasing attention from legislators. Active older people have learned an im­portant lesson about political effectiveness in a society that operates on the principle of "interest-group liberalism": organize. While this country has not yet developed a poli· tics of age, the potential for political confrontation over age-related issues is considerable if communities ignore the rising self-consciousness of older Americans. Fortunately, up to the present, older voters in the United States have provided a relatively rare illustration of political altruism; their self-interest has tended to be tempered with an awareness of the needs of future generations. Older people Aging in the Sunbelt and in Texas The population of Texas and the South and South­west, like that of the nation, will become progressively older. Some differences in regional and national age structures, however, can arise from two factors: differ­ences in fertility rates and migration between regions. For example, because of a relatively young population and high concentration of Hispanics in Texas, the birth­rate is slightly above the nation's. Consequently, there is a greater proportion of younger people and a smaller proportion of older people in Texas than in the country. More important than fertility differences, however, are the effects of migration on regional age distributions. Typically, migrants tend to be younger than the existing populations in the sending or receiving regions. Rapidly growing areas, such as Texas, thus attract young mi­grants, and the population becomes relatively younger. Declining areas, on the other hand, become relatively older as younger people leave. In fact, the proportion of persons over 65 has grown less quickly in Texas than in the nation (see table 1). Retirement migration, while relatively unimportant overall, tends to be strongly focused on certain areas and can lead to a relatively older population. Retirement migration into the Carolinas, Arizona, New Mexico, and, of course, Florida has been especially high. Within Texas, the above effects are clearly evident. Most population centers and college and military towns have a relatively young population because of high Table 1 Percentage of Population Age 65 and Over in Sunbelt States Population Percentage growth rate State 1970 1978 change 1970-1978 Virginia West Virginia North Carolina 7.8 11.l 8.1 9 .1 12.0 9.9 16.7 8.1 22.2 10.7 6.6 9.7 South Carolina 7.3 8.8 20.5 12.6 Georgia Florida 8.0 14.5 9.3 17.6 16.3 21.4 10.8 26.5 Kentucky Tennessee 10.4 9.7 11.1 11.0 6.7 13.4 8.6 11.0 Alabama 9.4 10.9 16.0 8.6 Mississippi Arkansas 10.0 12 .3 11.2 13.4 12.0 8.9 8.4 13.6 Louisiana 8.4 9.3 10.7 8.8 Oklahoma 11.7 12.4 6.0 12.5 Texas 8.8 9.7 10.2 16.2 New Mexico 6.9 8.6 24.6 19.2 Arizona 9.1 11.4 25.3 32.6 California 9.0 10.1 12.2 11.6 Sunbelt total 9.5 10.9 14.7 13.4 U.S. total 9.8 11.0 12.2 7.3 Source: U.S. Department of Commerce, Bureau of the Census, Current Population Reports, series P-2 5, no. 794, March 1979, and no. 799, April 1979. growth rates and net in-migration (see table 2). Hispanic border towns are also relatively young because of very high birthrates. Most small towns and rural areas, how­ever, have traditionally had high net out-migration, which has led to a relatively older population. Most of these areas, however, are now growing, and this growth should lead to a younger population. Unlike its effect in other Sunbelt states, retirement migration into Texas is not especially important. Much of this migration into Texas is concentrated on the border regions (especially the Lower Rio Grande Valley) but has not been important enough to lead to a rela­tively older population. Thomas R. Plaut Research Associate, Bureau ofBusiness R esearch Table 2 Percentage of Population Age 60 and Over in Texas Grouping Area 1975 Population centers Amarillo 12.8 Beaumont-Port Arthur-Orange 13.9 Corpus Christi 11.2 Dallas-Fort Worth 11.7 Galveston-Texas City 12.4 Houston 9.7 Midland 10.3 Odessa 9.7 San Antonio 11.7 Total 11.1 Small cities and rural areas Abilene 16.3 Longview-Marshall 17.I San Angelo 16.1 Sherman-Denison 20.6 Texarkana 17.6 Tyler 16.8 Waco 18.0 Wichita Falls 15.2 Nonmetropolitan areas adjacent to SMSAs 20.3 Other nonmetropolitan areas 19.8 Total 19.3 College and military towns Austin 10.9 Bryan-College Station 10.3 Killeen-Temple 9.0 Lubbock 10.1 Total 10.3 Hispanic Border Towns Brownsville-Harlingen-San Benito 12.2 El Paso 8.6 Laredo 11.6 McAllen-Pharr-Edinburg 11.0 Total 10.2 Texas total 13 .3 U.S. total 14.8 Source: Lynne L. Norton, "Age Distribution of the Texas Popu­lation," Texas Business R eview, September-October 1979, p. 147. NOVEMBER-DECEMBER 1979 are, after all, members of families that are, by definition, multigenerational; and experience in the mature years provides many illustrations of the intergenerational inter­dependence and the practical wisdom of altruism as an essential condition of community life. Older people are not problems, they have problems. Some of those problems are created by the attitudes of professionals and of all of us as citizens who make political decisions about how the goods, services, and opportunities of communities will be distributed. Moreover, the problems later life. This optimism that impairments and unnecessary dependency can be minimized does not deny that all lives have a common end result. The paths to that result, how­ever, are demonstrably varied and modifiable. An increasing number of clinicians have demonstrated their ability to increase the capacity of impaired older people for appro­priate independent living. A good rule for any clinician working with older people is to demonstrate the possibil­ities rather than to assume that an impairment is unmodi­fiable. More and more medical schools, and professional Active older people have learned an important lesson about political effectiveness in a society that operates on the principle of 'interest-group liberalism': organize. of older people will be our problems just a few years from now unless institutional change is achieved. Realistic Optimism about the Future of Aging There are many signs that there is a realistic basis for optimism about the future of aging in this country. Government is responding at many levels and in some useful ways. There have been three White House confer­ences on aging. There is a National Institute on Aging; a Center for the Study of the Mental Health of the Elderly in the National Institute of Mental Health; an Older Ameri­cans Act; an Administration on Aging; a Federal Council on Aging; a Counselor to the President on Aging; Medicare and Medicaid; special committees on aging in both houses of Congress; and a network of services for older people in every state and in most communities. These developments are not the only solutions to problems related to aging, but they are positive signs of substantial and relevant public response . Professional organizations are also beginning to respond in relevant ways. The Institute of Medicine of the National Academy of Sciences has issued an excellent report on the steps needed to reduce unnecessary dependence in later life and another report recommending guidelines for de­veloping medical education in geriatric care. Professional societies are regularly including gerontological and geriatric topics on their programs and offering opportunities for continuing education. The Gerontological Society has an active membership of 5,000 and is growing. Regional and state gerontological societies are proliferating. A profes­sional is increasingly less likely, when faced with an older client with a health problem, to say, "What do you expect at your age?" Therapeutic optimism is increasingly the rule among health professionals, and such optimism is the basis for intervention in the interest of maintaining independence in schools in general, are allowing older people to discover the difference that the application of this rule can make in their lives. Some medical faculty members say that medical students are not interested in geriatrics, but evi­dence that this is an uninformed opinion is increasing. Social Security was never intended to provide the sole source of retirement income. It certainly does not do so now and will not do so in the years ahead, even with signi­ficant increases in taxes. Private pensions and personal financial assets will continue to be important unless income is redistributed over the life cycle through taxation that is many times higher than the social security taxes currently paid or contemplated for the future. There is a growing body of opinion that we must rethink current retirement policy that encourages early departure from work. The minimum retirement age for receiving full social security benefits could realistically be raised from 65 to 68. In spite of the fact that recent legislation has raised the age of mandatory retirement from 65 to 70, however, the continued preference of most older people in the United States is for earlier rather than later retirement. Learning as a lifetime activity is being rediscovered. Recently, the Institute for Learning in Retirement was created at Duke University. Similar developments are evi­dent in many institutions of higher education and in many communities as the interests in and capacity for lifetime learning among older people have become more apparent. Lifetime learning means many things to older people. For some, continued learning is an end in itself. For others, it is an avenue to a new career as a paid worker or as a volunteer in the community. There is one potential benefit of learning as a lifetime affair that tends to be overlooked. In the past, adults have found it easy to withdraw support of public education when the education of their own children is completed. This lack of interest would be less likely if schools were for everyone in the community and not just for children. A community school can claim and expect community support. Inflation and the Young College Consumer Rapidly rising prices have been an economic fact in re­cent years and have been acknowledged by several national opinion polls as the country's most serious problem. In a recent survey of approximately 550 students at the Univer­sity of Texas at Austin, nearly four-fifths agreed that the present rate of inflation was a very important problem for the country; however, fewer than half of these same young consumers said that it was a very important problem in their own lives. When asked if inflation had influenced their spending habits, slightly more than two-fifths of those sur­veyed indicated that they were affected often or always, another two-fifths indicated that their spending habits were sometimes influenced, and fewer than one-fifth stated that their spending habits were seldom or never influenced by inflation. Attempting to get the most for their dollars was the most important strategy these students were using to cope with inflation. Government overspending was thought to be the most important cause of the present rate of inflation, and the major responsibility for lowering the rate of inflation was assigned to government. The student respondents cited co­operation among business, government, and consumers as the most important remedy for the current rate of inflation. The Sample The young consumers participating in this study were enrolled in "Family Financial Problems" (Home Economics 322) during the spring semester of 1979. The closed-end questionnaire they answered covered the importance of inflation, the causes of inflation, the remedies for the exist­ing rate of inflation, and the strategies that the individual students use to help cope with inflation. Sue Alexander Greninser, Vickie Hampton, and Karrol Kitt are asdstant professors in the Department ofHome Economics, Univer­sity of Texas at Austin. Sue Alexander Greninger Vickie Hampton Karrol Kitt Since nearly half of the respondents were business majors and because educational background might have a significant influence on the students' perceptions of infla­tion, data are available for the total sample as well as for subsamples of business and nonbusiness majors. While the age of the respondents ranged from 19 through 55 years of age, 88 percent of the respondents were younger than 23. The total sample was evenly divided between males and females, but 65 percent of the business majors were males and only 37 percent of the nonbusiness majors were males. Over 90 percent of the respondents were white, and only 12 percent reported that they were married or living with a person of the opposite sex. Almost 90 percent of the respondents were college juniors and seniors. In addition to business majors, a large number of other majors were represented in the sample. Nearly 80 percent of the respondents reported that they were currently living in off-campus housing, and over 80 percent owned an automobile. Thirty-five percent of the sample were currently employed, and the average work week was 20 hours. Respondents reported a median annual income before taxes of slightly more than $2,800, with business majors having a median income that was 19 per­cent higher than that for nonbusiness majors. Since the respondents were primarily young, family background characteristics are of special interest. These respondents grew up primarily in urban areas. About 6 per­cent had lived only on farms or ranches or in towns of fewer than 2,500 in population, and more than 50 percent had lived only in cities with populations of over 50,000. They perceived their parents' annual income before taxes to be a median of $39,280. Nearly 75 percent of their fathers were employed in professional, technical, or mana­gerial positions or were self-employed, while fewer than 15 percent of the parents were blue-collar workers. Slightly more than half of their mothers had been gainfully em­ployed while the students were growing up. Of the mothers who had been employed, nearly 60 percent worked full NOVEMBER-DECEMBER 1979 time, and the average number of years worked was nearly ten. Forty-six percent of the working mothers were em­ployed in professional, technical, or managerial positions or were self-employed, 45 percent were employed in sales or clerical positions, and the remaining 9 percent were blue­collar workers. An interesting relation emerged between the incomes and occupations of the parents of the business and nonbusi­ness majors. In general, business majors perceived their parents' family incomes before taxes to be about $3,000 more than the corresponding figure for nonbusiness majors, but a smaller percentage of both fathers and mothers of business majors were employed in professional, technical, or managerial positions or were self-employed. Mothers of business majors were less apt to have worked outside the home than mothers of nonbusiness majors. Of the mothers who had been employed, those of business majors were less apt to have worked full time than were mothers of nonbusi­ness majors. Impact of Inflation Respondents overwhelmingly perceived inflation to be much more important to the country than to their own lives. Forty-five percent of the respondents said inflation was very important in their lives, and an additional 38 percent said it was somewhat important. Nearly 80 percent reported that they felt inflation was very important for the country, and another 11 percent reported it was somewhat important to the country. These results support the find­ ings of national opinion polls that indicate inflation is a very important national concern. Business majors were more apt than nonbusiness majors to rate inflation as very important both in their own lives and to the country. Slightly more than 40 percent of the sample indicated that inflation often or always influenced their spending habits, while only 16 percent said that inflation never or seldom influenced their spending habits. Other studies, including the American Council of Life Insurance Survey of Public Attitudes and the General Mills Study of the American Family and Money, 1 have also reported that in­flation has greatly influenced consumer spending habits. The respondents to our survey, however, indicated that their spending habits have been influenced considerably less than have the spending habits of the respondents in national samples. This difference may be the result of the student population in our survey. Even though business majors thought that inflation was a more important problem in their lives than did nonbusi­ness majors, business majors indicated that their spending habits were actually influenced by inflation less frequently than were those of nonbusiness majors. Coping Strategies Since many consumers do think that inflation influences their spending habits, knowledge of how these consumers are coping with the problem is useful. In our study, respon­dents were asked to indicate how important ten different coping strategies were in their lives (see table 1 ). Getting the most for their dollars and budgeting were the two most important coping strategies used by these respondents. Data from several other studies show similar strategies.2 Respondents in the current study also indicated that using credit and lowering their levels of living were the least important methods they were using to cope with inflation. The low importance of using credit as a coping strategy contradicts much of the current thinking of eco­nomic reporters. 3 Coping strategies that were more impor­tant for business majors than for nonbusiness majors in­clude increasing income, making investments, and using credit. Causes of Inflation The respondents also rated twelve reported causes of inflation (see table 2). In accordance with current economic theorizing,4 eight of the twelve causes of inflation listed were thought to be somewhat or very important. Govern­ment overspending was perceived to be the most important cause of inflation, while too much government interference and not enough government control were thought to be the least important causes. In another recent study on infla­tion, the American Council of Life Insurance Survey of Public Attitudes reported that government was thought to be most responsible for current economic problems; how­ever, specific governmental roles were not delineated. Respondents to our survey also rated lagging productivity relatively low as a cause of inflation, in contrast with current economic thinking. 5 Business majors perceived government overspending, too much government interference, labor unions, the money Table 1 Strategies for Coping with Inflation Mean score• Total Business Nonbusiness Rank Strategy sample majors majors Get the most for my dollars 4.7 4 .7 4.7 2 Budgeting 4 .6 4 .5 4.6 3 Conserve resources- avoid waste 4 .3 4. 3 4.4 4 Increase my income 4.2 4 .4 4 .1 s Do own repair work and maintenance and increase house­ hold production 4 .0 4 .0 4 .0 6 Make investments 3.8 4 .0 3.7 7 Do without -buy only necessary things 3.3 3.3 3.4 8 Use less credit 3.3 3.1 3.4 9 Use credit 2 .8 3.0 2 .6 10 Lower my level of living 2 .8 2 .8 2.8 •s = very important, 4 = somewhat important, 3 = undecided, 2 ­somewhat unimportant, and 1 = very unimportant. supply, and the attitude of the American people in always wanting an increased level of living to be slightly more important than did nonbusiness majors; the greatest differ­ence between the two groups was in their thinking about labor unions. Nonbusiness majors, on the other hand, con­sidered business, scarcity of resources, and not enough government control to be slightly more important than did business majors. Remedies for Inflation When asked to rank who they thought should assume the major responsibility in lowering the rate of inflation, respondents ranked government first , followed by business, consumers, and labor. Well over half said that government should assume this responsibility, and slightly more than a fourth thought that business should be responsible. Non­business majors were much more apt than business majors to think that the major responsibility should be assumed by business, while business majors were more likely than non­business majors to think that government should assume the major responsibility. Nine reported remedies for the current rate of inflation were listed (see table 3). While government overspending was thought to be the most important cause of inflation, reducing government spending was considered to be only the third most important remedy for the current rate of in­ flation. The two most important remedies were perceived to be cooperation among business, government, and con­ sumers and development and conservation of resources. Respondents thought that reducing their levels of living and increasing taxes were the least important remedies for the current rate of inflation. Table 2 Causes of Inflation Mean score* Total Business Nonbusiness Rank Cause sample majors majors Government over­ spending 4.4 4.4 4.3 2 Money supply 4.3 4.4 4.2 3 Balance of trade 4.2 4.2 4.2 4 Business 4.2 4.1 4.2 5 Scarcity of resources 4.1 4.1 4.2 6 Expectations of con­ tinued inflation 4.1 4.2 4.0 7 Attitude of American people-always want­ing an increasing level of living 4.0 4.0 4.0 8 Consumer behavior 4.0 4.0 4.0 9 Labor unions 3.8 4.0 3.7 10 Productivity of workers 3.6 3.6 3.6 11 Too much government interference 3.4 3.5 3.3 12 Not enough govern­ment control 3.3 3.2 3.4 •5 = very important, 4 = somewhat important, 3 = undecided, 2 = somewhat unimportant, and 1 =very unimportant. NOVEMBER-DECEMBER 1979 The following remedies were rated as being more impor­tant to business majors than to nonbusiness majors: reduc­ing government spending, decreasing government regula­tions, increasing taxes, controlling interest rates, and con­trolling the money supply. The greatest difference between the two groups of majors was the matter of increasing taxes. Nonbusiness majors were more likely than business majors to think that the more important remedies were wage and price controls; cooperation among business, gov­ernment, and consumers; reducing their own levels of living; and the development and conservation of resources. Notes l. Cu"ent Social Issues: The Public's View (Washington, D.C.: American Council of Life Insurance, April 1979), p. 4; and Yankelo­vich, Skelly and White, Inc., The General Mills American Family Report 1974-75: A Study of the American Family and Money (Minneapolis: General Mills Consumer Center, 1975), p. 16. 2. "Food Prices Have Altered Shopping Habits," Advertising Age, May 26, 1975, p. 59; William J. Lundstrom, Donald Sciglimpaglia, and William G. Zikmund, "Consumer Coping Behavior in an Infla­tionary Economy," Akron Business and Economic Review 9, no. 3 (Fall 1978): 48, 52; Zoher E. Shipchandler, "Inflation and Life­Styles-The Marketing Impact," Business Horizons 19, no. 1 (Feb­ruary 1976): 90-96; and Yankelovich, Skelly and White, Inc., The General Mills American Family Report, pp. 20-24. 3. Lindley H. Clark, Jr., "Consumers Get Used to Price Increases, Don't Slow Spending as They Once Did," Wall Street Journal, October 3, 1978, p. 40; Jerry Edgerton, "Smashing Old Ideas About Money," Money, June 1979, pp. 39-45; Jeremy Main, "Fighting Back," Money, June 1979, pp. 46-49 ; and Leo J. Shapiro and Dwight Bohmbach, "Americans to 'Tough It Out' in Inflation Fight: Study," Advertising Age, November 20, 1978, pp. 24, 28. 4. A Conversation with the Honorable Barry Bosworth : Coping with Inflation (Washington, D.C.: American Enterprise Institute for Pub­lic Policy Research, 1978). 5. Ibid., p. 3; and Amitai Etzioni, "The Inflation Habit: A Case of Stunted Growth," Psychology Today 12, no. 12 (May 1979): 14­ 15. Table 3 Remedies for the Current Rate of Inflation Mean score* Total Business Nonb usiness Rank Remedy sample majors majors Cooperation among business, government and consumers 4.5 4.5 4.6 2 Development and con­ servation of resources 4.4 4.3 4.5 3 Reduce government spending 4.3 4.4 4.3 4 Control money supply 4.1 4.2 4.1 5 Control interest rates 3.8 3.9 3.7 6 Wage and price controls 3.7 3.5 3.8 7 Decrease government regulations 3.3 3.3 3.2 8 Reduce level of living 2.8 2.6 2.9 9 Increase taxes 2.6 2.8 2.5 *5 =very important, 4 =somewhat important, 3 = undecided, 2 = somewhat unimportant, and 1 =very unimportant . Index: Texas Business Review Volume 53 (1979) Evan E. Anderson Joanne P. Austin Helen R. Baca Calvin P. Blair Floyd S. Brandt Susanne Ethridge Cannon Gilbert Cardenas Robert J. Clark Sam Coats Claud M. Davidson Marianna Di Paolo Diane E. Downing E. Linn Draper Lowell Dworin George G. Eddy Bruce H. Fairchild William L. Fisher James A. Fitzsimmons Charles T. Franckle Robert Frank William P. Glade Norval D. Glenn Stuart Greenfield Sue Alexander Greninger Vickie Hampton Donald A. Hicks Cora L. Hilliard Deborah G. Jones Carol E. Kasworm Martin T. Katzman Herbert D. Kelleher Allan G. King Karrol Kitt Larry W. Lake George L. Maddox Author Index Employment in Texas Manufacturing: 19 50-197 5 Laredo: Trade Center on the Border Computers and Small Business, Part II : An Interview with Harry A. Levine Mexico's Economic Development and Relations with the United States Planning for Small Business Tax and Expenditure Limitation Activity in Texas Mexican Illegal Aliens in the San Antonio Labor Market National Demographic Patterns and Texas Public School Enrollment Rate Deregulation in the Airline Industry: A Panel Discussion Retail Adjustment to Rural Industrialization Dialect Differences in Texas Economic and Free Enterprise Education in Texas Nuclear Power: An Exchange of Views Manufacturing in Texas: How Recession Proof? The Small Business Owner: What It Takes to Succeed Capital Needs of Investor-Owned Electric Utility Companies in Texas: 1976-1985 Oil and Gas in Mexico Managing Service Capacity Interest Rate Ceilings and Consumer Credit Rate Deregulation in the Airline Industry : A Panel Discussion Prospects for Mexico's Socioeconomic Growth Profile of the American Small Businessman Texas Border Communities and the Peso Devaluation Inflation and the Young College Consumer Inflation and the Young College Consumer The City as Magnet: Residential Choice in Dallas Employee Development in the 1980s The Industrial Screening Matrix : A Tool for Industrial Developers Employee Development in the 1980s National Demographic Patterns and Texas Public School Enrollment Rate Deregulation in the Airline Industry: A Panel Discussion Unemployment Consequences of Illegal Aliens from Mexico Inflation and the Young College Consumer Enhanced Oil Recovery Our Future Selves : Aging in America Jan.-Feb., p. 5 Mar.-Apr., p. 57 July-Aug., p. 133 Mar.-Apr., p. 39 July-Aug., p. 117 Jan.-Feb., p. 16 Nov.-Dec., p. 187 Sept.-Oct., p. 149 Nov.-Dec., p. 206 July-Aug., p. 137 Sept.-Oct., p. 169 Jan.-Feb., p. 26 Nov.-Dec., p. 177 May-June, p. 95 July-Aug., p. 113 Jan.-Feb., p. 13 Mar.-Apr., p. 29 July-Aug., p. 125 Jan.-Feb., p. 23 Nov.-Dec., p. 206 Mar.-Apr., p. 47 July-Aug., p. 129 Mar.-Apr., p. 54 Nov.-Dec., p. 215 Nov.-Dec., p. 215 May-June, p. 81 Sept.-Oct., p. 167 May-June, p. 98 Sept.-Oct., p. 166 Sept.-Oct., p. 149 Nov.-Dec., p. 206 Mar.-Apr., p. 43 Nov.-Dec., p. 215 Sept.-Oct., p. 159 Nov.-Dec., p. 211 Douglas J. Manifold Charles L. McClenon James W. McKie Robert D. Mettlen Loma Aldrich Monti Loma Aldrich Monti Loma Aldrich Monti E. Victor Niemeyer Lynn L. Norton Kenneth W. Olm Thomas R. Plaut Thomas R. Plaut Joseph E. Pluta Joseph E. Pluta Joseph E. Pluta David F. Prindle Henry M. Rollins Stanley R. Ross Karl M. Schmitt Diane H. Schwartz Jean S. Spencer George A. Thoma Alejandro Velez Alfred J. Watkins Charles N. Weaver Murray L. Weidenbaum Ruth Weiner C. M. Woodruff, Jr. Charles P. Zlatkovich Charles P. Zlatkovich Charles P. Zlatkovich Charles P. Zlatkovich The Industrial Screening Matrix: A Tool for Industrial Developers Dialect Differences in Texas U.S. Oil Geography in 1990: Scenarios and Implications Residential Mortgages: Prospects for 1979 Economic Outlook for Texas in 1979 The Uses and Misuses of Metropolitan Area Employment and Unemployment Numbers A Successful Small Business: An Interview with Ginny Geery U.S. Oil Geography in 1990: Scenarios and Implications Age Distribution of the Texas Population Computers and Small Business, Part II: An Interview with Harry A. Levine Corpus Christi: Gateway to Padre Island Recent Trends in Net Migration into Texas and Its Regions Urban Fiscal Strain and the Health of Large Texas Cities The Federal Economic Stimulus Package: Effect on Large Texas Cities The Fiscal Health of Medium-Sized Cities: A Regional Perspective Petroleum and Politics: The Texas Railroad Commission The Plight of the Successful Small Business Key Issues in Mexican-United States Relations: The Border That Unites and Divides Us The Government and Politics of Mexico Natural Resource Taxation in Texas The Industrial Screening Matrix: A Tool for Industrial Developers U.S. Agricultural Policy as a Weapon against OPEC Hispanic Fertility in Texas The Socioeconomic Status of Texas Cities and Suburbs Profile of the American Small Businessman The Future of Business Regulation Nuclear Power: An Exchange of Views Geothermal Ground Water in Central Texas: A Potential Energy Resource The State Tax Burden in Texas Longview-Marshall: An Industrial Center Tyler: Promising a Rose Garden Texas Planning Regions: An Economic Summary Title Index Age Distribution of the Texas Population Capital Needs of Investor-Owned Electric Utility Companies in Texas: 1976-1985 The City as Magnet: Residential Choice in Dallas Computers and Small Businesses, Part II: An Interview with Harry A. Levine Corpus Christi: Gateway to Padre Island Dialect Differences in Texas Economic and Free Enterprise Education in Texas Economic Outlook for Texas in 1979 Employee Development in the 1980s Employment in Texas Manufacturing: 1950-1975 Enhanced Oil Recovery The Federal Economic Stimulus Package: Effect on Large Texas Cities NOVEMBER-DECEMBER1979 Lynne L. Norton Bruce H. Fairchild Donald A. Hicks Kenneth W. Olm and Helen R. Baca Thomas R. Plaut Marianna Di Paolo and Charles L. McClenon Diane E. Downing Loma Aldrich Monti Carol E. Kasworm and Cora L. Hilliard Evan E. Anderson Larry W. Lake Joseph E. Pluta May-June, p. 98 Sept.-Oct., p. 169 May-June, p. 65 Jan.-Feb., p. 21 Jan.-Feb., p. 1 May-June, p. 70 July-Aug., p. 109 May-June, p. 65 Sept.-Oct., p. 146 July-Aug., p. 133 Mar.-Apr., p. 61 Sept.-Oct., p. 141 Jan.-Feb., p. 8 May-June, p. 89 Nov.-Dec., p. 192 Nov.-Dec., p. 181 July-Aug., p. 119 Mar.-Apr., p. 51 Mar.-Apr., p. 35 Sept.-Oct., p. 163 May-June,p.98 Nov.-Dec., p. 173 May-June, p. 79 May-June, p. 85 July-Aug., p. 129 Nov.-Dec., p. 203 Nov.-Dec., p. 177 Sept.-Oct., p. 153 Jan.-Feb., p. 19 May-June, p. 103 May-June, p. 107 Nov.-Dec., p. 197 Sept.-Oct., p. 146 Jan.-Feb., p. 13 May-June, p. 81 July-Aug., p. 133 Mar.-Apr., p. 61 Sept.-Oct., p. 169 Jan.-Feb., p. 26 Jan.-Feb., p. 1 Sept.-Oct., p. 166 Jan.-Feb., p. 5 Sept.-Oct., p. 159 May-June, p. 89 The Fiscal Health of Medium-Sized Cities: A Regional Perspective The Future of Business Regulation Geothermal Ground Water in Central Texas: A Potential Energy Resource The Government and Politics of Mexico Hispanic Fertility in Texas The Industrial Screening Matrix : A Tool for Industrial Developers Inflation and the Young College Consumer Interest Rate Ceilings and Consumer Credit Key Issues in Mexican-United States Relations: The Border that Unites and Divides Us Laredo: Trade Center on the Border Longview-Marshall: An Industrial Center Managing Service Capacity Manufacturing in Texas: How Recession Proof? Mexican Illegal Aliens in the San Antonio Labor Market Mexico's Economic Development and Relations with the United States National Demographic Patterns and Texas Public School Enrollment Natural Resource Taxation in Texas Nuclear Power: An Exchange of Views Oil and Gas in Mexico Our Future Selves: Aging in America Petroleum and Politics: The Texas Railroad Commission Planning for Small Business The Plight of the Successful Small Business Profile of the American Small Businessman Prospects for Mexico's Socioeconomic Growth Rate Deregulation in the Airline Industry : A Panel Discussion Recent Trends in Net Migration into Texas and Its Regions Residential Mortgages: Prospects for 1979 Retail Adjustment to Rural Industrialization The Small Business Owner: What It Takes to Succeed The Socioeconomic Status of Texas Cities and Suburbs The State Tax Burden in Texas A Successful Small Business: An Interview with Ginny Geery Tax and Expenditure Limitation Activity in Texas Texas Border Communities and the Peso Devaluation Texas Planning Regions: An Economic Summary Tyler: Promising a Rose Garden Unemployment Consequences of Illegal Aliens from Mexico Urban Fiscal Strain and the Health of Large Texas Cities U.S. Agricultural Policy as a Weapon against OPEC The Uses and Misuses of Metropolitan Area Employment and Unemployment Numbers U.S. Oil Geography in 1990: Scenarios and Implications Joseph E. Pluta Murray L. Weidenbaum C. M. Woodruff, Jr. Karl M. Schmitt Alejandro Velez Deborah G. Jones, Douglas J . Manifold, and Jean S. Spencer Sue Alexander Greninger, Vickie Hampton, and Karrol Kitt Charles T. Franckle Stanley R. Ross Joanne P. Austin Charles P. Zlatkovich James A. Fitzsimmons Lowell Dworin Gilbert Cardenas Calvin P. Blair Martin T. Katzman and Robert J. Clark Diane H. Schwartz E. Linn Draper and Ruth Weiner William L. Fisher George L. Maddox David F. Prindle Floyd S. Brandt Henry M. Rollins Norval D. Glenn and Charles N. Weaver William P. Glade Robert Frank, Sam Coats, and Herbert D. Kelleher Thomas R. Plaut Robert D. Mettlen Claud M. Davidson George G. Eddy Alfred J. Watkins Charles P. Zlatkovich Lorna Aldrich Monti Susanne Ethridge Cannon Stuart Greenfield Charles P. Zlatkovich Charles P. Zlatkovich Allan G. King Joseph E. Pluta George A. Thoma Lorna Aldrich Monti James W. McKie and E. Victor Niemeyer Nov.-Dec., p. 192 Nov.-Dec., p. 203 Sept.-Oct., p. 153 Mar.-Apr., p. 35 May-June, p. 79 May-June, p. 98 Nov.-Dec., p. 215 Jan.-Feb., p. 23 Mar.-Apr., p. 39 Mar.-Apr., p. 57 May-June, p. 103 July-Aug., p. 125 May-June, p. 95 Nov.-Dec., p. 187 Mar.-Apr., p. 39 Sept.-Oct., p. 149 Sept.-Oct., p. 163 Nov.-Dec., p. 177 Mar.-Apr., p. 29 Nov.-Dec., p. 211 Nov.-Dec., p. 181 July-Aug., p. 117 July-Aug., p. 119 July-Aug., p. 129 Mar.-Apr., p. 47 Nov.-Dec., p. 206 Sept.-Oct., p. 141 Jan.-Feb., p. 21 July-Aug., p. 137 July-Aug., p. 113 May-June, p. 85 Jan.-Feb., p. 19 July-Aug., p. 109 Jan.-Feb., p. 16 Mar.-Apr., p. 55 Nov.-Dec., p. 197 May-June, p. 107 Mar.-Apr., p. 43 Jan.-Feb., p. 8 Nov.-Dec., p. 173 May-June, p. 70 May-June, p. 65 Barometers of Texas Business (All figures are for Texas unless otherwise indicated.) All graphs except the one for nonagricultural employment are adjusted for seasonal variation. Data were compiled from the following sources: U.S. Department of Labor, Texas Employment Commission, Texas Railroad Commission, and Federal Reserve Bank. Data for oil refining are current through June 1979 ; data for total industrial production are current through July 1979; all other data are current through August 1979. Consumer Prices (Index 1967=100) Percentage Unemployed Oil Production and Refining (Index 1967=100) 160 (144.6) 140 120 ....,.. 100 80-4----.-1-9-7~1.-----.-19_7_3,.--r1~9~7~5.-----,7 19~7=7:r--r.1~9=79~ 250 225 200 175 150 125 -..._..... ......._1 1 00-4--....-19_7_1.,--r.1~9~77 3,...---,,1-9-75-,---r-19~7~7:,.---..-:-:19~7:-=19 Industrial Activity (Index 1967=100) 8.0 6.0 4.0 2.o-1---.-19_7_1.,--T1~9~779~75--r-"r.'.19~7~7:,.---,-;-:19=7=19 3r---ir17 11 __ ,... Total industrial production BUREAU OF BUSINESS RESEARCH SECOND-CLASS POSTAGE PAID AT AUSTIN, TEXAS THE UNIVERSITY OF TEXAS AT AUSTIN AUSTIN, TEXAS 78712 Total (5,509) Trade (1,337) Manufacturing (999) Government (949) Services (940) Construction (414) Transportation and public utilities (357) Finance (312) Mining (200) 1971 1973 1975 1977 1979 Data current through August 1979.