The history of American corrections is marked by unusually ambivalent attitudes toward prison labor. Legal constraints growing out of political pressure combined with a changing correctional philosophy to relegate industries to a secondary role between 1940 and 1970. By the mid-1970's, disenchantment with the medicial model evoked a change in correctional philosophy from rehabilitation to reintegration. As a result, the free venture model of correctional industries developed. As originally conceived, the model combined microeconomic theory, (profitmaking, wages, and financial incentives) with the reintegration process. The economic history of prison industries has evolved through many philosophical views. These views have moved the emphasis of prison industries from disciplinary measures of the prison through reintegration of the prisoner with society, with stopovers at economic and rehabilitative goals. In 1975, the Law Enforcement Assistance Administration (LEAA) awarded a research contract to identify strategies for changing prison industry systems into self-supporting labor systems to promote inmate rehabilitation. Twenty-three States were identified as possible candidates for a demonstration program, seven others were surveyed, and a final host State was analyzed in order to construct a model prison industry. Illinois, Minnesota, and Washington were selected to join the host State, Connecticut, as initial participants. Over $2.8 million in Federal funds were expended for the effort. However, there appears to have been little analysis of prospective markets, organization of production, revenue projection, or management control systems. It is recommended that States undertake a comprehensive review of the statutory framework governing correctional industries. States should formally acknowledge the business and correctional purposes of industries by including a valuation for human capital formation in its financial statements. States approaching a decision to enter new markets or expand existing markets should prepare a complete business plan following a process comparable to that used in the private sector. A glossary, a bibliography of about 90 items, 21 reference notes and 22 tables are included.