FOR MANY YEARS THE ALTERNATIVES OFFERED BY THE NORTH CAROLINA PRISON SYSTEM HAVE BEEN THE FORMAL ORGANIZATION OF PRISON FIRMS AND A SMALL WORK-RELEASE PROGRAM. THE FIRMS HAVE LOW LABOR COSTS. HOWEVER, RESISTANCE FROM THE PRIVATE SECTOR HAS RESTRICTED THIS STRATEGY AND LIMITED THEIR USE. A MATHEMATICAL MODEL IS DEVELOPED WHICH EXAMINES THE ECONOMIC EFFICIENCY OF BOTH THE PRISON INDUSTRIES AND THE WORK-RELEASE PROGRAMS WHICH EXIST IN NORTH CAROLINA, AND PUBLIC AND PRISONERS ATTITUDES TOWARDS EACH ALTERNATIVE ARE ALSO EXAMINED. THE DEVELOPMENT OF THE MODEL IS DESCRIBED IN DETAIL. THE STUDY FINDS THAT, ALTHOUGH PRISON INDUSTRIES HAVE A LOW LABOR COST, THEIR USE OF CAPITAL IS INEFFICIENT AND THE NEGATIVE FEELINGS OF PRISONERS TOWARD THE INDUSTRIES LEAD TO LOW PRODUCTIVITY. ON THE OTHER HAND, PRIVATE FIRMS HAVE A MORE EFFICIENT CAPITAL/LABOR RATIO AND PRISONER ATTITUDE IS MORE POSITIVE, RESULTING IN GREATER PRODUCTIVITY. ANALYSIS SHOWS THAT EACH PRISONER IN A WORK-RELEASE PROGRAM REPRESENTS A GAIN TO SOCIETY OF AT LEAST $2065 A YEAR. IT IS URGED THAT THIS PROGRAM BE EXPANDED. APPENDIXES DETAIL THE COSTS CONSIDERED IN ESTIMATING THE BENEFIT OF WORK-RELEASE PROGRAMS (HOUSING THE PRISONER NEAR THE JOB, TRANSPORTATION, POSSIBLITY OF ESCAPE, AND OTHER COSTS) AND THE RULES OF THE NORTH CAROLINA WORK-RELEASE PROGRAM ARE PROVIDED. A BIBLIOGRAPHY IS INCLUDED. (GLR)