THE MAIN PROBLEM WITH THE PENAL SYSTEM IN AMERICA IS SEEN AS THE CONFLICT BETWEEN THE REHABILITATION FUNCTION CHAMPIONED BY PROFESSIONAL CORRECTIONS WORKERS AND THE DESIRE FOR PUNISHMENT OR RETRIBUTION DEMANDED BY THE PUBLIC. THIS CONFLICT COMBINES WITH OUTMODED STRUCTURES TO PROVIDE AN UNWIELDY INSTITUTION WHICH MAY PUNISH, SELDOM REFORMS, AND CERTAINLY DOES LITTLE TO REMOVE THE ECONOMIC INCENTIVES ATTACHED TO CRIME. IT IS SUGGESTED THAT THE INCARCERATION BE DIVIDED INTO TWO PARTS. THE FIRST FEW MONTHS COULD BE THE PUNISHMENT PERIOD IN THE TRADITIONAL MODE. THEN THE REST OF THE PERIOD COULD BE DEVOTED TO A SERIOUS EFFORT AT REHABILITATION. IT IS SUGGESTED THAT SENTENCES COULD BE MADE CONDITIONAL UPON ACHIEVING CERTAIN EDUCATIONAL OR EMPLOYMENT GOALS. INSTITUTIONS ALREADY HAVE TREMENDOUSLY EXPENSIVE FIXED PLANTS. INSTEAD OF UTILIZING THEM FOR UNPRODUCTIVE CONFINEMENT, SOCIETY SHOULD ACTIVELY INCREASE OPPORTUNITIES FOR SCHOOLING AND VOCATIONAL TRAINING. THIS, IN CONJUNCTION WITH AN INDETERMINATE SENTENCE WHICH MAKES RELEASE CONDITIONAL UPON FINISHING HIGH SCHOOL FOR ATTAINING CERTIFIED SKILL IN ONE OF MANY ALLOWABLE TRADES, COULD RESULT IN MORE RATIONAL RELEASE THAN IS CURRENTLY FOUND UNDER THE PAROLE BOARD SYSTEM. DATA COULD BE GATHERED ON SUCCESSFUL OUTCOME TO FURTHER REFINE THE SYSTEM. ECONOMIC ANALYSIS IS THEN APPLIED TO THE BASIC PROBLEM OF CRIME. IT IS POINTED OUT THAT MOST PRISONERS ARE POOR PEOPLE CONVICTED OF FEDERAL BUREAU OF INVESTIGATION TYPE 1 OFFENSES (MURDER, RAPE, AGGRAVATED ASSAULT, ROBBERY, LARCENY, AUTO THEFT AND BURGLARY). AS LONG AS SUCH PERSONS ARE MOTIVATED SOLELY BY QUICK PAYOFFS, ARMIES OF POLICE WILL NOT MAKE A SIGNIFICANT DENT IN CRIME RATES. EFFORTS MUST BE MADE TO TAKE THE PROFIT OUT OF CRIME IN THE FIRST PLACE. (GLR)