THIS ANALYSIS EXAMINES THE FOLLOWING: (1) DIRECT COSTS, AS COMPILED BY THE NEW YORK CITY DEPARTMENT OF CORRECTIONS; (2) OUTSIDE SERVICE COSTS, WHICH INCLUDE LEGAL SERVICES PROVIDED TO INMATES, MEDICAL SERVICES, EDUCATIONAL PROGRAMS FOR INMATES, AND GENERAL SUPPORT SERVICES; (3) SOCIETAL COSTS, WHICH ARE DEFINED AS LOST REAL ESTATE TAXES ON INSTITUTIONAL PROPERTIES, WELFARE PAYMENTS NECESSITATED BY INCARCERATION OF A FAMILY'S WAGE EARNER, AND LOST EARNINGS; AND (4) OTHER COST CONSIDERATIONS INCLUDING 'LOST' INVESTMENT OPPORTUNITIES FOR FUNDS TIED UP IN PROVIDING INCARCERATION. SINCE DIRECT COSTS AND SERVICE COSTS HAVE BEEN INCREASING AT THE RATE OF ABOUT 6 PERCENT A YEAR, IT IS ESTIMATED THAT IN 40 YEARS THE COST OF THE NEW YORK CITY CORRECTIONAL SYSTEM WILL BE $1.7 BILLION ANNUALLY AND THE COST PER INMATE DAY WOULD BE $697.47. IT IS ARGUED THAT THE CITY CAN NO LONGER AFFORD TO USE INCARCERATION FOR OFFENDERS WHO ARE NOT A DANGER TO SOCIETY. ALTERNATIVES TO INCARCERATION FOR NONVIOLENT OFFENDERS ARE URGED. (GLR)