IN CHOOSING BETWEEN SCHOOL DESEGREGATION AND SEGREGATED COMPENSATORY EDUCATION, POLICY MAKERS MUST CONSIDER THE CAUSES OF THE EDUCATIONAL RETARDATION OF NEGRO YOUTH AND THE SOCIAL, PSYCHOLOGICAL, AND FISCAL COSTS OF EACH POLICY. RESEARCH HAS SHOWN SOCIAL CLASS AND THE RACIAL COMPOSITION OF THE SCHOOLS RATHER THAN "CULTURAL DEPRIVATION" TO BE THE MAJOR CAUSE OF ACADEMIC FAILURE AMONG NEGRO YOUTH. TO COUNTERACT THE NEGATIVE EFFECTS OF A COMPENSATORY EDUCATION PROGRAM IN SUCH A SCHOOL ENVIRONMENT, EDUCATORS WOULD HAVE TO INSTITUTE CHANGES IN THE SCHOOL'S ORGANIZATION, LIKE DRAMATICALLY REDUCING TEACHER-PUPIL RATIOS. HOWEVER, EVEN IF IN ALL ELEMENTARY AND SECONDARY EDUCATION ACT TITLE I PROJECTS THIS RATIO WERE REDUCED TO 6 TO 1, THE COST OF INSTRUCTION WOULD INCREASE FROM $.5 BILLION TO $8.6 BILLION. AND DESPITE INCENTIVES ABLE TEACHERS ARE NOT INCLINED TO TEACH IN SEGREGATED COMPENSATORY EDUCATION PROGRAMS. SUCH PROGRAMS PERMANENTLY ESTABLISH RACIST ATTITUDES AMONG NEGRO AND WHITE STUDENTS AND PERPETRATE RACIAL SEPARATISM IN HOUSING AND OTHER LIVING PATTERNS. ONLY A POLICY OF SCHOOL INTEGRATION--ACCOMPANIED BY GENERAL SCHOOL IMPROVEMENT--CAN MAKE IT POSSIBLE FOR THE NEGRO TO GAIN ACCESS TO THE SAME EDUCATIONAL RESOURCES AS WHITES. EDUCATIONAL PARKS COULD POSSIBLY SATISFY BOTH REQUIREMENT. THIS PAPER WAS PREPARED FOR THE NATIONAL CONFERENCE ON EQUAL EDUCATIONAL OPPORTUNITY IN AMERICA'S CITIES, SPONSORED BY THE U.S. COMMISSION ON CIVIL RIGHTS, WASHINGTON, D.C., NOVEMBER 16-18, 1967. (LB)