After the Haight-Ashbury died, survivors of the flower generation settle down here like routes in a test tube at the very bottom of the continental United States.

Shoeless and shirtless, they gathered each evening to applaud the blazing sunset, they stole sails to use as tents, panhandled, peddled marijuana and made casual music on the streets.

"You could go anyplace in the bushes and find 'em wrapped up in somebody's sail," said Police Chief Winston L. James. "Nowadays they have sleeping bags."

The changes go a lot deeper than that. The fact is, hippies are being priced out of Key West.

Two years ago Mayor Charles (Sonny) McCoy launched a renovation program called "Downtown '76" with the help of some local bootstrap-pulling and federal money. Abandoned or failing business along Duval Street, the main drag of the Old Town, were brought up. New streelights were put in. Trees were planted. And people started buying and restoring those great old houses that give Key West the charm and character so disastrously lacking in the rest of Florida.

Because the place looks like a Tennessee Williams set. It looks like Monterey before they painted to pink in the '50s. It looks like raffish Oak Bluff on Martha's Vineyard, like New Orleans, like Venice, Calif., like San Francisco's Panhandle: Two-story wooden frames, overhanging balconies, carpenter gothic, gingerbread, corrugated iron porch roofs, louvres, fancy wooden grillwork, ironwork - and white: white with cabalt blue, white with gray, write with yellow, white with cream, white all over. Or paintless aristoeratic weathered gray.

Some houses go back well over a century. The carpenters who built them were ship's carpenteres, who knew how to keep out the wet, so they have lasted through the hurricanes. Guided by strict local controls, the new owners have been fixing up these places, bringing in new money and talent. Some buildings have become elegant restaurants, like the Rose Tattoo on Duval. Some are winter homes for the well-to-do. Some are museums.

At night they are ghostly, haunted by the soft ever-blowing tradewinds and moonlit palms whose shadow brush eerily across their blank white fronts.

The huge and depressing house that Ernest Hemingway bought in 1931 for $8,000 was sold in 1961 with its dank, banyan-and-palm-shaded acre for $81,000.

What all this means to the barefooted wanderers is that free pads are getting rare. The delightful vacant old tumbledown crash-mansion is hard to find. And life is expensive in Key West. Even a greasy-spoon lunch cost $5, though one modest Cuban cafe downtown charges about half that for black beans, ground beef and Cuban bread, which looks like French-bread that someone sat on.

"It's nothing like what is was," observed one gift shop owner who moved here two years ago from New York.

"The vans used to be bumper to bumper all year. There was a lot of shoplifting: I remember Fausto's food market had signs all over it warning against touching the merchandise. Some of the cops weren't what you'd call top people either. They'd take some guy and pay him $4,000 and give him a gun and put him out on the street."

Today Duval Street has more bicycle traffic than anything else, though at peak seasons it is definitely bumper to bumper. Off-season, the vans, many of them homemade - including one with nicely weathered shingles instead of steel - tend instead to congregate along the beaches on the south shore. Gypsylike, young people camp around them with their dogs and palm frond fires while they polish shells to sell or throw Frisbees or play the violin before a folding music stand stuck in the sand.

"There's a different atmosphere entirely here," said Chief James, who has headed the force for 10 years. "The first things was when we enacted laws against hitchiking in the city or county." Since the Keys are served by a single highway from the mainland, they can be blockaded easily. But James was dubious about this plan as a deterrent.

"It's an island, two by five," he said. "You kind of know who the people are. It filters back to you if there's something wrong."

As the community's self-confidence has blossomed, morale has risen in the 50-man police force itself. It has learned to accept the exotic nature of the population, keeps an eye out for hard drags but does not appear particularly uptight.

on Duval Street at night, tourist may be quietly offfered marijuana by stree-corner loungers.

"We're an easygoing force," James said. "Things are pretty well policed by the store managements. We keep cool. We bust someone for narcotics, but there isn't all that much really hard stuff around; we just don't run into it. You don't see it in the hospitals, where the overdose cases show up. There's marijuana, cocaine, some pills that kids get from their parents. It goes with element. We get college kids on the holidays, and they bring some in. But we hardly see any runaway any more."

Still, he noted, the force gets 2,000 calls a month, "and that's a lot for a city a 30,000." He was proud of the 90-second average response time.

There is more to the drug picture than this, if course. Key West and the Florida coast in general are a major trouble spot for drug importing, along with Texas and California. Ted Swift, with the Drug Enforcement Administration in Miami, said federal, state and Monroe County officials on the Keys are kept busy by the flow of marijuana and cocaine from Colombia and the Caribbean.

"For the past year or so the Keys have been big on drugs," he said, "though the figures to up and down, and you can't tell how much of this is better enforcement. It's not just the hippies. In the cities where there are ghettos we see a lot of heroin and pills, but this is at the street level. These come in from Chicago and Atlanta and other urban centers."

Nevertheless, the local consensus seems to be that, while young transients still flock to the city offseason, they are scarce when the prices go up.

Another group that seems to be drifting away is the local collection of young writers and musicians like novelist Thomas McGuane, writer Jim Harrison and singer Jimmy Buffet. McGuane in particular is identified with Key West because of his book and film, "92 in the Shade." He has moved to Montana, though he keeps a boat at Key West for visits. As Cleveland Amory has observed, there appears to be a Gresham's Law of resort: The artists come first, then are displaced by the rich and the dillettantes, who are in turn displaced by the climbers and would-bes.

"Key West is being discovered," said Raya Alpert, at Nibbles II, a hip place for clothes and food. "They call it the last resort. The tourists are coming in, and the hippies go out. It's the natural flow of events."

The move now is to the other Keys ranged along the highway southwest from Miami, she said. "They build their own houses on places like Christmas Island where they can still live cheaply and enjoy the warm weather."

On Southernmost Beach two youths in swim trunks fiddled with carburetor of their dented van. They were from central Florida, they said. Hadn't been here long enough to judge, but the town seemed cool.

One man's dog snarled at the dog of a passing cyclist and got a scolding from his master: "Hey man, if you're gonna run with me you gotta be cool." Like the leather and shell-jewelry shops, it had almost a quaint ring to it: a touch of '60s color in drab '77.

But the hippies are only one ingredient in the fascinating mix of people here. The black population, mostly from Jamaica, comes to about 8 per cent of the total. There is a Navy contingent, despite the phasing out of the submarine base here, and quite a few Cuban, though the flood of refugees who fled the Castro regime on rafts, in rowboats, even on inner tubes, has nearly ended. The last group to make the 90 miles voyage was reported more than a year ago.

There are native Floridians and the regular tourists and a large number of gays.The gays are especially visible in the Old Town, running boutiques and a popular disco and enjoying the live-and-let-live spirit.

All these groups come together once a day in an atavistic ritual that is one of the sights of Key West: greeting the sunset at Mallory dock. They start gathering in midafternoon when the sun is still glinting off a billion wavelets in the calm gulf, and sailboats still tack across the horizon.

Bu sundown there are maybe 200 people: jeans, shorts, bikinis, denim jackets, straw hats, sarongs, bare feet, slim sex-aware bodies, a few pink tourists with bellies. Fruit sellers spread their baskets on the pier: oranges, coconuts, banana fritters. Two bongo drummers, their rhythms waxing and waning but never stopping, hypnotize a large circle.A sun-blackened Cuban starts singing to the drums in Spanish. A guitar, a banjo, an Irish tenor. For a moment, the peaceable Kingdom.

Now the sun sinks into the water, elongated and scarlet, and suddenly the last cuticle is gone, and everyone applauds. "Aw-RIIIIGHT!" The drumers pick up the pace. A girl with a quail feather dangling from her ragedy long bionde hair starts to dance. She is good. Trained. Barefooted, with a long swirling dirndl skirt. Arms weave the air, body twists, sways. Her bearded partner, stoned, shuffles vaguely in front of her. Nearby, a tall man in a pareu begins bouncing involuntarily to the beat, but stops, and then she subsides too, smiles, drifts into the crowd, and the moment is over.

Gradually people go their various ways. Cars stream out of the parking lot bound for the big chain hotels to the north. The eternal fishermen remain, perched by the pillings. A tardy shell salesman. A handful of teenagers. Three dogs. A grimy child half-asleep on her father's shoulders, her hands clutching his qullet. A beachcomber holding a beer can in a paper bag People who can't possible afford to live here, but here they are. It's that kind of town. Pretty soon it will be dark.