NEW YORK -- Out There, where folks are reading their papers and cruising their shopping mall book marts, they're scratching their heads. How could the nation's biggest publisher print nearly a million copies of a bare-knuckles attack on a former First Lady without knowing for certain that everything between the covers was true? How could a no-name novelist touch off a bidding war that brings close to a million bucks when would-be buyers hadn't ascertained whether those intriguing blurbs from noted authors were for real? What the hell is going on?

But in the midtown offices and at the candlelit PEN fund-raiser and the luncheons-without-quotation-marks where publishers chat about the business, there's a lot of shoulder-shrugging about last week's headlines. Mysterioso Derek Goodwin and his somehow-forged endorsement letters? An aberration. Nasty, possibly sloppy Kitty Kelley? We should all have such problems. Kitty Kelley and Ronald Reagan's memoirs from the same publisher (the almost-publisher of Bret Easton Ellis's "American Psycho" as well) within five months? Unrelated blips on the screen. What's the big deal?

There's something to that. Apart from involving the same publishing house, Simon & Schuster, these books appear to have little to do with one another, to involve separate questions. But Out There, where such distinctions may matter less than the general sentiment that something smells, the incidents seem connected. And there's something to that too.

It has to do with the way publishing has become subject to the same pressures that afflict other market-driven American businesses: fierce competition, accelerating pace, debt-heavy corporate parents, a demand for increased profits. It's an environment that encourages the juiciest celebios and condones big money for first novels with "commercial potential," that ensures that a lurid tale of a well-dressed mutilator promptly gets picked up by another major publisher when Simon & Schuster belatedly considers "taste" and bows out.

"The linkage there," said one publishing executive last week, chewing over the startling chain of events, "is all about money."

Take the big bestseller first. While "Nancy Reagan: The Unauthorized Biography" may not be far off the mark in its overall portrayal of an unpopular political wife, other journalists are having a fine time uncovering omissions, denials, borrowings and embroideries while clucking over Kelley's shortcomings of perspective and proportion. Isn't Simon & Schuster accountable for the accuracy of the books it publishes?

The short answer is no. By contract and by industry understanding, Kelley is. "The author takes that responsibility on his shoulders," a prominent agent explains. "It's the author's book, not the publisher's. That's an important distinction."

Unlike many magazines, most famously the New Yorker, publishing houses don't employ fact-checkers. They employ lawyers who pore over manuscripts (and Kelley's, says a former Simon & Schuster employee, was "vetted up one side and down the other"), but lawyers worry about lawsuits for libel and invasion of privacy, not simple veracity. Things that are untrue or unsubstantiated are not necessarily libelous, particularly where public figures (or dead people) are involved.

Publishers also employ editors who are supposed to ask the tough questions. For an author reportedly worth a $3.5 million advance, though, Kelley got bumped around a bit at Simon & Schuster when it came to editing. Her book was acquired by top editors Joni Evans and Michael Korda, and when Evans left for rival Random House in 1987, Korda took over.

That relationship dissolved in 1989 when Kelley learned, via the press, that her publisher had acquired Ronald Reagan's memoirs (paying roughly twice as much for them, along with a volume of speeches, as it was paying Kelley) and that Korda would be shepherding Reagan's book too. "She practically fainted," says a former S&S editor. "She was extremely uncomfortable."

The juxtaposition of the two projects (not to mention another Reagan volume by Lou Cannon of The Washington Post) raised a few other people's eyebrows as well. "This is a major publishing company that has room on its lists for a diversity of books, books of different political perspectives and opinions," says Victoria Meyer, publicity director of the S&S trade division. "We don't think eyebrows should be raised."

At any rate, Korda was relieved of responsibility for the bio at Kelley's insistence, leaving her editorless for several months. The manuscript eventually went to freelance editor Jeanne Bernkopf, thanked in Kelley's voluminous acknowledgments for having "patiently smoothed the rough edges of an unwieldy manuscript."

When it came back in house it was assigned to Alice Mayhew, editorial director of the trade division, who generally handles a very different sort of nonfiction and whose public comments about the Nancy Reagan bio suggest some discomfort. Officially, however, "we stand behind the book completely," Meyer says. "Kitty Kelley is a formidable researcher. Her documentation is absolutely impeccable. We consider it an important work of biography."

Standards of documentation vary from one house to another, and the same house can treat one author differently from another. (At Random House, Julia Phillips, rude Hollywood memoirist and onetime drug abuser, got hit with a lot more queries than Pulitzer-winning authors do, Joni Evans points out.) But in the end few editors would or could vouch for the total accuracy of their books.

"They depend far too much on the author's veracity," says John Baker, editor of Publishers Weekly. "They don't have the staff to check things thoroughly. The sheer volume of material in an average-length nonfiction book makes it almost prohibitive. So they check for libel or other legal problems and if it passes, they feel there's no problem."

Indeed, Kitty Kelley doesn't seem like much of a problem at all. Thanks in part to Simon & Schuster's masterly promotion and press manipulation, her book is one of the fastest-selling in the history of the industry. A few publishers say, though not for the record, that they wouldn't have published her book. Most probably wish they had.

The Super Duper

As for publishing's other recent spectacle, the revelation that two of three authors' endorsements attached to a $920,000 first novel were faked (and that the third endorser wants to "reconsider" his support in light of the novelist's apparent untruthfulness), "it's totally aberrational," says Stephen Rubin, president and publisher of Doubleday. "It could have happened to anybody. Everyone was hoodwinked."

Once the fraud attached to "Just Killing Time" was revealed (how it happened remains undetermined), some editors and agents began to have second and third thoughts: John le Carre, he never blurbs manuscripts. Maybe someone ought to have called Binky? (Translation: Amanda Urban at ICM, le Carre's American agent. Also Bret Ellis's.)

At William Morrow & Co., which also publishes Joseph Wambaugh, someone noticed that the San Diego address on the letterhead containing his supposed rave wasn't Wambaugh's. "We thought that might be where he keeps his boat," says Howard Kaminsky, CEO of the Hearst Book Group. "It didn't trigger any alarm." The Morrow people were thinking of calling Wambaugh "to tell us a little about the author, whom I thought he might have known." But the bidding spiraled so quickly that Morrow was out of the action before it got in.

This happened to a number of players. The 787-page manuscript, offered under a pseudonym, arrived in editors' offices on Thursday, April 4, giving would-be bidders the weekend to read it. By Monday evening, when Larry Ashmead, executive editor of HarperCollins, called agent Peter Lampack, Lampack said he already had an offer of better than $600,000 for the hardcover and paperback rights. Ashmead loved the thriller -- "it has bestseller written all over it" -- but not the price, and didn't bid.

By lunchtime on Tuesday, several other editors planning mid-six-figure offers were stunned to learn from Lampack that he had two bidders at $850,000. "I wouldn't want to spend that much if Moses had endorsed it," says Larry Kirshbaum, head of Warner Books. Joni Evans, who heads the Random House imprint Turtle Bay Books, hadn't even finished reading the manuscript. Simon & Schuster/Pocket Books outbid Bantam and wrapped it up that afternoon for $920,000.

The deception would have been discovered eventually; publishers want written permission to use authors' names and quotes for jacket cover blurbs. But the frenzy of the informal auction made it even more unlikely than usual that anyone would stop to check the blurbs first. "This is as fast as I've ever seen it go," says Adrian Zackheim, executive editor at Morrow. "It was a drop-everything situation." Besides, Lampack was known as a reputable agent. And though American publishing has had its hoaxes, with Clifford Irving's fabricated 1971 biography of Howard Hughes the best-known modern example, no one could remember a case of a novel with falsified testimonials.

Now that there is one, S&S has yet to announce a response. There is no unanimity of opinion about what that ought to be. Kaminsky of Morrow and Evans of Random House say they'd drop the book. "It shows the character of the author," says Evans. "If this man is corrupt, who knows if the manuscript itself is stolen?" HarperCollins's Ashmead says he'd hold on to it. At Doubleday, Rubin's not sure.

Majority opinion is that Simon & Schuster will proceed with "Just Killing Time," negotiating itself a hefty price cut as reparation. (Estimates of how significantly the fraudulent blurbs helped inflame the bidding and jack up the price vary from "tremendously" to "very little.") Then, the speculation is, S&S will publish it quickly while readers still remember the scandal. Notoriety has rarely been known to hurt sales Out There.

It's not even that much money. In the past few years, Jeffrey Archer has wangled a $20 million package for a three-book deal while Stephen King is thought to be receiving in the mid-$30 million range for four. "Nobody ever wants to confirm these figures -- it makes them look crass -- but it was reliably reported that {Danielle} Steel gets $10 million per," says Baker of Publishers Weekly.

Those writers all have predictable track records, of course, while Goodwin is an unknown quantity. But most editors who read the manuscript thought it had considerable commercial potential (an exception: Thomas McCormack of St. Martin's Press, who thought the book "a shambles" and told Lampack, "Our bid is zero"). If Goodwin turns out to be the next Tom Clancy or Thomas Harris ("The Silence of the Lambs" is past the six-month mark as a paperback bestseller), $920,000 will look like a bargain.

Of Dollars and Dee Simon & Schuster has been known for years as an aggressive commercial publisher willing to spend what it takes to get what it wants. It takes pride, too, in being able to put a book into crash production and then lob it into bookstores in as little as two months, a process that traditionally takes nine. A division of Paramount Communications since 1975 (when it was called Gulf + Western), S&S has lately been plagued by questions about CEO Richard Snyder's relationship with Paramount chief Martin Davis. Sheer size -- its revenues reached $1.4 billion in 1990 -- may contribute to an impression of managerial drift.

"People call me all the time and say, do I want to do Sandra Dee's autobiography, and I say no," explains another top publishing executive, insisting on anonymity. "It's taste and tradition and the image of the house. Simon & Schuster is a different kind of publisher, more down-market, more glitzy. They invested $3.5 million in {Kelley's Reagan bio}. A million copies isn't going to pay it back. You have to have stuff to get the headlines, to get people into the stores. You can't do it with award-winning biography."

(Actually, a million hardcover copies probably would repay the advance. At an assumed 15 percent royalty rate, Kelley's $24.95 volume has to sell about 936,000 copies to "earn out." There are 925,000 copies in print to date. Returns of unsold trade books average 35 to 40 percent, according to the industry newsletter BP Report. But this is not an average book. S&S is probably not sweating its investment, especially since the reported price includes the paperback rights.)

To be fair, Simon & Schuster has its own list of award winners (including three of five nominees for this year's PEN/Faulkner Awards). And it hardly operates in a vacuum. The forces that drive it are felt, to greater or lesser extents, by all commercial publishers.

Almost all of them are now owned by large communications empires and empire builders: Time Warner, Paramount, Murdoch, Maxwell, Newhouse. This conglomeratization began more than 20 years ago but intensified during the '80s, as some of the acquirers were themselves acquired or merged and debt loads rose accordingly.

As a rule of thumb, publishers used to aim for (but rarely achieved) profit margins of 10 percent; now their owners and stockholders look for 15 percent or more. "When you're a public company you're examined continually," says Fredrica Friedman, executive editor of Little, Brown (owned by Time Warner). "Not only 'How did you do last year?' but 'How did you do in the first quarter?' "

Printing and peddling books is a fluky and unpredictable business in the best of times, which these emphatically are not. The competition for brand-name authors and big books, the closest thing to guaranteed profitability a publisher can hope for, has heated up accordingly. The pace of dealmaking and production accelerates. "You get into this kind of feeding frenzy," says Ted Solotaroff, former editor of the New American Review, now retired from Harper & Row. "That atmosphere isn't something that gets pumped up when a heavily promoted project comes down the pike. It's there all the time now, a kind of frantic attempt to keep matching the quarterly earnings projections." When Solotaroff raised some of these same issues in a 1987 essay in the New Republic, called "The Literary-Industrial Complex," colleagues in publishing told him he was exaggerating. Now they say he was prophetic.

All this means is that publishing has lost whatever insulation it once had from the demands and tensions of American capitalism. Why should people Out There, or anywhere, expect otherwise? They're still thinking in terms of dedicated (if impoverished) writers, of Maxwell Perkins wielding a firm but loving fountain pen, and other fantasies. One might argue that publishing ought to be different from other businesses because of the power books have to shape the political, social and cultural agenda. But In Here, few would argue that it is.

"Publishers just reflect the culture in which they operate," says Tom Wallace, who's been in the business for 30 years as editor and agent. "They're basically middlemen. They're not educators. They're not proselytizers. They supply what people want to read."

And people clearly do want to read "Nancy Reagan: The Unauthorized Biography." Quite a few want to read "American Psycho" too; Sonny Mehta, the president of Knopf, generally considered a classy house, bought it on the rebound from S&S and published it a few weeks ago as part of its Vintage trade paperback line. Despite a number of scathing reviews, it has been on the New York Times bestseller list for three weeks. The "Just Killing Time" sale indicates that a number of major publishers thought lots of people wanted to read still another saga of a serial murderer.

Of course, it may also indicate that publishers might serve their own and their readers' interests by adopting a more deliberate approach, taking more responsibility, treading with greater caution. But what are the odds of that?

Slim to none, thinks Brigitte Weeks, former editor of The Washington Post's Book World, now editor in chief of the Book-of-the-Month Club. "There'll be a certain amount of rhetoric and rustling of feathers about how we'll all be wiser and better," she says. "But I don't suppose we'll be wiser and better for more than a week. Reality will take over."