| Thou I was working in the trade back then, I was just an apprentice and was just learning. The code changes every three years, so it is difficult to remember what may have been allowed back 37 years.
Nowadays, the 3 wire feeder is not allowed to subpanels, and the neutrals and equipment ground must be separated, and a 4 wire system is used to each panel beyond the main breaker.
All thou , for years, dryers and ranges were wired with the same method one wire for both neutral and ground. If existing, they are allowed to remain.
I would like to get the home inspectors answer on if it is safe, hmmm. I trust there would be a detailed explanation of the theory behind the wiring method, and the possible problems it can cause?
The only person that can help in this matter is the local town, city, county, or state electrical inspector, or the authority having jurisdiction over electrical installations.
If the system was permitted and inspected back when it was installed, the chances are very good that was allowed back then, and there is not thing one the home inspector can do to demand a change to a pre-existing installation that passed inspection. The code in effect today does not cover existing installations.
If there is no proof or record of permits back then, perhaps,I am sure someplace, the code that was in effect back then can be found, either by NFPA, or the library, or perhaps the inspector has kept that edition of the NEC.
The issue is a neutral is current carrying, thou because it is grounded at the source, under normal conditions, a shock cannot be felt. With the neutral and ground as one wire, there is a chance, if the neutral is broken, current will try to flow thru the equipment ground that is at each outlet and appliance, and here is where there may be a safety issue. | 
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