Death of a Deregulatory Democrat

Economist Alfred Kahn died this week at 93.  Kahn had a remakrable career as an academic, administrator, and government official.  A noted regulatory scholar, he served as Dean of the College of Arts and Sciences at Cornell and Chairman of the New York Public Service Commission.  In 1977, President Carter tapped Kahn to chair the Civil Aeronautics Board where he had a profound effect on the shape of the airline industry.  Though a liberal Democrat, Kahn oversaw deregulation of the airline industry and championed reforms that eventually shuttered the CAB.

Though air travel is often no picnic, and the  industry is more turbulent than it was in the days of price regulation, it’s much cheaper thanks to Kahn’s efforts.  By some estimates, airline deregulation saves consumers as much as $20 billion per year and helped democratize air travel.  Airfares have climbed of late but, as this WSJ editorial notes, “fares are still lower today in real terms than they were in the 1970s.”

Kahn leaves an important legacy that illustrates the pro-consumer side of deregulation. He understood that deregulation is often the best way to help the “little guy.”  Regulatory agencies may be erected to advance the public interest, but are often “captured” and serve incumbent firms instead.  Competition, on the other hand, can discipline industry participants and help protect consumers.  Kahn also counseled care in deregulatory efforts.  He discovered the devil is in the details, and that partial deregulation can be worse than staying put.  A “mixed system” of partial deregulation, he warned, can be the “worst of all possible worlds” — a lesson regulators and deregulators alike would do well to remember.

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