An Economist Who Made a Difference

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Alfred Kahn passed away December 27 at the age of 93.  Dr. Kahn (Ph.D., Yale) was the main impetus behind deregulating the airline industry in 1978.  The last time I checked (admittedly quite a few years ago), deregulation of airfares had saved consumers about $2 billion.  My guess is that the total savings today is more than twice that.

Few people remember what the industry was like before Dr. Kahn came aboard.  From his academic job at Cornell, he was recruited by President Carter and Vice-President Mondale to head the Civilian Aeronautics Board (CAB), which he joined in 1977.  (He had wanted to head the FCC but allowed the administration to twist his arm.)

Using his “considerable gifts of persuasion and media insight, led the struggle for enactment of the Airline Deregulation Act of 1978, the first total dismantling of a federal regulatory regime since the 1930s.” (“Alfred E. Kahn Dies at 93; Prime Mover of Airline Deregulation.” New York Times, December 28, 2010).

Dr. Kahn actually dismantled the agency he headed.  The CAB was responsible for setting airfares, approving new routes or changes in existing routes, and otherwise micro-managing the industry.  Airfares were high, the average load factor was 55%, and airline executives and workers enjoyed the same privileges as bankers — an uncomplicated life marked by a lack of competition.

Dr. Kahn’s work with the airlines began the general move toward deregulation in Washington, D.C.  We could use someone like him today.

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About Tony Lima

Retired after teaching economics at California State Univ., East Bay (Hayward, CA). Ph.D., economics, Stanford. Also taught MBA finance at the California University of Management and Technology. Occasionally take on a consulting project if it's interesting. Other interests include wine and technology.