No. 3013: ALFRED KAHN AND DEREGULATION

by Andy Boyd

Click here for audio of Episode 3013

Today, the wrath of Kahn. The University of Houston presents this series about the machines that make our civilization run, and the people whose ingenuity created them.

By his own admission, he was a show-off and a ham, and if he hadn’t earned a Ph.D. in economics he might well have pursued musical theater. As it was, he led a distinguished academic life, teaching at Cornell, but with interludes as a public servant.

Alfred E. Kahn was a free spirit, and more than once he got himself into trouble while working for the Carter administration. Asked by a reporter if he could defend the defense budget, he simply replied “No.” When chastened by administration officials for using the word “depression,” he famously replaced it with “banana,” as in, “the country is heading for its worst banana in forty-five years.”

kahn
Alfred Kahn. Photo Credit: Wikimedia Commons

But while Kahn was humorous, he was also serious. An old-school democrat, his years of government service left him well versed in the economics of regulation. Yet for his liberal leanings, Kahn is best known for doing away with regulation in one of the nation’s most visible industries: the airline industry.

When Kahn took over the Civil Aeronautics Board in 1977, every aspect of airline operations required government approval, from what routes were flown to what prices were charged. Regulatory controls were originally aimed at encouraging growth of the nascent industry. But over the half century leading up to Kahn’s appointment the world had changed, but the government bureaucracy hadn’t. Kahn showed up as an outsider and economist, and set about to dismantle the government agency he headed. During his lifetime he became widely known as the father of airline deregulation, though whenever the claim was leveled he’d demand a paternity test.

3 planes
From left to right, planes from Pan Am, People Express, and Eastern Airlines". Photo Credit: Wikimedia Commons

And in reality Kahn wasn’t alone in his pursuit. Even senator Ted Kennedy held hearings bringing to light discontent on the part of the airlines and passengers. With half the seats flying empty, airlines saw the opportunity to make more money, and passengers wondered why the empty seats were so expensive. When the Airline Deregulation Act was passed in 1978, the real cost of air travel began to fall and continued to fall for decades.

What Kahn helped set in motion didn’t stop with the airline industry. Shipping, banking, brokerage services, telecommunications, and many other industries witnessed expansive deregulation dating from the seventies. Fueled by improvements in technology, and impelled by government recognition that a new playing field needed new rules, deregulation became the battle cry of lawmakers.

magnetronic
Magnetronic Reservisor on display at the American Airlines C.R. Smith Museum. Photo Credit: Wikimedia Commons

systemone
Univac Eastern Airlines Reservations Terminal 1960s. Photo Credit: Wikimedia Commons

newton
Orbitz price chart. Photo Credit: E. A. Boyd

Khan was an advocate of deregulation in his time, but that didn’t mean he was a stubborn antagonist of regulation. Rather, he was an astute thinker who acted in ways he believed were in the best interests of the public. At another time and in other circumstances, we can only imagine what this discerning mind would have to tell us.

I’m Andy Boyd at the University of Houston, where we’re interested in the way inventive minds work.

(Theme music)

“Alfred Kahn.” The Economist, January 20, 2011. See also: http://www.economist.com/node/17956457. Accessed July 10, 2015.

R. Hershey Jr. “Alfred E. Kahn Dies at 93; Prime Mover of Airline Deregulation.” New York Times, December 28, 2010. See also: http://www.nytimes.com/2010/12/29/business/29kahn.html?_r=2. Accessed July 10, 2015.

A History of U.S. Airline Regulation 1911-1979. From the Travel Insider website: http://blog.thetravelinsider.info/2010/07/a-history-of-us-airline-regulation-1911-1979.html. Accessed July 10, 2015.

New River Media Interview with: Alfred E. Kahn. From the PBS website:http://www.pbs.org/fmc/interviews/kahn.htm . Accessed July 10, 2015.

This episode was first aired on July 16, 2015