Alfred Kahn 1917-2010: A Proactive Economist Who Has Saved Us $20 Billion/Year

Professor Kahn of Cornell University, also known as The Godfather of airline deregulation, died last week. But his no-holds-barred free market legacy will, hopefully, live on for many decades to come. "Mr. Kahn, a leading regulatory scholar who wielded his influence in both government and academia, helped spur a broad movement beginning in the mid-1970s toward freer markets in rail and automotive transportation, telecommunications, utilities and the securities markets" according to The New York Times.

Ironically, Kahn's fame as the engineer of airline deregulation came as chairman of the Civil Aeronautics Board (CAB) to which he was appointed by then President Jimmy Carter in 1977. And according to the WSJ, "as chairman ... Mr. Kahn eliminated restrictions on prices and allowed airlines to choose their own routes. The move has been credited with lowering airfares -- estimates of annual savings range up to $20 billion -- and dramatically expanding flying. It also caused industry turmoil, as old airlines went bankrupt and new discount carriers, like Jet Blue and Southwest, emerged." The Journal also states that "Mr. Kahn introduced the biggest changes in airline regulation since CAB was established in 1940. By fiat, he eliminated restrictions on offering discounts and on establishing new routes and opened up smaller airports, including Chicago's Midway, to commercial traffic. In one case, two airlines flying between Los Angeles and Miami in 1978 slashed prices by a third and eliminated the Saturday stay-over rule. 'I open my mouth and a fare goes down,' he told the Washington Post in 1978 ... So successful was his barnstorming that just a year and a half after he became CAB chief, Congress formally deregulated aviation--and phased out CAB."

His "irascible and exuberant" manner was likely honed when he previously "served as head of the New York State Public Service Commission, the regulator for electricity, gas, water and telephones [where] he introduced pricing that varied by season or time of day, producing efficiencies benefiting utilities and consumers." And while Mr. Kahn, also according to The Times, "knew almost nothing about the airline business -- to him planes were just 'marginal costs with wings' -- ... he quickly mastered the arcana and politics of routes, pricing and costs ... despite opposition from industry executives and unions alike."

After he eliminated his job as CAB chairman, he was persuaded to take on the role of "Inflation Czar" and serve as chairman of the ill-fated Council on Wage and Price Stability, "a job described [in The Times] by a sympathetic friend as serving as fire chief to a pyromaniac ... [A job he disdained and commented upon saying:] 'I can't figure out why the president doesn't fire me,' he joked grimly at the time. 'Actually, I do know,' he added. 'Nobody would be foolish enough to take this job'."

None-the-less, Alfred Kahn was an economist who made a difference for us all. Perhaps his greatest legacy is his disdain for bureaucracy, while jumping into it with all his heart and soul and refusing to be a sideline commentator.

- William Busch

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