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The Unpredictability of Deregulation

Summary:
A closer look, though, at the deregulatory movement of the 1970s offers some grounds for optimism. Neither Carter nor Kennedy was particularly ideologically opposed to regulation. Rather, the deregulation was due to a confluence of circumstances, not all of which could be predicted, but which one can imagine being imitated. The circumstances behind airline deregulation, which I’ll focus on here, were: (1) ideas on the shelf; (2) dissent within the regulatory bureaucracy; (3) a budding consumer movement; (4) in Kennedy’s case, the hiring of a political entrepreneur, Stephen Breyer; and (5) a fracture within the organized defenders of regulation. Few of these factors, other than the first, could have been easily predicted and, by and large, were not predicted. This

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A closer look, though, at the deregulatory movement of the 1970s offers some grounds for optimism. Neither Carter nor Kennedy was particularly ideologically opposed to regulation. Rather, the deregulation was due to a confluence of circumstances, not all of which could be predicted, but which one can imagine being imitated. The circumstances behind airline deregulation, which I’ll focus on here, were: (1) ideas on the shelf; (2) dissent within the regulatory bureaucracy; (3) a budding consumer movement; (4) in Kennedy’s case, the hiring of a political entrepreneur, Stephen Breyer; and (5) a fracture within the organized defenders of regulation. Few of these factors, other than the first, could have been easily predicted and, by and large, were not predicted.

This is from David R. Henderson, “The Unpredictability of Airline Deregulation: The Case of Airlines,” Defining Ideas, December 19, 2018.

I lead with a quote from a Republican official who ended up buying into deregulation during the Ford administration. This quote beautifully sums up the serendipity that helped lead to deregulation.

The fact is I didn’t have very many views [on airline regulatory policy]. I had talked to the Ford administration about some other posts in government. Then I said to myself, “You are in a time when government isn’t going to have any money; no agency is going to have any money. You aren’t going to be able to do much from the standpoint of new domestic programs. . . . But you know you have the airline deregulation issue on the table because it has already surfaced.” . . . In terms of personal reward you don’t get a chance to change things very significantly very often in your life. –John Robson, Chairman of the Civil Aeronautics Board, 1975-1977.

Read the whole thing.

David Henderson
David Henderson is a British economist. He was the Head of the Economics and Statistics Department at the OECD in 1984–1992. Before that he worked as an academic economist in Britain, first at Oxford (Fellow of Lincoln College) and later at University College London (Professor of Economics, 1975–1983); as a British civil servant (first as an Economic Advisor in HM Treasury, and later as Chief Economist in the Ministry of Aviation); and as a staff member of the World Bank (1969–1975). In 1985 he gave the BBC Reith Lectures, which were published in the book Innocence and Design: The Influence of Economic Ideas on Policy (Blackwell, 1986).

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