For an upcoming three-day weekend, my 17-year-old son and I won’t think twice about hopping on a flight to visit family in Massachusetts. When I was my son’s age, such an excursion would have been an unthinkable luxury; air travel was reserved for businessmen and the wealthy. Alfred Kahn, the person arguably most responsible for the $100 round-trip fare that will make our weekend jaunt possible, died last week at the age of 93.
I had the honor of interviewing Professor Kahn last summer in his offices in Ithaca, New York. He was charming and witty, with a sharp mind and clear memory of the people and events that led to the successful deregulation of airlines (in which he was instrumental as chairman of the Civil Aeronautics Board), as well as telecommunications and electricity (which he helped initiate as chairman of the New York Public Service Commission).
Born in 1917, Fred Kahn finished high school in New Jersey at 15, and graduated first in his class at New York University at the age of 18. In 1942, he earned a doctorate in economics from Yale and in 1947 joined the faculty of Cornell University, where he remained until his death on December 27, 2010.
When we spoke, he admitted that he started off as an “early institutionalist,” influenced by Thorstein Veblen, and skeptical of markets, competition, and consumer choice. What he called his “radical change” came when he realized that “regulation was being used as an instrument of cartelization.” He elaborated on this theme — in two volumes — in his seminal and widely-used text, “The Economics of Regulation” (John Wiley, 1971, 1988).
In 1974, the governor of New York tapped the popular professor to chair the state’s Public Service Commission, responsible for electricity, gas, telephone, and water regulation. Kahn took a leave of absence from Cornell, but remained a teacher at heart. He treated his staff, the media, and the public as if they were his graduate students, carefully explaining the strategy and logic of his efforts to encourage greater competition. His knowledge and intellect were buttressed by his famous warmth, humor, and informal style (he encouraged staff to join him in his daily swims and was known to give interviews in his stocking feet). In 1975, he brought his professorial wit to Washington as a key witness at Senator Ted Kennedy’s 1975 hearings on airline deregulation.
When President Carter asked him to move to Washington in 1977 to chair the Civil Aeronautics Board, Kahn initially resisted, preferring instead to serve as chairman of the Federal Communications Commission. He used a comparative-advantage argument to suggest that he and the president’s chosen FCC chair (Charles Ferris) switch roles, arguing that no matter how little Ferris knew about airlines, it couldn’t be less than himself, but that Kahn must know more about telecom regulation (having served on the NY PSC). President Carter eventually persuaded him to extend his leave from Cornell to head the CAB, an independent agency he eventually succeeded in phasing out.
When he came to the CAB, he knew the Commission was responsible for awarding routes (a power it used to limit competition and entry into new markets), and for regulating service and fares. But Kahn was surprised by how picayune the decisions were that he was expected to make. He once got a call in the middle of the night from a carrier trying to determine whether an arrangement it had made to transport sheep from Virginia to England was approved. “The matter was urgent, because the sheep were in heat!” Alan Greenspan, in his 2007 book The Age of Turbulence, quotes Kahn as saying to a Congressional committee in 1978 testimony, “Is it any wonder that I ask myself every day: Is this action necessary? Is this what my mother raised me to do?”
He was invited to give a talk to airline executives at an exhibition showcasing newly-acquired European planes, but he demurred, saying “I don’t know one airplane from another; to me they’re all just marginal costs with wings.”