Alfred E. Kahn
Encyclopedia
Alfred Edward Kahn was an American professor, an expert in regulation and deregulation, and an important influence in the deregulation of the airline and energy industries. Commonly known as the "Father of Airline Deregulation," he chaired the Civil Aeronautics Board during the period when it ended its regulation of the airline industry, paving the way for low-cost airlines, from People Express to Southwest Airlines
.
He was the Robert Julius Thorne
Professor Emeritus of Political Economy
at Cornell University
.
, on Oct. 17, 1917, to parents Jacob and Bertha Kahn. His father, a Russian Jewish immigrant, worked in a silk mill. Kahn graduated from high school at 15 and New York University
at 18, summa cum laude and first in his class. He earned his doctorate in economics from Yale University
in 1942 after graduate study at NYU and the University of Missouri
.
Before World War II, he also worked for policy research organizations and government agencies in Washington, including the Brookings Institution
and the antitrust division of the U.S. Justice Department
. After serving in the United States Army
, he became Chairman of the Department of Economics at Ripon College
.
He moved to Cornell University
in 1947, where he served as chairman emeritus of the Department of Economics (a position he held for the rest of his life), as a member of the Board of Trustees of the University and as Dean of the College of Arts and Sciences. In 1974 he became chairman of the New York Public Service Commission, and later served as Chairman of the Civil Aeronautics Board, Advisory to the President on Inflation under Jimmy Carter
, and Chairman of the Council on Wage and Price Stability – Carter’s “inflation czar” – through 1980.
While serving under Carter, Kahn became known for his blunt and sometimes politically damaging comments. Convinced that certain administration policies would lead to a depression, he said that the economy would "become a banana." After banana producers objected, he changed his statement to "kumquat". He explained inflation in one press conference by saying "Inflation occurs when everyone is trying to take a piece of the pie, but there isn't enough pie to go around." While President Carter tried to downplay the significance of certain economic figures, Kahn called them "a catastrophe." At one point, a frustrated Kahn offered his resignation, but Carter refused, to which he said "I don't know why the president doesn't fire me. Actually, I do. There's no one else foolish enough to take this job."
He served on many private boards on commissions addressing regulated and deregulating industries such as electricity, telecommunications, and transportation. He also received numerous awards for his work in economics, regulation, and deregulation. A seminar room in the Lincoln Hall Music Library of Cornell University
is named in his honor. He also maintained a long relationship with NERA Economic Consulting
(formerly National Economic Research Associates).
In addition to his professorship at Cornell, Kahn sang baritone in university productions of Gilbert and Sullivan operettas from 1964 until retiring from the stage in 2000. He was badly injured in a 2003 car crash and endowed the New York hospital that saved him with funds to set up a camera traffic-surveillance system so emergency-room doctors could view the accidents that injured their patients.
Kahn remained completely convinced that deregulating the airlines was a success. When a friend complained that increased numbers of passengers on flights resulted in him sitting next to "a filthy hippie" on a plane, he replied "Since I haven't heard from the hippie, I can assume the distaste wasn't reciprocated." In 2008, the nonagenarian Kahn gave a speech to the Global Airport International Summit in Boston
where he said "The industry in the last 30 years gave the public something it had not received before: high quality, space, and low cost. It catered to a variety of demands and abilities today so that we had an enormous spread of fares. It offered the people upgrades such as business class and frequent flyer miles." Admitting that he was no expert on airplanes or the fine details of the industry, Kahn once said "I can't tell one plane from the other. To me, they're all just marginal costs with wings."
Kahn was the father-in-law of Daniel Mark Fogel
, president of the University of Vermont
.
Professor Kahn died of cancer in Ithaca at the age of 93, on December 27, 2010.
While serving as Chairman of the Civil Aeronautics Board (CAB), which regulated commercial airline fares, in 1977-1978, Kahn (a self-described "good liberal Democrat
") oversaw the deregulation of commercial air fares. As one analyst put it, Kahn "set to work with . . . other progressives" including Senator Edward Kennedy
, future Supreme Court Justice Stephen Breyer
, and consumer advocate Ralph Nader
to "dismantle anti-consumer cartels that had been sustained by government regulation." At the same time the CAB was disbanded, as deregulation
of commercial air fares made the agency no longer necessary. This is one of the very few examples of a regulatory agency deregulating itself out of existence.
He has consistently argued that, where feasible, complete deregulation is preferable to partial deregulation. "The verdict of the great majority of economists would, I believe, be that deregulation has been a success –- bearing in mind, as always, the central argument ... that society's choices are always between or among imperfect systems, but that, wherever it seems likely to be effective, even very imperfect competition is preferable to regulation .... Recent experience clearly suggests, instead, that the mixed system may be the worst of both possible worlds."
In an interview with USA Today
, he said that he wished that he could have deregulated the telecommunications industry.
He has served as an expert witness in many regulatory matters, particularly in issues regarding flat rate pricing for telecommunications, marginal costing in both telecommunications and electricity, and net neutrality. After his death, The Economist
wrote:
Southwest Airlines
Southwest Airlines Co. is an American low-cost airline based in Dallas, Texas. Southwest is the largest airline in the United States, based upon domestic passengers carried,...
.
He was the Robert Julius Thorne
Robert J. Thorne
Robert Julius Thorne was an American businessman who was president of Montgomery Ward from 1917 to 1920.-Life:...
Professor Emeritus of Political Economy
Political economy
Political economy originally was the term for studying production, buying, and selling, and their relations with law, custom, and government, as well as with the distribution of national income and wealth, including through the budget process. Political economy originated in moral philosophy...
at Cornell University
Cornell University
Cornell University is an Ivy League university located in Ithaca, New York, United States. It is a private land-grant university, receiving annual funding from the State of New York for certain educational missions...
.
Biography
Kahn was born in Paterson, New JerseyPaterson, New Jersey
Paterson is a city serving as the county seat of Passaic County, New Jersey, United States. As of the 2010 United States Census, its population was 146,199, rendering it New Jersey's third largest city and one of the largest cities in the New York City Metropolitan Area, despite a decrease of 3,023...
, on Oct. 17, 1917, to parents Jacob and Bertha Kahn. His father, a Russian Jewish immigrant, worked in a silk mill. Kahn graduated from high school at 15 and New York University
New York University
New York University is a private, nonsectarian research university based in New York City. NYU's main campus is situated in the Greenwich Village section of Manhattan...
at 18, summa cum laude and first in his class. He earned his doctorate in economics from Yale University
Yale University
Yale University is a private, Ivy League university located in New Haven, Connecticut, United States. Founded in 1701 in the Colony of Connecticut, the university is the third-oldest institution of higher education in the United States...
in 1942 after graduate study at NYU and the University of Missouri
University of Missouri
The University of Missouri System is a state university system providing centralized administration for four universities, a health care system, an extension program, five research and technology parks, and a publishing press. More than 64,000 students are currently enrolled at its four campuses...
.
Before World War II, he also worked for policy research organizations and government agencies in Washington, including the Brookings Institution
Brookings Institution
The Brookings Institution is a nonprofit public policy organization based in Washington, D.C., in the United States. One of Washington's oldest think tanks, Brookings conducts research and education in the social sciences, primarily in economics, metropolitan policy, governance, foreign policy, and...
and the antitrust division of the U.S. Justice Department
United States Department of Justice
The United States Department of Justice , is the United States federal executive department responsible for the enforcement of the law and administration of justice, equivalent to the justice or interior ministries of other countries.The Department is led by the Attorney General, who is nominated...
. After serving in the United States Army
United States Army
The United States Army is the main branch of the United States Armed Forces responsible for land-based military operations. It is the largest and oldest established branch of the U.S. military, and is one of seven U.S. uniformed services...
, he became Chairman of the Department of Economics at Ripon College
Ripon College (Wisconsin)
Ripon College is a liberal arts college in Ripon, Wisconsin, USA. It offers small class sizes and intensive mentoring to students. Ripon has a chapter of Phi Beta Kappa--one of the nation's most prestigious honor societies. Alumni have high rates of success in the workforce as well as acceptance...
.
He moved to Cornell University
Cornell University
Cornell University is an Ivy League university located in Ithaca, New York, United States. It is a private land-grant university, receiving annual funding from the State of New York for certain educational missions...
in 1947, where he served as chairman emeritus of the Department of Economics (a position he held for the rest of his life), as a member of the Board of Trustees of the University and as Dean of the College of Arts and Sciences. In 1974 he became chairman of the New York Public Service Commission, and later served as Chairman of the Civil Aeronautics Board, Advisory to the President on Inflation under Jimmy Carter
Jimmy Carter
James Earl "Jimmy" Carter, Jr. is an American politician who served as the 39th President of the United States and was the recipient of the 2002 Nobel Peace Prize, the only U.S. President to have received the Prize after leaving office...
, and Chairman of the Council on Wage and Price Stability – Carter’s “inflation czar” – through 1980.
While serving under Carter, Kahn became known for his blunt and sometimes politically damaging comments. Convinced that certain administration policies would lead to a depression, he said that the economy would "become a banana." After banana producers objected, he changed his statement to "kumquat". He explained inflation in one press conference by saying "Inflation occurs when everyone is trying to take a piece of the pie, but there isn't enough pie to go around." While President Carter tried to downplay the significance of certain economic figures, Kahn called them "a catastrophe." At one point, a frustrated Kahn offered his resignation, but Carter refused, to which he said "I don't know why the president doesn't fire me. Actually, I do. There's no one else foolish enough to take this job."
He served on many private boards on commissions addressing regulated and deregulating industries such as electricity, telecommunications, and transportation. He also received numerous awards for his work in economics, regulation, and deregulation. A seminar room in the Lincoln Hall Music Library of Cornell University
Cornell University
Cornell University is an Ivy League university located in Ithaca, New York, United States. It is a private land-grant university, receiving annual funding from the State of New York for certain educational missions...
is named in his honor. He also maintained a long relationship with NERA Economic Consulting
NERA Economic Consulting
' is a global firm of experts dedicated to applying economic, finance, and quantitative principles to complex business and legal challenges. For half a century, NERA's economists have been creating strategies, studies, reports, expert testimony, and policy recommendations for government authorities...
(formerly National Economic Research Associates).
In addition to his professorship at Cornell, Kahn sang baritone in university productions of Gilbert and Sullivan operettas from 1964 until retiring from the stage in 2000. He was badly injured in a 2003 car crash and endowed the New York hospital that saved him with funds to set up a camera traffic-surveillance system so emergency-room doctors could view the accidents that injured their patients.
Kahn remained completely convinced that deregulating the airlines was a success. When a friend complained that increased numbers of passengers on flights resulted in him sitting next to "a filthy hippie" on a plane, he replied "Since I haven't heard from the hippie, I can assume the distaste wasn't reciprocated." In 2008, the nonagenarian Kahn gave a speech to the Global Airport International Summit in Boston
Boston
Boston is the capital of and largest city in Massachusetts, and is one of the oldest cities in the United States. The largest city in New England, Boston is regarded as the unofficial "Capital of New England" for its economic and cultural impact on the entire New England region. The city proper had...
where he said "The industry in the last 30 years gave the public something it had not received before: high quality, space, and low cost. It catered to a variety of demands and abilities today so that we had an enormous spread of fares. It offered the people upgrades such as business class and frequent flyer miles." Admitting that he was no expert on airplanes or the fine details of the industry, Kahn once said "I can't tell one plane from the other. To me, they're all just marginal costs with wings."
Kahn was the father-in-law of Daniel Mark Fogel
Daniel Mark Fogel
Daniel Mark Fogel was President of the University of Vermont, located in Burlington, Vermont, a post he held from July 1, 2002 to July 31, 2011....
, president of the University of Vermont
University of Vermont
The University of Vermont comprises seven undergraduate schools, an honors college, a graduate college, and a college of medicine. The Honors College does not offer its own degrees; students in the Honors College concurrently enroll in one of the university's seven undergraduate colleges or...
.
Professor Kahn died of cancer in Ithaca at the age of 93, on December 27, 2010.
Work in Deregulation
Kahn's strong advocacy of deregulation stemmed largely from his understanding as an economist of marginal-cost theory. In his time at the New York Public Service Commission he was instrumental in using marginal costs to help price electricity and telecommunications services; this was novel at the time but is routinely performed today.While serving as Chairman of the Civil Aeronautics Board (CAB), which regulated commercial airline fares, in 1977-1978, Kahn (a self-described "good liberal Democrat
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...
") oversaw the deregulation of commercial air fares. As one analyst put it, Kahn "set to work with . . . other progressives" including Senator Edward Kennedy
Edward Kennedy
Edward Kennedy may refer to:*Ted Kennedy, Edward Moore "Ted" Kennedy , United States Senator from Massachusetts*Edward Kennedy , journalist who first reported the German surrender in World War II*Edward Kennedy, Jr., son of U.S...
, future Supreme Court Justice Stephen Breyer
Stephen Breyer
Stephen Gerald Breyer is an Associate Justice of the U.S. Supreme Court. Appointed by President Bill Clinton in 1994, and known for his pragmatic approach to constitutional law, Breyer is generally associated with the more liberal side of the Court....
, and consumer advocate Ralph Nader
Ralph Nader
Ralph Nader is an American political activist, as well as an author, lecturer, and attorney. Areas of particular concern to Nader include consumer protection, humanitarianism, environmentalism, and democratic government....
to "dismantle anti-consumer cartels that had been sustained by government regulation." At the same time the CAB was disbanded, as deregulation
Deregulation
Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or simplification of government rules and regulations that constrain the operation of market forces.Deregulation is the removal or...
of commercial air fares made the agency no longer necessary. This is one of the very few examples of a regulatory agency deregulating itself out of existence.
He has consistently argued that, where feasible, complete deregulation is preferable to partial deregulation. "The verdict of the great majority of economists would, I believe, be that deregulation has been a success –- bearing in mind, as always, the central argument ... that society's choices are always between or among imperfect systems, but that, wherever it seems likely to be effective, even very imperfect competition is preferable to regulation .... Recent experience clearly suggests, instead, that the mixed system may be the worst of both possible worlds."
In an interview with USA Today
USA Today
USA Today is a national American daily newspaper published by the Gannett Company. It was founded by Al Neuharth. The newspaper vies with The Wall Street Journal for the position of having the widest circulation of any newspaper in the United States, something it previously held since 2003...
, he said that he wished that he could have deregulated the telecommunications industry.
He has served as an expert witness in many regulatory matters, particularly in issues regarding flat rate pricing for telecommunications, marginal costing in both telecommunications and electricity, and net neutrality. After his death, The Economist
The Economist
The Economist is an English-language weekly news and international affairs publication owned by The Economist Newspaper Ltd. and edited in offices in the City of Westminster, London, England. Continuous publication began under founder James Wilson in September 1843...
wrote:
- And though, being an economist, he could not help muttering about the imperfection of societies and systems and the absurdity of predictions-- and though, being an inveterate puncturer of himself, he would demand a paternity test if anyone called him the father of the deregulated world--his adventures with airlines led on to the freeing of the trucking, telecoms and power industries, and heralded the Thatcherite and Reaganite revolutions.