Review of Industrial Organization 16: 323–325, 2000.
Letting Go: Deregulating the Process of Deregulation. Alfred E. Kahn. East Lans-
ing, Michigan: Michigan State University, The Institute of Public Utilities and
Network Industries, 1998, 146 pages.
If there were ever a top ten list of American economists based on contributions to
economic scholarship and economic policy combined, Kahn’s name would be on
it. His two volume The Economics of Regulation profoundly affected the academic
side of public utility regulation, serving the double barreled role of textbook and
treatise. As chair of the Civil Aeronautics Board, Kahn confounded his critics by
overseeing the demise of the agency, as he brought economic analysis into the
regulatory mix as an ingredient of deregulation.
Economists are not known for memorable lines. Kahn is. As the new head of
the CAB, faced by airline executives seeking to educate him on the differences in
airplane characteristics, Kahn informed them: “I really don’t know one plane from
the other. To me, they are all marginal costs with wings” (McCraw, 1984, p. 224).
Kahn now offers a short book, which the publisher claims can be viewed as the
third volume of The Economics of Regulation. Seen this way, the book will stack
up awkwardly on the shelf. It is a paperback of under 150 pages. But there is a
sense in which it is a belated sequel to the original two volumes (which appeared
in 1970–1971). The author has given this monograph an intriguing and reveal-
ing alternative title: Temptation of the Kleptocrats and the Political Economy of
The link between this book and The Economics of Regulation is political. Hav-
ing set forth the economic principles of regulation, and having observed (often,
participating in) the implementation of deregulation, Kahn uses this volume to
examine the rent-seeking strategies and the political maladies found in regulation
today. Many of these present maladies were not anticipated when The Economics
of Regulation appeared.
The alternative title Kahn has given this book reveals that, in many areas, Kahn
can restrain his enthusiasm for how deregulation is unfolding. As an aside, the book
is not about airline deregulation; it is about telecommunications and electric power
generation and distribution.
The short thesis of this short book is that short-sighted regulators may short-
circuit the deregulation process to generate short-run ﬁnancial gains for consumers