The Economics of Regulation: Principles and Institutions, Volume 1

Front Cover

As Chairman of the Civil Aeronautics Board in the late 1970s, Alfred E. Kahn presidedover the deregulation of the airlines and his book, published earlier in that decade, presented thefirst comprehensive integration of the economic theory and institutional practice of economicregulation. In his lengthy new introduction to this edition Kahn surveys and analyzes thederegulation revolution that has not only swept the airlines but has transformed American publicutilities and private industries generally over the past seventeen years.While attitudes towardregulation have changed several times in the intervening years and government regulation has waxedand waned, the question of whether to regulate more or to regulate less is a topic of constantdebate, one that The Economics of Regulation addresses incisively. It clearly remains the standardwork in the field, a starting point and reference tool for anyone working in regulation.Kahn pointsout that while dramatic changes have come about in the structurally competitive industries - theairlines, trucking, stock exchange brokerage services, railroads, buses, cable television, oil andnatural gas - the consensus about the desirability and necessity for regulated monopoly in publicutilities has likewise been dissolving, under the burdens of inflation, fuel crises, and thetraumatic experience with nuclear plants. Kahn reviews and assesses the changes in both areas: he isparticularly frank in his appraisal of the effect of deregulation on the airlines.His conclusiontoday mirrors that of his original, seminal work - that different industries need different mixes ofinstitutional arrangements that cannot be decided on the basis of ideology.Alfred E. Kahn is RobertJulius Thorne Professor of Political Economy at Cornell University and Special Consultant toNational Economic Research Associates.

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Contents

Part
1
The Distinction in Practice
8
Economics and Noneconomics Science and Prescription
14
The Traditional Issues in the Pricing of Public Utility Services
20
Supervision and Control of Operating costs and Capital Outlays
26
Regulating Rate Structures
54
Problems of Defining Marginal Cost
70
Tempering Principle with Practicalityor One Principle with Another
83
The Tendency of Regulation to Spread 28
28
A Few Warning Notes 46
46
Incentive Plans 59
59
Regulatory Planning 77
77
The Inherent Limitations of Regulation 93
93
The AJW Effect 106
106
Competitive Certification versus Centralized Planning
126
Natural Gas Transmission 152
152

The Appropriate Time Pattern of Rates
103
5
118
Principles of Discrimination
137
Fully Distributed Costs
150
The Impact on Competition at the Secondary Level
166
Conclusions
180
Externalities
193
Monopoly and Protectionism 1
1
5
167
Air Transport
209
The Benefits and Dangers of Discriminatory
246
Horizontal and Geographic Integration
281
The Problem of Judgment
306
7
320
Index Volumes I and II
345
Copyright

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About the author (1988)

Alfred E. Kahn (1917-2010) was Robert Julius Thorne Professor of Political Economy at Cornell University and Special Consultant to National Economic Research Associates.

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