SENATOR TED KENNEDY AND THE DEREGULATORY AGENDA

The avalanche of commentary on the life of Senator Kennedy has mostly concentrated on his commitments to and successes in legislating around issues of social justice.  His central role in the advancement of the deregulation movement has received far less note.  This role was something Kennedy himself deeply embraced, commenting on it in his famous 1980 “The Dream Shall Never Die” speech.

The connection of Senator Kennedy to deregulation is a story of ideas, expertise and elites.  Ideas count.  Those of us who were studying economics in the late 1960s and early 1970s were profoundly affected by the work of luminaries such as George Stigler (Chicago) and Alfred E. Kahn (Cornell).  The message was “markets work.”  We were persuaded by Stigler and Kahn that price and entry regulation of structurally competitive markets was a particularly stupid form of governmental regulation.  If we did not get the message through university economics departments then we were infected in law schools by the teaching of Don Turner (Harvard), Don Baker (Cornell), Stephen Breyer (Harvard) and Richard Posner (Chicago).

But if ideas and expertise are to be translated into implemented public policy, elites and politics become highly relevant.  For economic deregulation, Kennedy was crucial in making the links among ideas, expertise, elites, and successful politics.  This resulted in the deregulation of airlines and trucking.  The best economic evidence is that these actions have resulted in billions of dollars of benefit to the American public.

Kennedy made deregulation of transportation, in particular the deregulation of airlines and trucking, a central part of his political agenda in the late 1970s.  He brought to government the expertise that was crucial.  Key players on the Kennedy senatorial team working on deregulation included Breyer and David Boies.  The combination of political will, ideas and expertise was an awesome sight to behold.

Kennedy was also able to make alliances with likeminded political appointees in the executive branch.  He worked closely with the Justice Department Antitrust Division in pushing deregulation.  He had strong allies in two assistant attorneys general for Antitrust, first Don Baker (who had been appointed by Gerald Ford but carried over briefly into the Carter Administration) and then John Shenefield, for whom I worked.  Kennedy strongly cultivated these relationships.

Both Baker and Shenefield devoted considerable staff resources to the legislative battles and to advocating to the White House the need to support reform.  Baker brought to the battle his academic expertise as a Cornell Law professor.  Shenefield was a practicing lawyer who had cut his teeth working with Lewis Powell as a regulated industries lawyer in Virginia.  Shenefield came to Justice after serving as a key political advisor to the Carter presidential campaign.  His academic training at Harvard College and Harvard Law School, his connections to the Washington political elite, and his considerable talent as a trial lawyer enabled him to effectively achieve collaboration between the executive branch and Senator Kennedy.

If this story were a movie, the what happened next is also extremely interesting.  The rhetoric of deregulation was used powerfully in a number of other areas, in ways that I am sure deeply troubled Kennedy and almost certainly contribued to the current economic crisis.  The people moved on—Breyer became a Supreme Court Justice, Shenefield became chair of one of America’s most important law firms (Morgan Lewis), and David Boies became one of the leading lawyers of his generation.  As a side note on the connectedness of elites, Boies now chairs his own law firm, Boies, Schiller and Flexner.  The Flexner is Don Flexner, who served as the key deregulation staffer to Baker and Shenefield at Justice.

 

 

Comments

[Brian]

I seem to recall even Dick Posner acknowleding that deregulation of airlines has been a disaster, and is closely related to the poor quality of domestic air travel with which we're all familiar now in the U.S. Am I missing something?

[Roger Dennis]

You certainly in my view are very much missing the big picture. Here is a balanced story of what happened. http://www.centennialofflight.gov/essay/Commercial_Aviation/Dereg/Tran8.htm

Nothing unexpected..short term dislocations, long term huge gains. I don't believe Posner disagrees..r

[Eric Fink]

Does Judge Posner ever fly Coach?

Kidding aside, I'm not sure that essay supports the assertion of "long term huge gains." It does credit deregulation with reducing average fares by one-third between 1977 and 1992, and with an aggregate savings of $100 billion in ticket prices (not clear whether that's over the same time period). That seems very significant; but have those savings continued in the past 17 years?

Against the reduction in fares, it would be appropriate to offset the cost to consumers in reduced standards of service -- greater delays, longer travel time because of the increasing number of trips requiring one or more changes, and (very hard to quantify) a marked decline in the physical comfort of passenger aircraft (at just over 6'1" and not unusually fat for an American, I can barely squeeze myself into a typical Coach seat).

I suspect that someone has crunched these numbers in greater detail. This isn't at all my area of expertise, and I'm entirely prepared to believe that the benefits of deregulation to airline passengers have indeed been substantial. But I'd want to see a fuller picture before drawing any conclusions.

[Roger Dennis]

Eric--there is a huge literature on the topic, but your service complaints are not fully captured by the defenders of airline deregulation who primarily look to price and productivity measures..this is a typical debate across "cultures"

You might want to look at:

http://www.econlib.org/library/Enc/AirlineDeregulation.html