Dr. Alfred Edward Kahn, Ph.D., economist

http://news.cornell.edu/stories/2010/12/alfred-kahn-father-airline-...

Economist Alfred Kahn, 'father of airline deregulation' and former presidential adviser, dies at 93

By Susan S. Lang

Memorial service The family of Alfred E. Kahn and the Department of Economics invite the public to a memorial service Saturday, June 25, 1:30-3 p.m., in Kennedy Hall's Call Auditorium. A reception will follow at the A.D. White House.

Alfred E. Kahn, former chair of the Civil Aeronautics Board and the Council on Wage and Price Stability, adviser to President Jimmy Carter on inflation, and widely regarded as one of the world's leading scholars and influential figures in public utility regulation who helped create free markets in the air, rail and trucking industries, died of cancer at his home at Kendal at Ithaca in Ithaca, N.Y., Dec. 27. He was 93.

At his death, Kahn was the Robert Julius Thorne Professor of Political Economy, Emeritus, at Cornell University, where he spent most of his professional career, and a special consultant to NERA Economic Consulting.

Dubbed the "inflation czar" under Carter from 1977-78, Kahn became best known as the "architect of airline deregulation" when he spearheaded the U.S. Airline Deregulation Act of 1978 as chair of the now-defunct Civil Aeronautics Board (CAB). He showed that flexible pricing was beneficial for both customers -- who have saved billions of dollars in fares since Kahn's efforts -- and the U.S. airline industry. He was largely instrumental in garnering the support necessary for the federal legislation that deregulated the airline industry and was the first thorough dismantling of a comprehensive system of government control since 1935.

When honored with the 1997 Welch Pogue Award by the publishers of Aviation Week and Space Technology, which recognizes visionaries and leaders' lifetime contributions to aviation, it was said of Kahn: "His vision and actions resulted in a profound transformation of the U.S. airline industry and strongly influenced international air transportation."

Born Oct. 17, 1917, in Paterson, N.J., Kahn received an A.B. degree at age 18, summa cum laude and first in his class, in 1936 and an M.A. in 1937, both from New York University, and a Ph.D. from Yale University in 1942. In the early 1940s, he worked at the Brookings Institution, in the antitrust division of the U.S. Department of Justice and for the War Production Board as an economist. After basic training in the U.S. Army in 1943, he served as an economist for the Army for the Commission on Palestine Surveys and later as an economist for the Twentieth Century Fund. He began his teaching career at Ripon College in Ripon, Wis. In 1947, he joined the Cornell faculty, became an associate professor in 1950 and a full professor in 1955, and received his endowed chair in 1967.

Kahn served as chair of the Department of Economics (1958-63), as a member of the Cornell Board of Trustees (1964-69) and as dean of the College of Arts and Sciences (1969-74). In 1974, he took a leave from the university when he was appointed by New York Gov. Malcolm Wilson to chair the New York Public Service Commission, which was responsible for the regulation of the electric, gas, telephone and water companies. He was subsequently reappointed to the PSC by Gov. Hugh Carey.

While chairing the CAB in 1977-78, Kahn not only became known as the "father of deregulation" but also created a sensation with his campaign to eliminate "'bureaucratese' or gobbledygook" at the CAB, according to Robert Frank, the Henrietta Johnson Louis Professor of Management at Cornell's Johnson School and a colleague of Kahn. The Washington Post printed a copy of Kahn's memo calling for simpler language and ran an editorial, "The Sayings of Chairman Kahn," a reference to the then-topical Sayings of Chairman Mao. According to Frank, Kahn was subsequently nominated for the presidency by a newspaper in Kansas and for the Nobel Prize in an editorial in the Singapore Strait Times and was appointed to the Usage Panel of The American Heritage Dictionary; his war on bureaucratese was a major feature of his first, full-hour appearance on PBS's "The MacNeil/Lehrer Report" -- for which the demand for copies was greater than for any previous program -- featuring especially his admonition to the CAB staff: "If you can't explain what you're doing in plain English, you're probably doing something wrong."

In October 1978, Kahn was tapped by Carter to serve as adviser to the president on inflation and as chair of the Council on Wage and Price Stability. He appeared with Carter on the cover of Newsweek as the nation's "Inflation Czar."

Kahn was not only well known as a brilliant economist but also as an irrepressibly candid wit. Attacked by airline industry executives for not knowing one airliner from another, Kahn, a leading exponent of marginal cost theory, readily conceded, quipping, "To me they are just marginal costs with wings." When the administration admonished Kahn for alarming the public that the country could face a "deep, deep depression" if Carter's anti-inflation policies failed, Kahn thereafter used the euphemism "banana" for the word "depression," which he later switched to "kumquat" when a large banana company complained.

In 1980 he returned to his chair in economics at Cornell. He is the author of more than 130 academic papers as well as eight books, including the landmark two-volume "The Economics of Regulation" (John Wiley, 1971; reissued with a postscript by the MIT Press in 1988), which is still considered the pre-eminent work in the field almost four decades later, and most recently of "Whom the Gods Would Destroy, or How Not to Deregulate" (2001) and "Letting Go: Deregulating the Process of Deregulation" (1998), which focuses on deregulation of the electric power and telecommunications industries. His other publications include "Great Britain in the World Economy," "Fair Competition," "The Law and Economics of Antitrust Policy" (co-authored), and "Integration and Competition in the Petroleum Industry" (co-authored). Kahn was one of the four titular subjects of "Prophets of Regulation: Charles Francis Adams, Louis D. Brandeis, James M. Landis, Alfred E. Kahn" by historian Thomas K. McGraw, who won the Pulitzer Prize for history in 1986 for the book.

Kahn testified before U.S. House and Senate committees some 70 times and served on numerous public and private boards and commissions, such as the Attorney General's National Committee to Study the Antitrust Laws; the Environmental Advisory Committee of the Federal Energy Administration; and as the chair of the International Institute for Applied Systems Analysis Advisory Committee on Price Reform and Competition in the USSR. He is the recipient of numerous honorary degrees and awards, including the Distinguished Transportation Research Award of the Transportation Board Forum, the Alumni Achievement Award of New York University, and the Wilbur Cross Medal for Outstanding Achievement from Yale University. He also has testified before the Federal Power Commission, the Federal Energy Regulatory Commission and numerous state regulatory bodies.

Kahn was also a performer for many years with the Cornell Savoyards, acting, singing and dancing in their productions. A seminar room in the Department of Music at Cornell is named in his honor.

In addition to his wife, Mary, he is survived by three children and a nephew for whom he and Mary were legal guardians, eight grandchildren, and two great-grandchildren.

Funeral arrangements will be made by Bangs Funeral Home with a private burial. A memorial celebration of his life will be held in the late spring or early summer. In lieu of flowers, memorial donations can be made to Hospicare of Tompkins County.

• Alfred's birth, biographical, and death information are available in his obituary at https://www.nytimes.com/2010/12/29/business/29kahn.html, which is provided below, as well:
  • "Alfred E. Kahn Dies at 93; Prime Mover of Airline Deregulation
  • "By Robert D. Hershey Jr., Dec. 28, 2010
  • "Alfred E. Kahn, a Cornell University economist best known as the chief architect and promoter of deregulating the nation’s airlines, despite opposition from industry executives and unions alike, died Monday at his home in Ithaca, N.Y. He was 93.
  • "The cause was cancer, Cornell said in a statement.
  • "Mr. Kahn, a leading regulatory scholar who wielded his influence in both government and academia, helped spur a broad movement beginning in the mid-1970s toward freer markets in rail and automotive transportation, telecommunications, utilities and the securities markets.
  • "Before deregulation, the airlines were tightly controlled by the Civil Aeronautics Board, which approved routes and set fares that guaranteed airlines a 12 percent return on flights that were 55 percent full. The changes Mr. Kahn orchestrated resulted in increased competition, lower fares and the rise of low-cost carriers like JetBlue and Southwest. But they also created severe financial problems for the industry, leading to bankruptcies and mergers.
  • "“I have to concede that the competition that deregulation brought certainly was terribly, terribly hard on the airlines and their unions, who had heretofore enjoyed the benefits of protection from competition under regulation,” Mr. Kahn said decades later.
  • "He added that he accepted “some responsibility” for the industry’s financial problems but said that it had eventually recovered, despite sharply rising oil prices and terrorist-related security costs.
  • "Before he tackled such national issues, Mr. Kahn served as head of the New York State Public Service Commission, the regulator for electricity, gas, water and telephones. He introduced pricing that varied by season or time of day, producing efficiencies benefiting utilities and consumers.
  • "But Mr. Kahn proved virtually helpless when, as the Consumer Price Index jumped in 1978 to 8 percent, President Jimmy Carter persuaded him to become inflation “czar” and to serve as chairman of the ill-fated Council on Wage and Price Stability, a job described by a sympathetic friend as serving as fire chief to a pyromaniac.
  • "Before long in his new post, the voluble Mr. Kahn, shunning “recession” as a euphemism, warned of a “very serious depression” if inflation were not tamed, prompting a private rebuke by the president’s chief domestic policy adviser, Stuart E. Eizenstat.
  • "So instead, Mr. Kahn began referring in public to a possible economic downturn as a “banana,” only to be chided by the president of the United Fruit Company and induced to shift once again to a different euphemism, “kumquat.”
  • "Mr. Kahn, operating without staff of his own and with inflation accelerating to above 10 percent, became so frustrated in late 1979 that he asked to be relieved of the job. “I can’t figure out why the president doesn’t fire me,” he joked grimly at the time. “Actually, I do know,” he added. “Nobody would be foolish enough to take this job.”
  • "His most significant public policy impact was undoubtedly as chairman of the Civil Aeronautics Board, which he joined in 1977 under pressure from Mr. Carter and Vice President Walter F. Mondale. What Mr. Kahn had really wanted was to head the Federal Communications Commission.
  • "His most significant public policy impact was undoubtedly as chairman of the Civil Aeronautics Board, which he joined in 1977 under pressure from Mr. Carter and Vice President Walter F. Mondale. What Mr. Kahn had really wanted was to head the Federal Communications Commission.
  • "An academic, Mr. Kahn knew almost nothing about the airline business — to him planes were just “marginal costs with wings” — but he quickly mastered the arcana and politics of routes, pricing and costs.
  • "“Fred was clearly the perfect man to lead the airline deregulation effort,” said John H. Shenefield, a Washington lawyer, in a 2003 tribute as Mr. Kahn accepted an award from the American Antitrust Institute, describing him as “Carter’s field general for deregulation.”
  • "Mr. Kahn, drawing on considerable gifts of persuasion and media insight, led the struggle for enactment of the Airline Deregulation Act of 1978, the first total dismantling of a federal regulatory regime since the 1930s.
  • "Washington, he argued in various settings, had long fostered airline inefficiency and by thwarting competition was enabling carriers to keep fares artificially high.
  • "While the industry was financially battered by the new law and some smaller cities lost service, Mr. Kahn over the years stoutly defended his handiwork by saying that many more Americans were flying with greater choice of carriers and at lower fares than ever before.
  • "Alfred Edward Kahn, known as Fred, was born on Oct. 17, 1917, in Paterson, N. J., the son of Russian immigrants, and came of age during the Depression, which prompted his interest in economics. His father worked in a silk mill, eventually owning one himself.
  • "After taking degrees at New York University and a Ph.D. at Yale, Mr. Kahn went to Washington to work briefly as a economist for the Brookings Institution, the Justice Department’s antitrust division and the War Production Board before a 1943 Army stint that ended with a discharge for poor eyesight after basic training.
  • "He joined the Cornell faculty in 1947 after two years at Ripon College in Wisconsin, where he began an extended academic career distinguished by publication of “The Economics of Regulation,” his landmark two-volume treatise, first published in 1970.
  • "At Cornell, he served as dean of the college of arts and sciences and as a member of the board of trustees.
  • "He became a favorite of colleagues and students, often holding forth while padding about in stocking feet or sitting with legs slung over the side of his chair.
  • "Mr. Kahn was also an avid Savoyard, appearing in numerous campus productions of the light operas of Gilbert and Sullivan. “I was a ham,” he acknowledged, which “made for a special relationship with the students.”
  • "For nearly 30 years the Kahns lived on a large waterfront property on Lake Cayuga in which, to justify what seemed to him an outrageous expense, he forced himself to swim every day until it was too cold. He continued swimming into his 90s.
  • "Mr. Kahn is survived by his wife, Mary Simmons Kahn; two daughters, Rachel Kahn-Fogel of Colchester, Vt., and Hannah Kahn of Denver; a son, Joel, of Melbourne, Australia; a nephew for whom he and his wife were legal guardians, Peter S. Boone of Arlington, Va.; eight grandchildren; and two great-grandchildren.
  • "A longstanding revulsion to bureaucratic language, which he attacked in a widely reported episode four days after arriving at the C.A.B., never waned. Try to write, he told the staff in a memo, “in straight-forward quasi-conversational, humane prose — as though you were talking to or communicating with real people.”
  • "This probably also impressed editors of the American Heritage Dictionary, on whose usage panel Mr. Kahn served for more than 25 years.
  • "[A version of this article appears in print on Dec. 29, 2010, Section A, Page 21 of the New York edition with the headline: Alfred E. Kahn, 93, Dies; Led Airline Deregulation.]