This week in Industrial Organization we will talk about the peculiarities of the deregulation movement that got going in the Jimmy Carter administration (?). One peculiarity is that — like the Spanish Inquisition — no one expected the deregulation movement. Why? Because the benefits of regulation generally flowed to a nice, concentrated group of producers at the expense of diffuse, often clueless consumers. This is pretty much the point of the Stigler-Peltzman-Becker characterizations of regulation.
A second puzzle is the public suspicion of regulation, and in particular the lack of recognition that consumers have been the overwhelming beneficiaries of the deregulation movement. On each of these points, I refer my students to the Clifford Winston’s excellent (but somewhat dated) piece from the Journal of Economic Literature.
Derek Thompson has a quite excellent piece in The Atlantic online, “How Airline Ticket Prices Fell 50% in 30 Years (and Why Nobody Noticed).” Well, some of us noticed, I guess, like those of us who teach IO.
Of course, deregulation has had its share of fiascoes and industry handouts as well, so perhaps that’s more etched in our brains than the radical price differences and innovation that often accompany industry deregulation.