Exporting Deregulation - Alfred Kahn and the Celtic Tiger

Abstract

Airline deregulation in Ireland arose from a parliamentary revolt in 1984 against legislation to imprison and fine those selling airline tickets below government approved fares. The revolt was heavily influenced by US airline deregulation in 1978 and the writings of Alfred Kahn. The results were spectacular. Dublin-London, deregulated in 1986, became the busiest international route in Europe. The 2.2m passengers on the Irish national airline before deregulation in 1986 increased to 72m passengers on four Irish airlines in 2008. Ryanair redefined the European aviation. The success of airline deregulation had a major influence on Irish economic policy IntroductionAlfred Kahn's visit to Ireland in October 2006 was a remarkable tour de force. He addressed the annual economic policy conference of economists, senior public servants and financial sector executives at Kenmare where celebrated his 89 th birthday. He lectured to packed halls of undergraduates in Trinity College, Dublin. He lived on campus, entered into the spirit of traditional events such as choral evensong and held briefings on competition issues for senior Irish regulators. Scores of undergraduate examination scripts in that academic year included phrases such like "as Alfred Kahn said on his visit last October".Kahn's visit was no empty ceremonial occasion. No country adopted more enthusiastically than Ireland the policy of airline deregulation developed by Alfred Kahn and promoted by President Carter and Senator Edward Kennedy. No country had more dramatic results from aviation deregulation than Ireland. In this special issue of the Review of Network Economics commemorating the economic and public policy contributions of Alfred Kahn, the export of his ideas to Ireland is an important case study. The sole Irish national airline had 2.2 million passengers in 1985/6, the last full year before deregulation in May 1986. In 2008, the four Irish airlines in the deregulated market have 72 million passengers. Airline deregulation was the first step in a series of changes in Irish economic policy, which led to the so-called Celtic Tiger era of rapid economic growth described in Table 7. The successive themes of this paper in sections 2, 3 and 4 below are the regulatory capture of aviation policy by Europe's national airlines, the stagnation before deregulation and the case made by Aer Lingus to exclude new market entrants from Irish aviation.* Department of Economics, Trinity College, Dublin,2, Ireland. E-mail: sbarrett@tcd.ie I appreciate the helpful comments of the editors and referees but the usual disclaimer applies. All errors are mine.

Regulatory Fog: The Informational Origins of Regulatory Persistence

“…The architect of the CAB deregulation, Alfred Kahn, cited the importance of the "demonstration effect," provided by airline deregulation, in understanding subsequent deregulation of trucking and railroads (Peltzman, Levine and Noll 1989). Likewise, the US experiment spurred airline deregulation overseas (Barrett 2008). Consistent with our model of regulatory fog, a glimpse of the unregulated intra-state market provided regulators with new information about the underlying environment, which in turn spurred a successful deregulation of the airlines.…”