The Deregulated Environment

Many people are enamored of the idea of deregulation as a way to counter the growth of government and the perception that government is wasteful, intrusive, and inefficient. Deregulation was touted as a cure-all for Big Government during the Reagan administration, though one of the major acts of deregulation took place prior to that during the Carter administration with deregulation of the airline industry. Deregulation has also been instituted for other industries, such as finance and communications, and it has been found not to work as intended. In the deregulated environment, the consumer feels less protected and less safe. What may have been intended as a means of simplifying the business environment usually complicates it, as has happened with deregulation of the communications industries, and the consumer is left feeling confused by the change.

Regulation typically refers to governmental efforts to control individual price, output, or product quality decisions of private firms in an effort to prevent purely private decision-making that would take inadequate account of the public interest. The first modern regulatory agency was established by Congress in 1887--the Interstate Commerce Commission--to control railroad rates. by the 1960s, government regulation was commonplace in the transportation, communications, and utility industries, and federal or state regulatory bodies exercised control over trucking, airlines, telephone services, electricity, radio, televisio

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t include the finding that under deregulation, travelers had saved $6 billion annually through lower fares and better service. Airlines had improved their earnings by $2.5 billion annually. In addition: Because the industry is still tied to the capital structure created under government regulation, it has not fully adjusted to deregulation, and the authors conclude that the benefits achieved thus far should be still greater in the long term. They recommend continued vigorous pursuit of policies that promote competition in deregulated airline markets (Morrison and Winston, 1986, vii). In other terms, though, questions were raised about how close deregulation had moved the industry to the socially optimal configuration of fares and services. The authors estimated that social welfare maximization of fares and service could increase annual benefits achieved under deregulation by roughly thirty percent, or $2.5 billion. The largest gains would come from further increases in departure frequency, particularly in low-density markets. However, the authors questioned whether this would be possible given the fact that deregulated airline markets are not perfectly competitive. They did believe that significant welfare gains would be p

Category: Government - T