Prophets of Regulation

Thomas K. McCraw’s Prophets of Regulation (1984) is a cornerstone in the history of American economic regulation, capturing how individual regulators shaped the institutions and ideologies that defined U.S. economic policy across the 20th century. Chapters 2 (on Charles Francis Adams, Jr.), 7 (on Alfred E. Kahn), and 8 (comparative analysis) are especially rich with insights relevant for anyone interested in policymaking, business, or how creative leadership shapes public outcomes.

Charles Francis Adams, Jr.: The Integrity of Early Regulation (Chapter 2)

Chapter 2 traces the emergence of American regulatory thought through the figure of Charles Francis Adams, Jr., scion of a historic political family. Adams rose to prominence in the late 19th century as the principal architect of railroad regulation in Massachusetts. McCraw positions Adams as the prototype of the “prophet” reformer—a regulator who believed in the virtues of integrity, openness, and rational persuasion rather than heavy-handed government control.

Adams saw railroads as an essential public service, but also as private businesses prone to excesses—collusion, discriminatory pricing, and indifference to the public good. His genius, according to McCraw, lay in understanding that outright government takeovers were impractical and ideologically fraught in the U.S. Instead, Adams pushed for regulatory commissions that would expose corporate abuses, foster transparency, and rely on informed oversight rather than strict command.

Key attributes of Adams’s approach included:

• Moral Authority: Adams believed that regulatory commissioners should embody public trust. He often wrote that the mere presence of honest, independent oversight would dissuade much wrongdoing by corporations.
• Persuasion over Force: Rather than imposing punitive rules, Adams fostered a climate of voluntary compliance—relying on publicity (“sunlight is the best disinfectant”) and reasoned argument to guide railroad conduct.
• Early Precedent: Adams’s Massachusetts Board became a national model, demonstrating that regulation could serve the public interest without stifling business innovation or relying on cumbersome legal machinery.

Adams’s faith in the power of character and persuasion over bureaucratic force was central to the American regulatory style. But as McCraw notes, it also anticipated many of the tensions—over discretion, independence, and efficacy—that later regulators would face.

Alfred E. Kahn and the Arrival of Deregulation (Chapter 7)

Fast-forward a century to the story of Alfred E. Kahn, chronicled in Chapter 7. Kahn, a liberal economist and academic, became the “czar” of airline deregulation at the Civil Aeronautics Board (CAB) in the 1970s. McCraw paints Kahn as a radically different prophet: empirical, witty, practical—a believer in markets rather than morality as the ultimate regulator.

Kahn’s career illuminates the waning confidence in traditional, command-style regulation and the rising belief that competition, not bureaucracy, produces the best outcomes for consumers and society.

Salient aspects of Kahn’s legacy:

• Economic Pragmatism: Kahn viewed regulatory rules as a necessary response to natural monopoly only when markets couldn’t deliver efficiency. By the 1970s, new technologies, changing demand, and economic evidence showed that the airline industry was ripe for healthy competition.
• Transparency and Humor: Kahn’s charismatic leadership, humor, and direct communication style made complex regulatory reforms palatable to both the public and wary policymakers. He turned technical analysis into popular argument, deftly explaining how deregulation would lower fares, improve service, and unleash innovation.
• Institutional Transformation: Under his stewardship, the CAB voluntarily dismantled its own power—deregulating route entry and pricing, and finally, recommending its own abolition. This self-liquidation was virtually unprecedented in the history of government agencies.
• Enduring Influence: Kahn’s approach marked a watershed: the transition from faith in “wise” government oversight to an era skeptical of regulation for its own sake, marking the start of “neoliberal” policy in the U.S.

Comparative Analysis: Prophetic Styles and the Evolution of U.S. Regulation (Chapter 8)

Chapter 8 offers a comparative perspective, distilling key lessons from the book’s four primary regulatory “prophets”: Charles Francis Adams, Louis D. Brandeis, James M. Landis, and Alfred E. Kahn. The chapter examines how the American regulatory model has evolved—shaped less by textbooks or theories and more by the values and styles of its leading figures.

McCraw highlights several enduring themes relevant for present-day policy and business:

• No Singular Model: The American experience refutes the idea that regulation fits a single template. Instead, each prophet led with a distinct philosophy—moral authority (Adams), judicial oversight (Brandeis), engineer-bureaucrat (Landis), and economist reformer (Kahn).
• Adaptation to Context: Effective regulation arises in response to the technologies, markets, and public needs of the era. What worked for Adams’s 19th-century railroads would not fit the jet age; Kahn’s competitive solutions would have failed in Adams’s time.
• Regulatory Cycles: U.S. regulation swings between periods of expansion and retrenchment—ideals of public service and protection contending with faith in market discipline and efficiency. Each era’s prophet serves as both product and critic of the system.
• Role of Character: Across all, McCraw argues that the specific virtues—integrity, pragmatism, vision, and even wit—of individual regulators have often mattered more than structure or statute. Institutions mirror the convictions and capacities of their stewards.

Timeless Lessons for Today’s Readers

Prophets of Regulation shows that economic regulation is not a technical matter alone. It is repeatedly re-invented—by reformers who balance the enduring conflicts between private profit and public interest, discretion and due process, bureaucracy and enterprise.

• Principles of integrity, transparency, and adaptability remain vital for those who wield regulatory power.
• Both character and context drive regulatory effectiveness.
• The United States’ regulatory tradition is a living, often experimental blend of ideals and improvisation, shaped by the talents and beliefs of its “prophets.”

Business leaders, policymakers, and engaged citizens continue to wrestle with the core dilemmas brought to life by Adams, Kahn, and their peers—a reminder that good regulation is not a fixed system, but an ongoing negotiation between competing visions of the public good.