List and discuss the importance of the major effects of the deregulation that occurred in the 1980s

Answer 1

Baumol and Blinder list seven effects:
1 . Effects on Prices: Prices have been lower. Examples include airline rates, freight rates, and telephone rates, all of which have on average declined. Lower prices increase consumer utility.
2 . Effects on Local Services: It was widely feared that smaller communities would be deprived of services because small numbers of customers would make those services unprofitable. The outcome was not as serious as feared. For example, although larger airlines have left smaller communities, they have usually been replaced by smaller commuter airlines that have often provided more frequent service. In addition, larger airlines began "hub=and-spoke" service, enabling them to continue to serve less traveled destinations profitably.
3 . Effects on Entry: Entry conditions changed. Major airlines began to invade routes of others, new airlines entered the industry, and new truckers entered, though many have since dropped out. Almost all of the new airlines ran into trouble and were sold to older airlines. Since 1990, several small airlines have been launched, and several are now the most profitable firms in the industry. A battle is now brewing over whether the small airlines need special protection from the larger airlines. Large and small airlines have perished.
4 . Effects on Unions: Deregulation has badly hurt unions such as the Teamsters (trucking) and the Airline Pilots Association. As profits fell, firms were less able to pay high wages. Teamsters opposed trucking deregulation, and the Airline Pilots Association suffered harm as income of members fell. To remain competitive, firms have been forded to make sharp cuts in their workforces, and to resist wage increases and other costly changes. Not surprisingly, unions often oppose deregulation.
5 . Effects on Product Quality: In some industries, deregulation and the resulting increased competition have led to quality reductions. In the case of airlines, for example, planes have become more crowded, meals less elaborate, etc., and flights often stop at the airline's hub where passengers board another plane to their destination, rather than going direct.
6 . Effects on Safety: Observers have been concerned that cost cutting after deregulation would lead to skimping on safety measures, but deregulation seems not have increased the rate of airline accidents, for example. Even so, deregulation may require special vigilance to guard against neglect of safety as a cost-cutting measure.
7 . Effects on Profits and Wages: Deregulation has generally strengthened competition, but led to depressed profits and wages. This has particularly been true in the airline industry which has had other financial problems, including the threat of terrorism and rising fuel prices. Generally, deregulation has worked out well, but not perfectly in promoting the welfare of consumers.