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  Deregulation is the reduction or elimination of governmental controls and rules regulating the behaviour or firms in an industry. Deregulation is one strand of supply-side economics. Regulatory reform and deregulation developed momentum in the US in the Nixon administration and continued apace in the administrations of Ford, Carter and Reagan. The deregulation that occurred during those years has been referred to as economic deregulation because it involved returning to a reliance on competition in markets to control prices and quantities, rather than reliance on laws and commission rules. At the same time that economic regulation was declining a new regulatory movement was under way in the form of protective regulation, designed to protect people from the social consequences of production with legislation to provide clean air, clean water, occupation safety and health, etc.

Perhaps the best example of deregulation came in the American airline industry in the late 1970s, when rules on which airlines could fly which routes and at what price were abolished. The result was a surge of activity, with new airlines setting up—and by the time the cycle was properly advanced many new routes had settled back into a pattern not dissimilar to the original. The cut-price innovators like People Express had failed to survive or had been taken over by bigger, older competitors. TF



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