NEOCLASSICAL PRICE THEORY AND RATE REGULATION
The premier contender in the lists of challengers to neopopulism was Professor Alfred Kahn of Cornell.1 In the realm of public policy, "ripeness is all." Kahn's two-volume Economics of Regulation ( 1970-71) more than any other work brought the neoclassical vineyard to ripeness for harvesting.2 Part of Kahn's influence derived from his ability to expound economic theory in terms that were accessible to laymen. Moreover, when in 1974 Kahn himself became chairman of the New York State Public Service Commission, and then in 1977 chairman of the U.S. Civil Aeronautics Board, he applied his formidable forensic and political skills to the implementation of ideas that had been set forth in his earlier academic writings.
Various of Kahn's colleagues, such as the contestability theorists led by William Baumol, added their voices to the theoretical critique of neopopulism. And the feisty, flashy pack of antitrust scholars collectively known as the Chicago School mounted an aggressive--and ultimately, a successful--challenge in the field of antitrust.
In many respects, the various critics of neopopulism held very different visions of the good society.3 But all of them shared a belief in the promise of neoclassical analysis. All avowed a faith in economic welfare as a core social value. And all sought to reemphasize the value of economic efficiency4 which, they felt, had been sacrificed--or had never been appreciated in the first-place-- by the postwar interpreters of antitrust and regulatory law.
In lay terms, the proponents of neoclassicism were advancing a version of the theory of the expanding pie. According to this theory, programs to protect