Abstract: 1973 and the Roots of Deregulation
Deregulation was one of the most important economic developments of the late twentieth century. In country after country, industries that had long been subject to government control of pricing, entry, and service quality were thrown open to market forces. The deregulatory wave began in the United States, but it quickly spread internationally. The question I explore in this paper is why the deregulatory moment arrived when it did. The answer, I suggest, has to do with a precipitating factor that has received little attention in the deregulation literature: the first OPEC oil crisis of 1973. When the crisis struck, regulation kept oil and natural gas markets in the United States from adjusting to the new conditions. In a matter of months, public anger at higher gasoline prices and cut-offs of natural gas shipments turned deregulation from an intellectual crusade into a front-burner political issue. Ironically, because of idiosyncracies that made the oil and gas industries difficult to deregulate, deregulation ended up affecting other sectors of the economy long before it affected the energy sector.