In this critical essay, Alfred E. Kahn, distinguished economist, educator, and government official, assesses the current status of the public utility deregulation movement in the United States. Professor Kahn is the preeminent authority on that subject because in the 1970s he played a leading role in propelling the forces of competition among the airlines, in surface transportation, and in telecommu-nications and promulgated the need for marginal cost pricing by the still-regulated ?natural monopolies.?

Here, the author of the classic two-volume Economics of Regulation focuses on the continuation of releasing competitive forces in the revolutionary deregulation of a large portion of the public utilities industries since 1980.

In his incisive analysis, Professor Kahn confronts the tension between Schumpeterian competition and the regulator?s mandate to provide for the prompt dissolution of franchised monopoly. He also addresses charges of oppor-tunistic behavior on the part of both regulators and utility companies in the process of deregulation. Finally, he examines the jurisdictional question of what agency should be responsible for the necessarily continuing task of promoting and preserving efficient competition. Professor Kahn provides several recent, arresting illustrations of the pitfalls of that choice, most notably in California?s electric utility industry.

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