The Potential Consequences of Deregulation of Transportation

This article discusses the probable results if federal deregulation of rates and entry were to take place in surface transportation in the U.S., as argued by proponents of deregulation in the literature on the subject. Seven aspects of transportation that could be significantly affected were examined and it was found that those in favor of substantial deregulation make the following arguments: (1) Overall transportation rates would decline with deregulation; (2) the railroad industry would be the prime beneficiary of deregulation, particualrly in connection with deregulation of rates; (3) while the transportation industry as a whole would become more competitive and rates would be reduced, the overall effect of deregulation would not be seriously detrimental or destructive to any mode of transportation; (4) deregulation would not result in an increased problem of railroad rate discrimination between water-competitive and other traffic, and truck rates on certain undesirable traffic would not necessarily be increased; (5) many of the restrictions, which cause inefficient operations, that are found in carrier operating authorities would be eliminated with deregulation; (6) deregulation would result in carrier management being more innovative in terms of rates and service; and (7) the common carrier system would be strengthened vis-a-vis private transportation as a result of deregulation. The authors of this article disagree with some of the above conclusions, although they agree that some loosening of regulation of entry and rates is in order. They conclude that the advantages of partial deregulation seem to outweight the disadvantages, and partial deregulation is preferable to maintaining intact the existing economic regulatory system.