Railroads, freight, and public policy

The railroad industry has not adjusted easily to changes in competing methods of transportation, in location of other industry, or in the general tastes of business and the public. This lack of adaptability has led to bankruptcies or large deficits, deteriorating service, and the nationalization of some railroads. Many believe that regulation by the Interstate Commerce Commission has aggravated--even been the chief cause of--the industry's problems. In response to such criticism Congress enacted sweeping changes in rail regulatory policies in 1980 that substantially loosened government controls. In this book, the twentieth in the Brookings series of Studies in the Regulation of Economic Activity, the author presents an economic analysis of rail freight transportation, with emphasis on public policy. He reviews the history of rail regulation, which is based on medieval laws of common carriage, before comparing the economic theories that have evolved to explain government policy toward the industry. He analyzes the economic effects of regulation on the railroads; these include rates charged shippers, abandonment of service, entry of firms, taxation and subsidization, mergers and antitrust laws, labor policies, and scale economies and competition. Although it is too soon to be certain of what the long-term effects of the 1980 regulatory reforms will be, the author provides some preliminary evidence on their immediate effects, predicts their probable future course, and recommends further appropriate changes. An index is provided.