Railroad Diversification: Where Lies the Public Interest?

Abstract

The potential public benefits and costs of railroad diversification are examined in this article. The principal claimed benefit, that diversification will produce an increased flow of capital to the railroad industry, is unlikely to be realized. The principal cost, that management may use diversification as a means of transferring assets from railroading to other more profitable lines of business, is less a problem created by diversification than a reflection of the current financial state of the railroad industry. Railroad diversification should be neither banned nor tightly regulated. Either will further hamper a much needed process of adjustment that already has been too long delayed. Instead, diversification ought to be welcomed, for it will place a needed check on the ICC's ability to force railroads to operate in a noneconomic fashion.