The Potential Consequences of Deregulation of Transportation Revisited

Abstract

An article by the authors that appeared in the February 1975 issue of Land Economics discussed the probable results of federal deregulation of surface transportation (rail, highway, water, and oil pipeline), as set forth by the proponents of deregulation (Johnson and Harper 1975). Specifically, the potential consequences of two changes in economic regulation were discussed. The first was a change in federal minimum rate regulation to allow surface carriers to price their services without interference from government, regardless of the objections of competing carriers of the same or different modes, as long as the proposed rates were equal to or greater than the variable cost of producing the service, and below some maximum ceiling to be set by law or by a regulatory agency such as the Interstate Commerce Commission (ICC). The second change in regulation examined was a significant decrease in federal entry control so that any prospective surface carrier that could prove he or she is ready, willing, and able to perform as a common carrier would be issued operating authority by the ICC. The effect of the new entry on competing carriers would not be considered by the Commission. At that time, no reform steps had been taken administratively by the ICC and no reform legislation had yet been enacted by Congress. The article discussed seven possible outcomes that were predicted by advocates of federal deregulation in the early and mid 1970's. Since that time, reform (but not complete elimination) of federal economic regulation of interstate rail and highway transportation has taken place, via administrative action of the Commission and statutes enacted by Congress, but no important changes have taken place in water or oil pipeline economic regulation. The purpose of this article is to examine how accurate the predictions of the advocates of reform have turned out to be thus far.