Consequences of regulatory reform in the American railroad industry

Although regulatory reform has occurred in many American industries in the past two decades, in few of these industries was the need for reform as clear and urgent as in the domestic railroad industry during the 1970s. This article will examine the nature and consequences of reform. In large part the financial condition of the industry has stabilized, and while the survival of the industry in the long run is still of some concern, the future of the industry is much brighter than it was 20 yr ago. A number of economic challenges remain on the horizon for the industry and for policy makers. The article describes some of these issues. In many areas of transportation railroads continue to be subjected to intense intermodal competition from other carriers, including motor carriers, pipelines and water carriers. Railroads have attempted to become revenue adequate by setting rates based not only on their own costs, but also in response to elasticities of demand. The nature of regulatory reform is described in more detail in secton 2. Selected general trends and effects in the industry following reform are summarized in section 3. Some of the current concerns and issues confronting the industry and policy makers are discussed in section 4, including areas that are currently being considered for further resolution. A conclusion follows. -from Author