Regulation of railroads - historical perspective
Author: Basic econ
Date: 07-23-2021 - 13:09
I posted this comment to the Trains.com news wire today:
We would have a healthier rail industry today if President Eisenhower had the wisdom to de-regulate railroads in 1956 as a concession to passage of the Federal Aid Highway Act of 1956 (which built the interstate highway system).
Imagine:
Deregulation in 1956 would have given marginal carriers like the Rock Island, C&NW, and Milwaukee ample time to cut money losing business and position themselves for the changing playing field of subsidized freeways and airports.
Deregulation in 1956 would also have prevented the railroad bankruptcies of the 1970’s that hurt shippers, cost the government money, and caused sudden unemployment for thousands of railroaders.
Instead, the government did everything wrong.
By the time the government recognized the need to deregulate, the patient was already dead or on life support. (This is called, recognition lag).
By the time the government implemented deregulation, what they deregulated were the surviving monopolies. (This is called, implementation lag).
The outcome is that today we hear calls for re-regulating these monopolies.
Sigh.
It seems that the government can only do harm when it interferes with markets. Government regulation is reactive and not proactive. Because of that, the timing of changing regulations is 100% wrong, and the laws come at precisely the wrong time.