Regulation

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Regulation De-Regulation of Transport

• Quick Synopsis of Regulatory Changes

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Railroads

• Regulation ICC, est 1887
• Why? Ills of competition
• discriminatory rates (big/small shippers,
  long/short hauls)
• instability (1 line is a monopoly, 2 lines yield
  excess capacity bankruptcy)
• Form
• Cost of service pricing
• CCN required to operate
• Mandated routes

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RRs

• De-regulation Staggers Act, 1890
• Why? No constituency?
• RRs were in bad financial condition
• despite regulated rates being higher than would
  be sustained under competition.
• Political nature of ICC decision making hog-tied
  everyone. (But this begs the question, why
  couldn't the ICC reform itself?)

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Trucks

• Regulation Motor Carrier Act, 1935
• Why? Protect the RRs from new competitive
  threat?
• MCA extended ICC's powers to trucks but same
  rationale does not exist for trucks
• Routes granted with award of "CCN." Issue of new
  CCN's hotly contested

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Trucks, continued

• De-regulation New Motor Carrier Act, 1980
• Why? Dead weight costs too high?
• Rents of regulated firms wore significant
• CCN's traded for 500,000 each in 1970s

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Planes

• Regulation CAB, 1938
• Initially planes were regulated by ICC
• CAB continued basic practices of ICC
• Reg form similar to RRs
• CCNs, mandated service, cost of service pricing

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Air

• De-regulation Airline De-Regulation Act, 1978
• Note As with RRs trucks, some relaxation of
  pricing restrictions took place before the
  legislation.
• But also the case that some regulatory
  requirements were phased out slowly after 1978.

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Simple Evidence on Transfers Under Transport
Regulation

• Trucks
• Agricultural exemptions passed, 1950s
• Rates for produce poultry fell 20-30
• service quality improved (Walters)
• Estimated Value of CCNs in mid-70s 3billion
  (John W. Snow Stephen Sobotka)

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Simple Evidence on Transfers Under Transport
Regulation

• Planes Intra-state vs. Inter-state Fares

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Intra- vs. Inter-state Fares
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Moore, US Airline Dereg

• Nuts bolts assessment of 78 Act
• Econ assessment of regs prior to 78
• CAB as an inefficient cartel
• Limited entry
• Prices set above minimum cost
• Rents dissipated by competing on quality
• Efficiencies of hub spoke system were
  recognized (DeVany Garges, 1972) but not
  implemented

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Moore, cont

• Dimensions Studied
• Service
• Frequency Quality
• Fares
• Capital Values
• Employment Wages

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Moore, Service Frequency
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Moore, Srv Freq (76 v 83)
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Moore, Fares (76 vs. 83)
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Moore, Cap Values

• Mkt Value of Major Carriers
• 1976 6.9 B
• 1983 6.9B
• Mkt Value of Regionals
• 1976 0.5 B
• 1983 2.8B
• Notes NYX fell 3 in same period
• Excludes nascent firms (Peoples Express)

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Moore, Labor
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