Policy Analysis No. 12

Deregulation and Re-Regulation of Transportation

By Thomas Gale Moore
July 8, 1982

Executive Summary

Transportation deregulation has produced enormous benefits for consumers and shippers. Airfares are down sharply; trucking rates have fallen; the nation’s railroads are offering new services. A few years ago, passenger and freight transportation were among the most heavily regulated industries in the United States. Now federal regulation has been totally eliminated for air freight, and air passenger controls are being phased out. Furthermore, in 1980 Congress passed the Motor Carrier Act and the Staggers Rail Act, which significantly reduced Interstate Commerce Commission control over truckers and railroads. Unfortunately, there are disturbing signs that this progress may be halted and in part reversed.

This wave of deregulation stems from a growing recognition that government controls of transportation have not fostered the public interest. Scholars have long recognized that regulatory agencies tend to protect the interests of the industries they regulate. Studies by experts representing the whole spectrum of political persuasion, from the Nader-left to the American Conservative Union-right, have confirmed that regulatory agencies reduce competition at the expense of the public. Typically, industry-oriented individuals are appointed to commissions, often from industry itself or from Capitol Hill. Once in office, regulators perceive their duty as protecting the financial health of the companies they regulate. The easiest way to accomplish this is to reduce competition, thereby increasing rates and creating monopolies.

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Thomas Gale Moore is a Senior Fellow and Director of the Domestic Studies Program at the Hoover Institution at Stanford University.