The Lost Economy

Transportation & Infrastructure

US transport infrastructures allow efficient distribution of persons, printed matter, packages, manufactured goods and bulk commodities.  The competing modes offer commercial and residential consumers a choice of price, speed and special handling accommodations.

Rail and truck transport modes are commonly used for chemicals, manufactured equipment, ore and grain.  Intermodal competition has led to seagoing containers between trains, trucks and oceangoing freighters. That helps commercial shippers to choose the combination of modes, schedule and cost they require to meet demand. Residential consumers can choose the transport mode that best suits their current need, including private automobiles, taxicabs, local or intercity buses, tramcars, ferries, scheduled airlines and intercity rail. Much of these modes of transportation requires good infrastructure and investment, both private and public.

While public dollars need taxpayer funding, private sector does not.  Yet, there are instances where private infrastructure spending is being slowed or stopped by onerous regulations, including railroad and shipyard projects that are getting completely hung up.

Moreover, in general, there appears to be a resurgence is regulations that could inhibit investment and increase consumer costs.  This resurgence is ironic, considering that many decades ago these various modes of transportation were heavily regulated in the “public’s interest,” but were later deregulated.  Looking back, overwhelming evidence shows that these regulatory reforms led to massive consumer benefits, totally $100 billion in annual consumer welfare.

Despite the success of regulatory reforms, regulators and policymakers are finding new ways to micromanage markets, erect new market barriers and impose onerous regulations that ultimately affect consumer costs.  For example, rail regulations are once again on the rise, and ride-sharing companies continue to face market entry barriers and local restrictions that unequivocally increase service costs for consumers.  These sorts of regulations will impede market investment, reduce job creation and raise consumer prices. These and similar regulations represent the Lost EconomyTM.


Suggested Readings:

  • Curtis Grimm and Clifford Winston, “Competition in the Deregulated Railroad Industry: Sources, Effects, and Policy Issues,” published in Deregulation of Network Industries: What’s Next, Sam Peltzman and Clifford Winston, ed., AEI-Brookings Joint Center for Regulatory Studies, Washington, DC, 2000.
  • Steve Pociask, Deregulation and Consolidation of the Information Transport Sector: A Quantification of Economic Benefits to Consumers, Joel Popkin and Company, Sept. 29, 1999.
  • Clifford Winston, et. al., The Economic Effects of Surface Freight Deregulation, Brookings, 1990.
  • Robert Crandall and Jerry Ellig, “Economic Deregulation and Customer Choice: Lessons for the Electric Industry,” Mercatus Center, George Mason University, 1997.
  • W. A. Jordan, Airline Regulation in America, Brookings Institute, Washington, DC, 1974.
  • M. Levine, “Is Regulation Necessary? California Air Transportation and National Regulatory Policies,” Yale Law Journal, Vol. 74, July 1965, pp. 1416-47.
  • Steven Morrison and Clifford Winston, “Regulatory Reform of U.S. Intercity Transportation,” in Essays in Transportation Economics and Policy, published in Jose Gomez-Ibanez, William Tye and Clifford Winston (ed.), Brookings, Washington, DC, 1999.