Railroads, the Free Enterprise Alternative

By Daniel L. Overbey | Go to book overview

9
ECONOMICS AND STRUCTURE

The Railroad Problem is an economic problem.

It is only by the application of economic principles that a final solution will be found. Any attempt to resolve railroad difficulties is doomed to failure if it ignores economic fundamentals, regardless of the intentions of its proponents and the amount of public or private funds spent in its behalf.

The concepts of competition and monopoly have special significance in the railroad industry, since economic regulation depends to a large extent on their interpretation. Despite nearly a century of regulatory efforts by the Interstate Commerce Commission, debate continues about whether the railroad industry is predominantly competitive or monopolistic, and how regulatory policy should be addressed.


A BRIEF REVIEW

To understand the railroad industry's problems, the problems must be analyzed in terms of economic fundamentals. The concepts of competition, monopoly, fixed and variable costs, economies of scale, and natural monopoly are essential to this analysis.


Competition

Competition is fundamental to the free market system and is generally regarded as beneficial. The classic competitive market is characterized by numerous independent firms selling a highly standardized product. Each seller (producer) is so small that it has no influence over the market. Price is determined by the market's supply and demand, not by individual buyers or sellers. Firms enter and leave the market freely. The most efficient firms earn the highest profits. Less efficient firms have lower profits, operate at a loss, or shut down and leave the market. Agriculture, with many farmers selling the same products on open markets, is often cited as an example of a classic competitive market.

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Railroads, the Free Enterprise Alternative
Table of contents

Table of contents

  • New Titles From Quorum Books ii
  • Title Page iii
  • Copyright Acknowledgments v
  • Contents ix
  • Figures xi
  • Tables xiii
  • Preface xv
  • Acknowledgments xvii
  • 1 - Development of The Railway 3
  • Notes 6
  • 2 - A Product of Necessity 9
  • Notes 13
  • 3 - Degrees Of Standardization 15
  • Notes 18
  • 4 - Changing Times, 4 Changing Needs 19
  • Notes 31
  • Appendix To Chapter 4 Tables 1-4 33
  • 5 - For Everyone Else: The Typical Transportation Industry Structure 41
  • Notes 53
  • 6 - Railroad Industry Structure 55
  • Notes 65
  • 7 - Aspects of Joint Use 67
  • Notes 73
  • 8 - Aspects of Innovation 75
  • Notes 87
  • 9: Economics And Structure 91
  • Appendix To Chapter 9 109
  • 10 - In Theory, in Congress 113
  • Notes 124
  • 11 - A Proposal 127
  • 12 - Roadway Companies 131
  • 13 - Carrier Companies 147
  • Notes 161
  • 14 - Terminals 163
  • 15 - Regulation 173
  • Notes 181
  • 16 - Opportunity For Innovation 183
  • Notes 192
  • Appendix To Chapter 16 Service Alternatives For Short-Haul Traffic 195
  • 17 - The Promise And The Prospects 199
  • Notes 204
  • 18 - A Logical Conclusion 207
  • Notes 210
  • Bibliography 211
  • Index 221
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