Government plays a legitimate role by providing any necessary economic and safety regulation. It is equally important, however, for the government to provide no more regulation than is absolutely necessary. In some cases no regulation is needed.
Two distinct forms of regulation exist: economic and safety. The need for economic regulation is determined by market structure. A free, competitive market requires no regulation, but a monopolistic market needs regulation to prevent abuse. Safety regulation is intended to protect the public from unreasonable hazards and commonly involves technical standards and engineering specifications.
The free market is the best form of economic regulation. It is automatic, efficient, and fair to both producers and consumers. It rapidly equates the needs of individual participants with those of the entire market. In some instances a minimal degree of policing is needed to assure that the market remains free. In other markets, such as natural monopolies, economic regulation is required due to the absence of free competition. It is axiomatic, though, that economic regulation achieves nothing in and of itself. Regulation can only facilitate or hinder the functioning of producers and consumers.
To be effective, economic regulation must complement industry structure. Neither regulation based on competition nor regulation based on monopoly can be effective for the railroads' traditional industry structure, which has elements of both competition and monopoly. The Free Enterprise Alternative separates monopolistic and competitive elements. Economic regulation must recognize these distinctions if the industry is to function properly. The regional roadway companies would be natural monopolies and would require a high degree of regulation. Carrier companies would compete in a free market and need little or no economic regulation.
Economic regulation of the regional roadway companies must address their natural monopoly structure. It must protect the interests of both the