Railroads, the Free Enterprise Alternative

By Daniel L. Overbey | Go to book overview

18 A LOGICAL CONCLUSION

Railroads in America are built for a single avowed purpose; namely, to make money.1

Private enterprise is justified, in the defense long offered by economists, by the service it renders to people in their capacity as consumers. Private enterprise seeks profit. But, to obtain profit, it must serve consumers, for this is the only way to profit that competition will allow. It is thus on the foundation of competition that the case for private enterprise is built.2

Each railroad company provides its own fixed way and has exclusive use of that fixed way. In contrast the highway, water, and air transport modes use publicly provided fixed ways which are available to all carriers. This distinction is the root of the Railroad Problem.

The present railroad industry structure was implemented during the early nineteenth century when two technological developments, the iron rail and the steam locomotive, pushed the railroad beyond the realm of then- existing communications and management capabilities. The complexities of the steam-and-iron railroad mandated adoption of the exclusive service concept under which only one railroad company used each rail fixed way.

During the late 1800's and early 1900's the railroads dominated the national transportation scene. Exclusive service meant many shippers were served by only one railroad company. Only those shippers at junction points, terminals, and a few other locations received competitive service. The competitive-monopolistic dichotomy often led to destructive competition. Shippers in monopolistic markets were commonly charged high rates so that low rates could be charged in competitive markets. This situation caused the railroads to try to control and minimize competition through techniques like pooling, mergers, and even economic regulation.

The railroads' aversion to competition placed them at a disadvantage. Vigorous competition within each of the other modes demanded responsiveness and efficiency from their carriers. The complete absence of eco

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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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