Freight Transportation
Economic Regulation
Transportation Logistics
Spring 2009
Transportation Participants
I need something
shipped at the lowest
possible cost!
Transportation Participants
I need something
shipped at the lowest
possible cost!
I need something
delivered at the lowest
possible cost!
Transportation Participants
Carriers: We have the
equipment!
Transportation Participants
Carriers – we can find a shipper!
Shippers – we can find a carrier!
Transportation Participants
the transportation system
is vital for the country’s
economic health
Transportation Participants
purchase fuel,
transportation
equipment, supplies
Transportation Participants
track shipments
purchase fuel,
transportation
equipment, supplies
Transportation Participants
track shipments
purchase fuel,
transportation
equipment, supplies
match products needing to
be shipped with available
capacity
Transportation Participants
Creates demand for
transportation by
purchasing products
Types of Transportation Regulation
Economic
• Investments in transportation infrastructure
(e.g., highways, airports, ports)
• Control of routes, pricing, schedules
Types of Transportation Regulation
Economic
• Investments in transportation infrastructure
(e.g., highways, airports, ports)
• Control of routes, pricing, schedules
Social/Safety
• Protect the public, the environment
• Make sure equipment operates safely, cleanly
• Safe transportation of hazardous materials
(HAZMAT)
• Regulating hours worked
Robber Barons
Initial Regulation
• Railroads provided a needed and valuable
service to millions of customers in an
unregulated market economy
• Interstate Commerce Commission formed in
1887
– Regulate railroads
– Fix price ceilings
– Prevent them from making a profit that would be
deemed excessive
• 1916 was year of peak trackage (254,000 miles)
History of Transportation Regulation
• 1920-1940 – Regulatory formalization,
extension to other transportation modes
– Motor Carrier Act (1935)
– Civil Aeronautics Act (1938)
– Civil Aeronautics Board (1940)
History of Transportation Regulation
• 1940-1970
– Regulation of water transportation by ICC
(1940)
– National Aeronautics & Space Administration
(1951)
– Federal Aviation Administration (1958)
– Railroad Revitalization and Regulatory Reform
Act of 1976
• AMTRAK
• CONRAIL
History of Transportation Regulation
• 1970-1980 – prelude to deregulation
– Shift from regulation/control to fostering
competition
– Department of Transportation (DOT) 1961
– Airline Deregulation Act 1978
History of Transportation Regulation
• 1980-2000 – Deregulation
– Motor Carrier Act 1980
– Staggers (Rail) Act 1980
– Interstate Commerce Commission (ICC)
abolished in 1996
– Ocean Shipping & Reform Act 1998
Freight Transportation and the
Economy
Efficient Transportation
Infrastructure Investment
Increased Transportation Capacity,
Efficient, Reliability, and Level of Service
Transportation
Cost Savings
Transit Time Savings
(Reliability Improvement)
Increased Productivity
Increased Competitiveness
Increased Economic Growth
Business Expansion
(Relocation and Restructuring)
Effects of Improved Freight
Transportation
Firstorder
Benefits
Immediate cost reductions to carriers and shippers, including
gains to shippers from reduced transit times and increased
reliability.
Secondorder
Benefits
Reorganization-effect gains from improvements in logistics.
Quantity of firms’ outputs changes; quality of output does not
change.
Thirdorder
Benefits
Gains from additional reorganization effects such as improved
products, new products, or some other change.
Other
Effects
Effects that are not considered as benefits according to the strict
rules of benefit-cost analysis, but may still be of considerable
interest to policy-makers. These could include, among other
things, increases in regional employment or increases in rate of
growth of regional income.
Revenue down
Employee productivity up
Trucking has become more
competitive, with thin margins
Longer combinations are growing
faster (more cost effective)
Truck miles have grown faster than
the economy
Freight represents a greater
percent of total traffic
Total Logistics Costs Down
Substitute transportation spending
for inventory spending
Rail Track Mileage and Number of Class I
Rail Carriers, United States, 1830-2005
300,000
Rail Track Mileage
Class I Rail Carriers
180
160
140
Miles of tracks
200,000
120
150,000
100
80
100,000
Rail Carriers
250,000
200
60
40
50,000
20
0
1830
0
1850
1870
1890
1910
1930
1950
1970
1990
Copyright © 1998-2007, Dr. Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University. For personal or classroom use ONLY. This material (including graphics) is not public domain
and cannot be published, in whole or in part, in ANY form (printed or electronic) and on any media without consent. This includes conference presentations. Permission MUST be requested prior to
Average Speed of Class I
Railroads, 1945-2004
40
Kilometers per hour
35
30
25
20
15
1945
1955
1965
1975
1985
1995
2005
Copyright © 1998-2007, Dr. Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University. For personal or classroom use ONLY. This material (including graphics) is not public domain
and cannot be published, in whole or in part, in ANY form (printed or electronic) and on any media without consent. This includes conference presentations. Permission MUST be requested prior to
Performance of Class I
Railroads, 1964-2005
300
Productivity
Volume
Revenue
Price
Index 1981 = 100
250
200
150
100
50
0
1964
1968
1972
1976
1980
1984
1988
1992
1996
2000
2004
Copyright © 1998-2007, Dr. Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University. For personal or classroom use ONLY. This material (including graphics) is not public domain
and cannot be published, in whole or in part, in ANY form (printed or electronic) and on any media without consent. This includes conference presentations. Permission MUST be requested prior to
Consequences
• Has deregulation
–
–
–
–
reduced barriers to entry?
improved intermodal transport and productivity?
improved effect of market pressures?
improved customer’s choices?