Railroad Regulation Helped Kill Passenger Service

(p. 1179) By 1970, passenger service was a not only losing money, but had deteriorated to such an extent that it was no more the elegant transportation mode as it once was. No more were the Hollywood stars long distance rail passengers. No more movies like “North by Northwest,” which featured the New York Central’s Twentieth Century Limited service from New York to Chicago. The book highlights the factors causing the decline of private rail passenger service and the creation of AMTRAK. The authors cite ICC regulation, the growth in alternative modes, which were heavily subsidized, the mix of freight and passenger service on the same lines, and public policy, which favored the airline industry.
. . .
One public policy that government got right is deregulation. This started with the 3R Act, then the 4R Act and then the Staggers Rail Act of 1980, which had a massive impact on the industry. Deregulation culminated in the ICC Elimination Act, in which the ICC was replaced by the Surface Transportation Board–or STB–with substantially diminished regulatory power. Gallamore worked in government when much of this legislation was passed and gives a firsthand account of the debates that took place in Congressional (p. 1180) hearings and the discussions in and out of government on the merits of deregulation.
In the concluding chapter of the over 500-page book, entitled “Decline and Renaissance of American Railroads in the Twentieth Century” the authors provide a summary of the history of the railroads and the lessons for public policy in the future. This chapter is such a great summary, that the reader may be best off starting with it, before reading the book. But don’t forget the afterword, which provides the authors’ recommendations for future U.S. policies for the railroads. It is a very insightful chapter.
. . .
American Railroads should be on the reading list of economists interested in transportation and logistics, economic historians, government officials, and rail fans who would like to know more about the history of the railroads in the twentieth century, and are interested in understanding the economics of the industry and the problems of government regulation. Gallamore and Meyer, at the end of the book, sum up why it should be read:

This book’s authors love railroads because they have a great history, fascinating operations, intriguing technology and untold opportunity for the future, but we also love them because no other enterprises illustrate elegant economic principles quite so well (p. 435).

For the full review, see:
Pagano, Anthony M. “American Railroads: Decline and Renaissance in the Twentieth Century.” Journal of Economic Literature 52, no. 4 (Dec. 2014): 1178-80.
(Note: ellipses added.)

The book under review is:
Gallamore, Robert E., and John R. Meyer. American Railroads: Decline and Renaissance in the Twentieth Century. Cambridge, MA: Harvard University Press, 2014.

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