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The Costs and Benefits of Early Regulation of the Railroads

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  • Richard O. Zerbe Jr.

Abstract

In an earlier article Spann and Erickson (S-E) found that the welfare effects of early ICC regulations were negative. Their calculations fail to include part of the relevant welfare surplus and incorrectly apply demand elasticity estimates. Correct calculations, using S-E's basic data, result in positive welfare effects for 70 percent of alternative calculations across a range of assumptions. For the S-E central case correct calculations indicate positive changes in both producer and consumer surpluses. This ignores regulatory gains from price stability and fairness. The question remaining is how the long-run costs of ICC creation could have been avoided while obtaining the short-run gains.

Suggested Citation

  • Richard O. Zerbe Jr., 1980. "The Costs and Benefits of Early Regulation of the Railroads," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 343-350, Spring.
    • Handle: RePEc:rje:bellje:v:11:y:1980:i:spring:p:343-350
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    Cited by:

    1. Gilbert Becker, 1986. "The public interest hypothesis revisited: A new test of Peltzman's theory of regulation," Public Choice, Springer, vol. 49(3), pages 223-234, January.
    2. Wilson, Wesley W., 1985. "Interstate Commerce commission regulation of motor carriers operating in the state of WAshington: An historical perspective," Transportation Research Forum Proceedings 1980s 311745, Transportation Research Forum.
    3. Morris Fiorina, 1982. "Legislative choice of regulatory forms: Legal process or administrative process?," Public Choice, Springer, vol. 39(1), pages 33-66, January.
    4. Bruce Blonigen & Anca Cristea, 2013. "The Effects of the Interstate Commerce Act on Transport Costs: Evidence from Wheat Prices," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(1), pages 41-62, August.
    5. Kevin Henrickson & Wesley Wilson, 2013. "Voting, Regulation, and the Railroad Industry: An Analysis of Private and Public Interest Voting Patterns," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 43(1), pages 21-39, August.

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