Rate Regulation and Freight Traffic Allocation - A Review and Revision

The current inflation and recent fuel shortage have focused attention on the allocative effects of regulatory policy. In particular, the Interstate Com1nerce Commission (ICC) has been criticized for inefficiencies arising under its control of entry, rates, and investment in the surface freight transportation industries, and alternative regulatory practices, emphasizing less agency control, have been suggested. The objective of this paper is t6estimate the losses that arise in rail and truck transportation of manufactured goods because the rate structure does not coincide with the costs of providing service. The literature on costs and service of these modes will be examined and updated, and the magnitude of the loss will be developed from a reallocation of current rail-truck traffic in manufactures to the lower-cost carrier. Finally, a more general approach to the evaluation of alternative regulatory policies will be described.