Freight Transportation Economic Regulation Transportation Logistics Spring 2009

Transportation Participants I need something shipped at the lowest possible cost!

Transportation Participants I need something delivered at the lowest possible cost! I need something shipped 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 match products needing to be shipped with available capacity purchase fuel, transportation equipment, supplies track shipments

Transportation Participants Creates demand for transportation by purchasing products

Economic Types of Transportation Regulation Investments in transportation infrastructure (e.g., highways, airports, ports) Control of routes, pricing, schedules

Economic Types of Transportation Regulation 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 – Regulatory formalization, extension to other transportation modes –Motor Carrier Act (1935) –Civil Aeronautics Act (1938) –Civil Aeronautics Board (1940)

History of Transportation Regulation –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 – prelude to deregulation –Shift from regulation/control to fostering competition –Department of Transportation (DOT) 1961 –Airline Deregulation Act 1978

History of Transportation Regulation – 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) Business Expansion (Relocation and Restructuring) Increased Competitiveness Increased Productivity Increased Economic Growth

Effects of Improved Freight Transportation First- order Benefits Immediate cost reductions to carriers and shippers, including gains to shippers from reduced transit times and increased reliability. Second- order Benefits Reorganization-effect gains from improvements in logistics. Quantity of firms’ outputs changes; quality of output does not change. Third- order 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

Copyright © , 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 use. Rail Track Mileage and Number of Class I Rail Carriers, United States,

Copyright © , 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 use. Average Speed of Class I Railroads,

Performance of Class I Railroads, Copyright © , 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 use.

Consequences Has deregulation –reduced barriers to entry? –improved intermodal transport and productivity? –improved effect of market pressures? –improved customer’s choices?