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Last Exit

Last Exit: Privatization and Deregulation of the U.S. Transportation System

Clifford Winston
Copyright Date: 2010
Pages: 188
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  • Book Info
    Last Exit
    Book Description:

    InLast ExitClifford Winston reminds us that transportation services and infrastructure in the United States were originally introduced by private firms. The case for subsequent public ownership and management of the system was weak, in his view, and here he assesses the case for privatization and deregulation to greatly improve Americans' satisfaction with their transportation systems.

    eISBN: 978-0-8157-0476-8
    Subjects: Transportation Studies, Business

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. Acknowledgments
    (pp. ix-x)
  4. 1 Back to the Future to Improve U.S. Transportation
    (pp. 1-18)

    From ocean voyages to flights into outer space, new ways of traveling generate excitement because they expand opportunities for travelers to visit faraway places and to reach their destinations faster. Today, Americans’ interest in new travel options has been piqued by the possibility of high-speed rail service that exceeds 300 miles an hour and by supersonic air service that does little damage to the environment. At the same time, most travelers would be ecstatic if they could drive on well-maintained roads at posted speed limits during rush hours, fly on airplanes that arrived at their destinations on time, and commute...

  5. Part I Motivating the Case for Privatization and Deregulation:: U.S. Transportation System Inefficiencies

    • 2 Intercity Transportation under Partial Deregulation
      (pp. 21-37)

      Regulatory reform—that is, partial economic deregulation—of intercity passenger and freight transportation during the late 1970s and early 1980s significantly improved the efficiency of airlines, railroads, motor carriers, and buses by giving carriers greater operating freedom and stimulating industry competition (Morrison and Winston 1999; Meyer and Oster 1987). Regulatory reform of domestic ocean shipping occurred more recently, and its effects on economic efficiency have not been well documented.¹

      As indicated by the termpartial deregulation,policymakers did not deregulate every aspect, economic and otherwise, of carrier operations.² In addition, they did not reform public infrastructure policies to ensure that...

    • 3 Highways
      (pp. 38-60)

      Valued at $2.4 trillion in 2006, roads represent the largest public sector investment in the United States.¹ Consisting of some 8.4 million lane-miles of interstates, highways, and innumerable local streets, the nation’s road network is vital to the American economy: 75 percent of goods are transported by truck, and 90 percent of commutes to work are made in private automobiles and public buses.² It would not be an overstatement to characterize public roads as the arterial network of the United States.

      Given the road system’s importance, the worsening strains on highway capacity and durability are troubling (National Surface Transportation Infrastructure...

    • 4 Urban Transit
      (pp. 61-75)

      In 1964 Congress passed the Urban Mass Transportation Act, paving the way for the public sector to assume control of urban bus and rail transit in the United States. With the benefit of hindsight, it is hard to escape the conclusion that the act has been a policy failure. Although U.S. cities have spent close to $100 billion since 1970 building, and billions more operating, new urban rail transit lines (O’Toole 2010), less than 5 percent of all commutes to work were taken on urban transit in 2004, down from 21 percent in 1960.¹ While ridership has declined, service costs...

    • 5 Airports and Air Traffic Control
      (pp. 76-101)

      The first commercial plane flight in the United States, an eighteen-mile run of the St. Petersburg-Tampa Airboat Line that carried one paying passenger, took place in 1914. Federal Aviation Administration (FAA) domestic forecasts indicate that by 2014 annual airline passenger enplanements will reach roughly 1 billion.¹

      Efficient, technologically up-to-date aviation infrastructure—airports and air traffic control—is essential for moving air travelers safely and quickly from their origins to their destinations. Responsibility for basic aeronautical services in the United States—including terminals, gates, taxiing areas, and runways—lies with local governments that operate airports either directly, as in the case...

    • 6 Constraints on Efficient Reforms
      (pp. 102-110)

      Policymakers experience most of the same shortcomings in the nation’s transportation system that other travelers experience, so it is natural to ask why they do not make greater efforts to improve travel for all Americans.¹ One reason is that agency limitations and regulatory constraints make it extremely difficult for would-be reformers to rid any part of the system of its major inefficiencies. Of course, politicians are willing to fight for near-“Pareto” policy improvements, which benefit a vast majority of their constituents and impose small—and possibly escapable—losses on other potential voters. But political forces impede such improvements in the...

  6. Part II Privatization and Deregulation:: Evidence of Economic Effects and Implementation

    • 7 Lessons from Deregulation of Intercity Transportation
      (pp. 113-124)

      The first part of this book makes clear what government intervention in the transportation system has going against it. Those drawbacks provide a starting point for what private sector involvement in the system may have going for it. Of course, private sector involvement may have its own drawbacks, so I now turn to a balanced assessment of privatization and deregulation—a transformative policy where the government transfers (through a sale) the remaining parts of the U.S. transportation system that it owns and operates to private firms and does not explicitly regulate those firms’ prices, service, and the expansion and contraction...

    • 8 Theory and Evidence on the Economic Effects of Privatization
      (pp. 125-144)

      The United States is generally thought to be the world’s leading proponent of free markets and economic deregulation, but the policy of converting state-owned assets into privately managed assets gained worldwide attention following the United Kingdom’s privatization program that was initiated by the Thatcher government in the early 1980s. As Roland (2008) observes, the privatization movement was not motivated by a well-developed theoretical argument supported by persuasive empirical evidence. Roland notes that general equilibrium theory and traditional industrial organization say little about the effect of firm ownership on economic welfare.

      Traditional welfare economics indicates that public provision of goods and...

    • 9 Privatization Experiments
      (pp. 145-162)

      A major policy reform can occur if policymakers are convinced that it will have its intended effects and that constituents, especially influential ones, will benefit. Experiments are invaluable for providing policymakers with evidence that can be used to justify and guide policy reforms. For example, the European Union has been able to learn from a variety of policy experiments conducted by its member countries. Similarly, the size and diversity of the United States facilitates such experiments before policymakers have to decide whether to implement a policy nationwide.

      I do not expect policymakers to run controlled experiments; rather, in the context...

    • 10 Conclusion
      (pp. 163-166)

      The public sector’s large role in the U.S. transportation system is attributable to economic shocks at various times in the nation’s history that have left private providers of transportation service and infrastructure in financial ruin. But government regulations and the failure of policymakers to make constructive interventions also have played a significant role in the fate of private transportation firms. Until the late 1970s the nation’s transportation system consisted of intercity modes that were heavily regulated; urban modes that, with the exception of the automobile, were owned and operated by the public sector; and infrastructure that, with the exception of...

  7. References
    (pp. 167-178)
  8. Index
    (pp. 179-188)
  9. Back Matter
    (pp. 189)