schlimm This article contains a good balanced summary of differing views on rail regulationin the 19th century: http://www.nber.org/chapters/c6571.pdf [page 24] "The traditional historical view of regulation, sometimes called the “public interest” or normative theory, held that railroad regulation arose t o protect ship- pers, especially farmers, from monopolistic abuses. According to this account, regulation sought to force railroads to charge more competitive prices in mo- nopolized, primarily short-haul, markets. In the framework of the economic theory of politics, the winning interest in the battle over railroad regulation was rural industry, primarily agriculture. Farmer activist organizations such as the Grangers were the interest groups that sought regulation and controlled its character. The revisionist view, emphasized by the early research applying the eco- nomic theory of regulation, argued that regulation benefited railroads because it helped them organize more effective regional cartels to prevent competition i n long-haul shipping. To revisionists the long-haul, short-haul rate differential was reduced by setting monopoly prices in structurally competitive long-haul routes. rather than by cutting monopoly prices in short-haul markets. Thus, the winning organized interest was the railroad industry. More recent research has produced a third view. According to this account. the coalition that benefited from railroad regulation included some (but not all) shippers and railroads. Farmers, through activist organizations, received some relief from price discrimination, but the large regional railroads that competed in long-haul markets also received relief from intermittent competitive price wars that more than offset the loss of profits i n monopoly routes. The losers were small railroads with little or no long-haul traffic, and shippers of products in competitive long-haul markets (especially manufacturers). Thus, on each side of the market, the better organized and more powerful interests succeeded at the expense of less powerful, less well organized interests."
This article contains a good balanced summary of differing views on rail regulationin the 19th century: http://www.nber.org/chapters/c6571.pdf
[page 24] "The traditional historical view of regulation, sometimes called the “public interest” or normative theory, held that railroad regulation arose t o protect ship-
pers, especially farmers, from monopolistic abuses. According to this account, regulation sought to force railroads to charge more competitive prices in mo- nopolized, primarily short-haul, markets. In the framework of the economic theory of politics, the winning interest in the battle over railroad regulation was rural industry, primarily agriculture. Farmer activist organizations such as the Grangers were the interest groups that sought regulation and controlled its character. The revisionist view, emphasized by the early research applying the eco- nomic theory of regulation, argued that regulation benefited railroads because it helped them organize more effective regional cartels to prevent competition i n long-haul shipping. To revisionists the long-haul, short-haul rate differential was reduced by setting monopoly prices in structurally competitive long-haul routes. rather than by cutting monopoly prices in short-haul markets. Thus, the winning organized interest was the railroad industry. More recent research has produced a third view. According to this account. the coalition that benefited from railroad regulation included some (but not all) shippers and railroads. Farmers, through activist organizations, received some relief from price discrimination, but the large regional railroads that competed in long-haul markets also received relief from intermittent competitive price wars that more than offset the loss of profits i n monopoly routes. The losers were small railroads with little or no long-haul traffic, and shippers of products in competitive long-haul markets (especially manufacturers). Thus, on each side of the market, the better organized and more powerful interests succeeded at the expense of less powerful, less well organized interests."
On a dreary Chicago area day, with freezing rain continually forecast but ever later in arrival, I had time to read the cited document. It’s not something to be breezed through quickly. But I wanted to stay close to home. So I had time.
I’m very glad to see the authors acknowledge that railroad regulation introduced inefficiencies in the US economy after the WWI. These inefficiencies had to dampen the economy and reduce the population’s living standards. Inefficiency does create extra costs and these costs have to be borne by the end users of products and services. There’s no one else to bear them.
I disagree with the authors when they say that regulation prior to that time produced beneficial results with little or no adverse effects. They focus on the “Long Haul – Short Haul” controversy in Illinois and make the claim that regulatory action mitigated this “discrimination” by forcing rail charges down to many points while having no adverse effect on railroad development. But, unless I missed it, they present zero evidence that any rates went down because of legislation (Or, in the case of Illinois, the adoption of a new state constitution.) You’d kind of think they’d want to document that before making their claim.
For those who don’t know, the long haul – short haul thing was (and is) about when a railroad would charge more to move a given commodity a shorter distance than it did to move it a longer distance. This is counterintuitive and it will drive people nuts if they don’t understand that there are valid reasons for such rates. It is impossible to base railroad rates solely on mileage
An example cited by William Z. Ripley in his “Railroads: Rates and Regulation” was lemons from California to everywhere else in the US. The rate (before WWI) was $1.00/hundred pounds. To everywhere. The only time anyone complained about this was when the railroads tried to increase the rate to $1.15/cwt. Otherwise, the rail customers were perfectly happy with a rate not having anything to do with mileage.
Why would the railroads price like this? Well, lemons don’t gain value as they are moved further and further away from the lemon tree. A lemon in New York has pretty much the same utility as a lemon in St. Louis. If you keep adding freight charges to the cost of the lemon you’ll move down the demand curve as people decide lemons just aren’t worth their cost. This means the railroads would haul fewer and fewer lemons as the distance from California increased.
Now understand this in terms of a railroad’s cost structure. Until a rail line approaches its effective capacity it has average costs that decline as volume is added to the line. And, the marginal cost will be below the average cost. The railroad obviously has to cover its average cost in aggregate but it can go below average cost down to the marginal cost and still come out ahead. (No customer has to “Make Up” for the pricing below average cost. No one is harmed. The railroad is better off taking the freight or it wouldn’t seek the freight.)
Lemons from California could go from a real railroad money maker at St. Louis to marginally profitable in New York, but the eastern carrier would still want to haul as many carloads of lemons as it could. Unless it was having capacity issues. Marginally profitable beats nothing.
How does this relate to the cited article? The same principals apply. The first case to hit the courts involved the movement of lumber on the Chicago and Alton from Chicago to Lexington, IL and Bloomington, IL. Lexington is 16 miles closer to Chicago than Bloomington. The C&A charges are given at $5.65/thousand to Lexington and $5.00/thousand to Bloomington. (They don’t say 1,000 of what, but I guess it to be board feet.) The C&A was charging more for a shorter haul. Was that “unjust” discrimination against Lexington? (The adjective is important. There’s nothing wrong with discrimination unless it’s done for an “unjust” reason. Racial and gender discrimination are unjust, discriminating against slow runners in selecting a track team is good practice.)
The C&A claimed it wasn’t. It wasn’t happy with the rate to Bloomington. They felt it was too low. But, the Illinois Central rate from Chicago to Bloomington was $5.00/thousand. The C&A couldn’t charge any more than that and participate in the business. They had to cover their average costs (Lexington rate) but when market conditions and competition dictated they could go lower (Bloomington rate). In any event, the only injured party was the C&A – they were the one foregoing revenue on the Bloomington shipments.
So what happened? Well, the C&A won the 1st round. But the legislature rewrote the law. Back to court where the C&A was ordered to “Stop That.” The Illinois Central, along with other railroads, found themselves facing similar situations. So they all got together and raised their rates to places like Bloomington. (This was not illegal.) The railroads, which had been competing, were encouraged to collude by the regulation.
I don’t see situations such as the Lexington/Bloomington dispute as discrimination at all. I see them as reality based competitive pricing decisions made in accordance with the railroads’ cost structure. The people who get upset with this, in the words of Ripley's cited book, “Substitute mileposts for brains.” It’s not the last time the government has tried to alter economic reality by statute or, in this case, a state constitution adopted by popular vote. It rarely works well.
greyhoundsThe cost of producing a mass market item, such as a washing machine, has nothing, absolutely nothing, to do with the affordability of the item.
That's not what I said, Greyhounds.
I said: Markets determine prices.
John WR Greynounds, I don't have any questions but I do not agree with all of your analysis. First of all, I do not defend Federal regulation of the railroads during most of the 20th century. I believe much or most of it was misguided as the country was a whole was worse off because of it. However, it does lead to the conclusion that individuals who desired consumer goods were necessarily priced out of the market and could not obtain a washing machine or similar thing. 1) I disagree. It is quite possible for a producer of washing machines or anything else to make too many. Also a retailer may buy too many. The producer or retailer must necessarily sell them even if he takes a loss. In that case all costs will not be borne by the end user. 2) If a manufacturer of a given washing machine sells it for $500 and then reduces the price to $300 no doubt he will sell more at the lower price. However a prospective purchaser who sees a $500 machine he cannot afford can shop around for a different model or a less expensive brand that he can afford. Failing to find even that he can shop for a used washing machine. It is not at all clear that he must simply do without one. 3) Everyone seeks to maximize profits, not just washing machine manufacturers. 4) I generally agree. This is why it can make sense to sell some machines at a loss rather than keeping unsold machines. 5) Certainly the costs to produce a washing machine include the costs to transport to the factory where it is assembled and the costs to transport the machine to the consumer. However, the price is determined by the market at any particular moment in time. The market price may not cover all of the costs of production. In that case the machine must be sold at a loss. This is similar to point 1. 6) The more efficiently any part of the manufacturing and distribution process can be accomplished the loser the costs of production. This includes transportation which is part of the costs of production. However, as noted about, the producer sees to maximize profits. He may choose not to reduce prices when his costs are reduced or he may choose to reduce his prices. This is a decision the individual manufacturer makes. Different manufacturers have made different decisions. 7) A lower price for any reason only means more items sold if all other things are held equal. But all other things are never equal. During a depression prices may fall but if incomes fall faster than prices fewer of anything will be sold. If we do hold other things equal and, because of transportation efficiencies, prices of washing machines fall more machines would no doubt be sold. However, it does not follow that fewer people will do without them. What is more likely is that more people will buy a new machine rather than repairing an old one. In a market of first time buyers there is also the option of buying a used and less expensive machine. 8) None of this is to say that lower transportation costs are unimportant or that we should not be concerned with them. Rather, society is not a simple two dimensional thing and there is a variety of ways of dealing with transportation costs that are higher than they really ought to be. The actual number of families who can or cannot afford a washing machine is an empirical rather than a theoretical question. John
Greynounds,
I don't have any questions but I do not agree with all of your analysis. First of all, I do not defend Federal regulation of the railroads during most of the 20th century. I believe much or most of it was misguided as the country was a whole was worse off because of it. However, it does lead to the conclusion that individuals who desired consumer goods were necessarily priced out of the market and could not obtain a washing machine or similar thing.
1) I disagree. It is quite possible for a producer of washing machines or anything else to make too many. Also a retailer may buy too many. The producer or retailer must necessarily sell them even if he takes a loss. In that case all costs will not be borne by the end user.
2) If a manufacturer of a given washing machine sells it for $500 and then reduces the price to $300 no doubt he will sell more at the lower price. However a prospective purchaser who sees a $500 machine he cannot afford can shop around for a different model or a less expensive brand that he can afford. Failing to find even that he can shop for a used washing machine. It is not at all clear that he must simply do without one.
3) Everyone seeks to maximize profits, not just washing machine manufacturers.
4) I generally agree. This is why it can make sense to sell some machines at a loss rather than keeping unsold machines.
5) Certainly the costs to produce a washing machine include the costs to transport to the factory where it is assembled and the costs to transport the machine to the consumer. However, the price is determined by the market at any particular moment in time. The market price may not cover all of the costs of production. In that case the machine must be sold at a loss. This is similar to point 1.
6) The more efficiently any part of the manufacturing and distribution process can be accomplished the loser the costs of production. This includes transportation which is part of the costs of production. However, as noted about, the producer sees to maximize profits. He may choose not to reduce prices when his costs are reduced or he may choose to reduce his prices. This is a decision the individual manufacturer makes. Different manufacturers have made different decisions.
7) A lower price for any reason only means more items sold if all other things are held equal. But all other things are never equal. During a depression prices may fall but if incomes fall faster than prices fewer of anything will be sold. If we do hold other things equal and, because of transportation efficiencies, prices of washing machines fall more machines would no doubt be sold. However, it does not follow that fewer people will do without them. What is more likely is that more people will buy a new machine rather than repairing an old one. In a market of first time buyers there is also the option of buying a used and less expensive machine.
8) None of this is to say that lower transportation costs are unimportant or that we should not be concerned with them. Rather, society is not a simple two dimensional thing and there is a variety of ways of dealing with transportation costs that are higher than they really ought to be. The actual number of families who can or cannot afford a washing machine is an empirical rather than a theoretical question.
John
Well, there you go. The cost of producing a mass market item, such as a washing machine, has nothing, absolutely nothing, to do with the affordability of the item. It's more "complex" than that. That's why everyone in the world who wants a wasing machine has one. At least a used one.
There's even a washing machine fairy that causes manufacturers to make too many machines, which they then sell at a loss.
If anyone wants to believe the quoted words please be my guest.
carnej1 I probably should try to find some links to sources but I recall reading that in the early discussions of railroad deregulation that led to the Staggers act there was some concern on the part of several of the most viable Western carriers that deviating from the status quo of regulation might actually hurt their business i.e they were operating very successfully under the existing laws and weren't sure that change wouldn't be for the worse. I suspect it was a case of "the devil you know is better than the devil you don't). The material posted above would tend to support that....
I probably should try to find some links to sources but I recall reading that in the early discussions of railroad deregulation that led to the Staggers act there was some concern on the part of several of the most viable Western carriers that deviating from the status quo of regulation might actually hurt their business i.e they were operating very successfully under the existing laws and weren't sure that change wouldn't be for the worse. I suspect it was a case of "the devil you know is better than the devil you don't).
The material posted above would tend to support that....
Concerns in the Staggers era was that no carrier managements or marketing department had EVER conducted business in other than a highly regulated envoirnment, there were many misgivings about mangement's abilities to come to grips with the differences in the ways of doing business between regulated and de-regulated.
From personal observations at the time, it took a number of years for carrier managements to feel out what legitmate business interests for the carriers were and it took a second generation of management to understand that railroads were not a industry on it's death march as so many of Staggers era managers believed. Staggers era managers felt Staggers was only a delaying action to slow the eventual demise of rail transportation, rather the the beginning of the rebirth of rail transportation.
Never too old to have a happy childhood!
Murphy,
Thanks for your question. Yes, I am replying to Greyhounds. I went back and added his name so he and everyone else could know that.
John- Are replying to someone specific?
Thanks to Chris / CopCarSS for my avatar.
"I Often Dream of Trains"-From the Album of the Same Name by Robyn Hitchcock
C&NW, CA&E, MILW, CGW and IC fan
greyhoundsHey look guys, this whole discriminatory tariff, rebate, monopoly, the railroads couldn't "justify" their rates, etc. thing is a bunch of hooey.
greyhounds has been sounding the same clarion call over and over, but to advance his view of the evils of any regulation across the board, whether in the 19th century or later, he now simply dismisses historical issues as a "bunch of hooey." He makes many good points about how the regulations later in the 20th century became counter-productive. However, dismissing regulation from its beginnings is at varience with the consensus of historical research for many years.
GP-9_Man11786 cacole One of the biggest problems with the Penn Central creation was that it merged two parallel railroads who served the same industries and towns. Yes but so did SCL.
cacole One of the biggest problems with the Penn Central creation was that it merged two parallel railroads who served the same industries and towns.
One of the biggest problems with the Penn Central creation was that it merged two parallel railroads who served the same industries and towns.
Yes but so did SCL.
True, but SCL's territory was nowhere near as overbuilt for the traffic of the time as Penn Central's. And nowhere in SCL's territory was there the equivalent of the area between New York City and Buffalo, with 7 or 8 railroads competing for the available traffic.
greyhounds Regulation was a terminal illness for the US railroads. But like cancer in humans, it affected different railroads differently. The Southern did RELATIVELY well because it served a geographic area experiencing good economic growth, it had more marketing smarts than most other rail lines, and it was willing to fight a Texas chain saw caged death match with the regulators through to the Supreme Court if need be.
Regulation was a terminal illness for the US railroads. But like cancer in humans, it affected different railroads differently. The Southern did RELATIVELY well because it served a geographic area experiencing good economic growth, it had more marketing smarts than most other rail lines, and it was willing to fight a Texas chain saw caged death match with the regulators through to the Supreme Court if need be.
Great, very vivid description of Southern's attitude toward regulation!! I can just picture D. W. Brosnan with a chainsaw, going after the ICC.
Thank you, Greyhounds, for your cogent statement at 9:17 (MT) p.m. today.
Johnny
schlimm Murphy SidingI'm curious what some of those subtleties of history might be, that greyhounds is overlooking, that you think had important effects on railroad regulation. Seriously. Subtleties that led to the major regulatory acts up to 1906 included discriminatory tariffs, rebates, monopolies, and the lack of open books and uniform accounting standards. It is likely that the regulations became counter productive as competition on a major scale developed. But the contention that regulation was destructive from the ICC Act onward is hardly as settled an issue as greyhounds seems inclined to present it.
Murphy SidingI'm curious what some of those subtleties of history might be, that greyhounds is overlooking, that you think had important effects on railroad regulation. Seriously.
Subtleties that led to the major regulatory acts up to 1906 included discriminatory tariffs, rebates, monopolies, and the lack of open books and uniform accounting standards. It is likely that the regulations became counter productive as competition on a major scale developed. But the contention that regulation was destructive from the ICC Act onward is hardly as settled an issue as greyhounds seems inclined to present it.
Hey look guys, this whole discriminatory tariff, rebate, monopoly, the railroads couldn't "justify" their rates, etc. thing is a bunch of hooey.
I can answer and refute this stuff. But I'm not going to devote my life to this forum. I'll get to it, but I've got other things to do. You just throw out these tired old unfounded allegations and I've got to write thoughtful responses.
You're just repeating the same old false accusations and I've got to refute them. That takes some time on my part. Meanwhile, I do have a life and I'm going to lead it. So be patient. When I have time I'll be glad to point out why you're wrong.
John WR greyhoundsWhat part of this do you not understand? The legislation I refer to is the Transportation Act of 1920. What I don't understand is the empirical evidence that in fact many people were priced out of the washing machine market because of that legislation. You have asserted that because of the legislation some people became unable to afford to buy a washing machine. I request the evidence to support your contention.
greyhoundsWhat part of this do you not understand?
The legislation I refer to is the Transportation Act of 1920.
What I don't understand is the empirical evidence that in fact many people were priced out of the washing machine market because of that legislation. You have asserted that because of the legislation some people became unable to afford to buy a washing machine. I request the evidence to support your contention.
OK.
1) All costs of producing and distributing a washing machine will be borne by the end users. In this case that would be the family purchasing the washing machine.
2) There is no fixed level of demand for washing machines. Everybody may want a washing machine, but the actual number of machines sold at $400/machine will be greater that the number sold at $500/machine. Conversely, the number sold at $300/machine will be greater than the number sold at $400. The number of machines not sold as the price increases represents the number of families priced out of the market due to the higher cost of purchase. (This is the demand curve.)
3) Producers of washing machines seek to maximize their profits.
4) Profits are maximized when marginal costs are equal to marginal revenue. This means the producer will add capacity and labor to build more washing machines up until the point where the additional revenue from the extra sales falls below the additional cost of the added capacity and labor. Implicit in this is that the producer will reduce the price in order to secure more sales volume. Profitability is margin multiplied by volume. The margin can come down (it can’t go to nothing) as long as the volume increase makes up for the margin decrease. The producer is concerned about the overall profit, not the margin on each machine sold. (The producer will want as much margin as he can get, along with as much volume as he can get.)
5) The expenses of moving everything around, along with warehousing/storage, are included in the costs that the end users must bear. These expenses are part of the product’s cost. Building a washing machine requires a lot of moving things around and keeping them in storage. You need copper for the motor. You have to move the copper from the mine to the smelter. Then it needs to go to a wire factory. Then it needs to go to an electric motor factory. Then the motor needs to go to the washing machine factory. Then the washing machine needs to go to a distribution center. Then it needs to go to a store. Then it needs spare parts.
Repeat the process with everything in the washing machine; steel, rubber, etc. It adds up.
6) The more efficiently all this moving and storing can be done, the lower the cost of producing the washing machine. A lower cost of production will be a strong incentive for the washing machine producer to reduce the consumers’ price in order to gain more sales volume. The producer’s marginal cost will go down with improved logistics efficiency. This will reduce the marginal revenue required to make marginal cost equal to marginal revenue, which is where the producer wants to be in order to maximize profits.
7) A lower price due to improved transportation/distribution efficiencies will mean that more families can buy washing machines. And fewer families will be priced out of the washing machine market.
8) Got that?
So, just how did the Transportation Act of 1920 cause increased transportation/distribution cost to the washing machine industry? Thereby forcing lower income people to be priced out of the washing machine market.
Well, my reading of that act is that it was set up to protect inefficient rail transportation. The only way to protect the inefficient rail transportation producers was to restrict the efficient rail transportation producers. And that’s what happened. To the detriment of the American people.
The most salient example I can think of is my often cited “In the Matter of Container Service”. (173 ICC 377) decided by the commission in 1931 while operating under the 1920 act.
Before the development of the internal combustion engine and the highway motor truck the best the railroads could do was loose car railroading. Loose car railroading is inherently inefficient, slow, unreliable, and expensive. It cannot be fixed. In 180 years of railroading no one in the world has come up with a way to make a loose car system efficient, fast, reliable, and inexpensive. Focused management can make marginal improvements, but they cannot change the nature of the beast. The deficiencies are inherent.
A slow, unreliable and expensive transportation system increased the costs for the washing machine producers, which forced up the prices to consumers, which then forced some consumers out of the market. Because of such a system the producers had to maintain larger inventories of stock. This “safety stock” was necessary because they couldn’t rely on a shipment of needed parts to arrive on a schedule. If they ran out of electric motors they couldn’t assemble washing machines and the factory shut down. Please remember, this was not a deficiency in railroad management. Railroad management could not fix an inherent problem. It cost money to carry inventory, the more you carry, the greater the cost. And the cost was eventually paid by the end consumer. Loose car railroading existed for one reason. It beat the Hell out of the cost of moving the freight by the only alternative, which was a team of horses pulling a wagon.
When a decent motor truck was developed, around 1920 and coincident with the Transportation Act of 1920, this all changed for the better. Railroads, lead by the New York Central, realized that the motor truck could eliminate many of the inefficiencies of the loose car system by enabling unit trains of containers operating from origin rail terminal to destination rail terminal. Pickup and delivery of freight was by motor truck. This eliminated the expensive, unreliable rail terminal operations and provided a reliable scheduled service that allowed manufacturers to reduce the amount of inventory they carried.
By now, you should understand why this would make washing machines more affordable to the American people.
The dang government’s own study showed that the intermodal container system reduced the New York Central’s cost by 75%. That’s not a typo. What had cost the railroad $1.00 to move in the loose car system cost it $0.25 to move with the new container system. Most of these savings were passed on to the railroad’s customers. But the railroad managed to hang on to about 1/3 of the cost reduction. The benefits to the American people (including potential washing machine purchasers) are obvious.
So what did the government fools do? They said no way.
They ordered the railroads to increase the container rates to non completive levels. Now think about this silliness. The Federal Government ordered corporations to increase their prices. Remember, all costs are paid by the end users. So the government effectively ordered an increase in the price of washing machines. Which inevitably meant that some people had to forego the purchase of a washing machine.
Why would the commission do this? Well, they were protecting the inefficient. Really bad idea. But it came from congress, so what do you expect?
Any further questions?
Murphy Siding I see what you're saying. Perhaps part of the regulation problems down the road could have been attributed to unintended consequences.
well put. That and no sunset provision when the need was no longer relevant.
Schlimm,
Here are Greyhouns's words: " It [economic regulation of the railroads] meant, for a very real example, that some families could not afford washing machines. (Again, this is very real.) That generally meant that the woman of the house had to drudge away on a washboard long after she could have been freed from that arduous task by a simple machine. (The underlining is added).
The number of families who could not afford a washing machine is an empirical question. Since Greyhounds asserted a fact I believe it is up to him to present evidence to sustain his assertion.
I do believe that Federal Legislation to regulate the railroads during this period was flawed at best. However, Martin Albro has pointed out that the railroads themselves were never really able to justify their rates and Congress was particularly reluctant to believe that it cost them more to haul freight a relatively short distance than it cost to haul that same freight a long distance.
for greyhounds, like many others, an assumed truth needing no proof is: "Most of the US economy was free market capitalism. That economic system has consistently been shown to produce the highest level of prosperity. But rail transportation was not allowed to operate in a free market. This drove costs up and, as a result, the standard of living was lower than it would have been absent the economic regulation of railroads. Do you disagree with any of this? " So John WR, I'm guessing the burden of proof is on you.
John WR At the same time the people's lives were being "degraded" we were achieving a historically high standard of living. In part this was because of new labor saving appliances in our homes. No doubt the laws which provided for regulation of railroad rates had serious faults. But is there evidence to show a decline in the number of washing machines sold following passage of the legislation?
At the same time the people's lives were being "degraded" we were achieving a historically high standard of living. In part this was because of new labor saving appliances in our homes. No doubt the laws which provided for regulation of railroad rates had serious faults. But is there evidence to show a decline in the number of washing machines sold following passage of the legislation?
What legislation are you talking about?
Anyway, it doesn't matter whether washing machine sales declined, went up, or moved sideways. What matters is that the economic regulation of railroads, and other transportation, introduced inefficiencies in the logistics systems in the US.
These inefficiencies increased the costs of goods, such as washing machines. This meant that a number of people who would have liked to purchase a washing machine could not do so because the cost of such a machine was higher than it otherwise would have been due to the regulatory caused inefficiencies. People's lives were degraded due to the economic regulation of transportation.
What part of this do you not understand?
When the Transportation Act of 1920 was passed the majority (65%) of US households couldn't have used a washing machine if they were able to afford one. They didn't have electricity. As the country got hooked up to the grid people bought electric appliances. But they paid a higher price for those appliances than they otherwise would have because the logistics system was not allowed to be efficient as it could have been. The higher prices for the appliances meant that some folks were priced out of the market and had to do without. This regulatory induced added cost reduced the living standards.
As to that US standard of living, yes, it was relatively high. Most of the US economy was free market capitalism. That economic system has consistently been shown to produce the highest level of prosperity. But rail transportation was not allowed to operate in a free market. This drove costs up and, as a result, the standard of living was lower than it would have been absent the economic regulation of railroads.
Do you disagree with any of this?
greyhounds t is important to realize that the economic regulation of the railroad industry did far more than harm the railroad corporations. It greatly harmed the nation's economy and, as a direct result, degraded the lives of the nation's people. Regulation prevented the most efficient transport and distribution of goods. That raised the cost of those goods. It meant, for a very real example, that some families could not afford washing machines. (Again, this is very real.) That generally meant that the woman of the house had to drudge away on a washboard long after she could have been freed from that arduous task by a simple machine.
t is important to realize that the economic regulation of the railroad industry did far more than harm the railroad corporations. It greatly harmed the nation's economy and, as a direct result, degraded the lives of the nation's people. Regulation prevented the most efficient transport and distribution of goods. That raised the cost of those goods. It meant, for a very real example, that some families could not afford washing machines. (Again, this is very real.) That generally meant that the woman of the house had to drudge away on a washboard long after she could have been freed from that arduous task by a simple machine.
schlimm greyhounds schlimm Nice rant. Thank you. I wouldn't have expected you to understand it. But it is true. And the result of several decades of actually trying to understand the subject. I understood what you wrote and agree with a good deal of it. I called it a rant because of your dismissive, sarcastic tone, as above. You have a univocal view on regulation that tends to overlook the subtleties of history in the service of consistency.
greyhounds schlimm Nice rant. Thank you. I wouldn't have expected you to understand it. But it is true. And the result of several decades of actually trying to understand the subject.
schlimm Nice rant.
Nice rant.
Thank you. I wouldn't have expected you to understand it. But it is true. And the result of several decades of actually trying to understand the subject.
I understood what you wrote and agree with a good deal of it. I called it a rant because of your dismissive, sarcastic tone, as above. You have a univocal view on regulation that tends to overlook the subtleties of history in the service of consistency.
MerrilyWeRollAlong While over regulation was certainly a major contributing factor, it would be foolish to forget why railroads were over regulated in the first place. The out-dated regulations were the result of railroad management practicing destructive business practices. Charging extremely high rates to farmers, holding shippers hostage, manipulating stocks, stealing investors money, etc were the reasons why railroads were over-regulated. Plain and simply there was a time when railroads were the most powerful corporations in America and few rotten apples took advantage of that power. As highways and airlines came into their own, the railroads unfortunately continued to pay the price of the sins of their forefathers. I think the best analogy to describe the battle to dergulate the railroad industry is the paroling a convicted criminal. Railroads were convicted for committing a variety of crimes at the end of the 19th Century, were sentenced to a life of regulation and are now asking for a parole. Has the convicted changed his ways? Until the collapse of Penn Central and the creation of Conrail, the answer to that question was "No. Once a criminal, always criminal." Here, regulation was born out of sin. Forgiveness and trust was and still is hard to come by.
While over regulation was certainly a major contributing factor, it would be foolish to forget why railroads were over regulated in the first place. The out-dated regulations were the result of railroad management practicing destructive business practices. Charging extremely high rates to farmers, holding shippers hostage, manipulating stocks, stealing investors money, etc were the reasons why railroads were over-regulated. Plain and simply there was a time when railroads were the most powerful corporations in America and few rotten apples took advantage of that power. As highways and airlines came into their own, the railroads unfortunately continued to pay the price of the sins of their forefathers.
I think the best analogy to describe the battle to dergulate the railroad industry is the paroling a convicted criminal. Railroads were convicted for committing a variety of crimes at the end of the 19th Century, were sentenced to a life of regulation and are now asking for a parole. Has the convicted changed his ways? Until the collapse of Penn Central and the creation of Conrail, the answer to that question was "No. Once a criminal, always criminal." Here, regulation was born out of sin. Forgiveness and trust was and still is hard to come by.
Oh, good grief! Where do I start with this one?
This is an ideologue's view of the history of government economic regulation of the railroads. "Regulation was born out of sin"? My left foot! Faith has its wonderful place with regards to the human soul, but it is out of place in economic analysis. Let's stick to facts.
Niether the original Act to Regulate Insterstate Commerce of 1887 nor the Transportation Act of 1920 was punative in intent. They were simply attempts by legislators and other politicians to impossibly alter economic realities that they didn't begin to understand. They begat fool's errands that harmed the people of the United States.
And that's where I'll start.
It is important to realize that the economic regulation of the railroad industry did far more than harm the railroad corporations. It greatly harmed the nation's economy and, as a direct result, degraded the lives of the nation's people. Regulation prevented the most efficient transport and distribution of goods. That raised the cost of those goods. It meant, for a very real example, that some families could not afford washing machines. (Again, this is very real.) That generally meant that the woman of the house had to drudge away on a washboard long after she could have been freed from that arduous task by a simple machine.
If regulation was punative, which it wasn't intended to be, the burden of the punishment sure fell on millions of innocent people.
Were there swindles in railroad finances? Sure. There are swindles today. Here in Illinois we have our share. Largely in government. It wasn't too long ago that the head of Metra, the government commuter rail authority, stepped in front of one of his own trains to commit suicide after being caught with his hand in the cookie jar. A current scandle involves administrators of the Chicago Public Schools filching money from a fund set aside to make sure impoverished children are fed a good hot lunch.
The reasonable response to these modern day transgressions is to prosecute and imprison the wrong doers. No one should punish all commuter rail authorities or all schools for what some individuals did. Especially since doing so would inevitably punish the commuters (innocent) and the students (innocent children).
It was the same with the past railroad financial scandles. Go after the people who did it and put 'em in prison. But don't set up some unworkable economic regulatory scheme. The legislators at least got that right and didn't apply group punishment - something that you seem to desire and approve. The legislators did put in an unworkable economic scheme, but they had enough sense not to do it as group punishment for the "sins" of a few individuals. Again, the original act of 1887 and the act of 1920 were not intended to be punative in any way. The 1920 act was really obsolete when passed, stupid beyond all belief, and totally unworkable. But it was not intented to be punishment for past "sins". The 1920 act was what strangled the railroads and drove them to finacial perill, harming the nation's people as it did so. The Federal Fools left it largely in place for sixty years.
As to charging the farmers "extremely" high rates: That's "Horse Hockey".
Where, when, and how much too much? You don't say. You just sling mud.
How much is "too much"? How do you know what the rail charge "should" have been? You can't answer any of these questions becuase you can't possibly determine what the "correct" rail charge should have been. No one can do that. Rail rates fell like a rock in the last quarter of the 19th century. Which is when the original act of 1887 was passed. It wasn't passed because rail rates were felt to be "too high". It has strong hints of being predatory regulation, that's regulation meant to protect the railroads from rate competition as opposed to protecting the consumer. (read "The Wealth of Nations" by Adam Smith for further information on predatory regulation.)
Yes, there was the Grainger Movement. Financially distressed farmers complained that the railroads charged too much. But then they complained that everyone charged too much. Farm equipment dealers, the banks, the insurance companies, the grain dealers -- they were all just so evil.
Nope, the farmer members of the Grainger Movement - which certainly did not include all farmers - were looking for someone else to falsely blame for their financial difficulties. The railroads, and anyone else they could think of, would do just fine.
Now go repent and sin no more ye knave of economic misinformation.
MP173Clearly the south was in growth stage, particularly the ACL as their tonnage grew by nearly 40% in the 6 years.
Railroads didn't need permission to grow, but did to shrink....and it was hard to come by.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
carnej1and the very high ups seemed more interested in the Corporations non-rail businesses (Real Estate, ect.) than fixing the schism..
Because selling real estate was what was keeping the boat afloat. Guys who wanted to invest in the RR were just in the way. Sell the RE, net goes to bottom line, stock goes up, everyone's happy.
Our community is FREE to join. To participate you must either login or register for an account.