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Voting, Regulation, and the Railroad Industry: An Analysis of Private and Public Interest Voting Patterns

Review of Industrial Organization volume 43, pages 21–39 (2013)Cite this article

Abstract

We examine the role of public and private interests in the passage of major legislative bills that have governed the rail industry since 1887. Our model of voting patterns in the House and Senate introduces novel measures of industry concentration, competition, and network characteristics. We find that both the level and concentration of rail infrastructure in a state, the presence of water competition, and the level of agricultural production each have a major influence over voting patterns not only for the inception of regulation but also in the major bills that deregulated the industry in the 1970s and in 1980.

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Notes

  1. Much of this literature is amply discussed in Carleton and Perloff (2005), Kahn (1988), Stigler (1971), Schmalensee (1979), Posner (1969), Posner (1974), Needham (1983), and Viscusi et al. (2005). There is a related set of papers on regulatory capture; see, for example, Laffont and Tirole (1991), and Dal Bó (2006). There are also a number of studies that examine public and private interest theories in terms of voting patterns on legislation. These include Kau et al. (1982), Chappell (1982), Gilligan et al. (1989), Glazer and Robbins (1985), Glazer et al. (1987), Poole (1988), Poole and Rosenthal (1993) and Stratmann (1995).

  2. Pegrum (1968), Locklin (1972), Wilcox (1955), and Hillman (1968) that provide superb summaries of the development of the industry, the Granger movement, and the call for regulation as well as descriptions of sections of the Act.

  3. Zerbe (1980) used the same basic data as Spann and Erickson (1970) but used different calculations.

  4. As Hilton (1966) documents, this was not due to a lack of expansion of rail infrastructure, as there was a 60 % increase in track built between 1880 and 1885. However, this track was located strategically, and often there was no economic motivation to serve certain locations and/or to offer multiple alternatives to locations.

  5. Gilligan et al. (1989) explains how short-haul and long-haul movements can actually be thought of as separate markets served by rail.

  6. Binder (1988), Ulen (1980a, b), Ellison (1994),and many others outline many of these arrangements.

  7. In the Wabash case, the Wabash railroad charged more for a short-haul than for a long-haul for similar shipments in the same direction. Shippers from Gilman, Illinois, paid more for shipments to New York than did shippers that were located in Peoria, Illinois. Gilman was closer to New York than Peoria, but Wabash had no competition in Gilman and faced considerable competition in Peoria.

  8. Anecdotal evidence of this conflict of interest can be provided by Joseph Emerson Brown, the senator from Georgia. Senator Brown was one of only 15 U.S. Senators to vote against the Interstate Commerce Act, and the only representative from Georgia to vote against this act. He also served as president of the Western and Atlantic Railroad prior to taking office. Whether this history of working in the railroad industry influenced his vote on the Interstate Commerce Act or not is unknown, but this does illustrate the potential conflict of interest for elected officials leaving office.

  9. As mentioned previously, railroads had formed associations, through which pooling was used to squelch “destructive” competition among railroads in the association.

  10. Although we also have run the model for the Hepburn Act of 1906, the Mann–Elkins Act of 1910, the Transportation Act of 1920, and the Sunset Act of 1995. The former three Acts refine the ICAct, the latter retained rail reregulation, but created the Surface Transportation Board housed within the Department of Transportation and ended the 108 year reign of the Interstate Commerce Commission with a vote of 417 for and only 8 against in the House, and a voice vote in the Senate.

  11. Some members did not vote and were excluded from the analysis.

  12. Note that each of these variables are common to the Congressional voting literature (e.g. McArthur and Marks 1988; Rothenberg and Sanders 2000; Goodman and Nokken 2004; Lawrence 2007; Jenkins and Nokken 2008).

  13. Note that the 1880 Census provides state level data on “cereal production” which includes wheat, oats, corn, etc. and is used for our grain production variable.

  14. We also estimated specifications with a Granger State dummy variable, but never found this to be a statistically significant determining factor in voting behavior when included with the more informative right-hand side variables, including grain production and railroad concentration.

  15. Note that Gilligan et al. (1989) also have a “center” variable for large shipping regions, but details of the construction of this variable are not provided, preventing us from reconstructing this variable. However, as mentioned previously, our waterway competition, grain production, and coastal waterway shipments variables should adequately capture the impacts of their center dummy variable.

  16. Note that our track per square mile variable could be misleading if railroads are monopolizing sections of the state, something which we lack data to estimate. However, the insignificance of this results when accounting for the other competitive factors could be caused by this dynamic.

  17. In the 1960s and 1970s, the railroad industry was struggling due to the advent of new forms of competition, innovations of products that displaced products that were dominated by rail that were more likely to travel by truck, and a lack of innovation and ability to respond due to regulatory control. Major bankruptcies led to the 3R Act, which established Conrail; the 4R Act, which refined the establishment of Conrail but also initiated a new regulatory environment; and the Staggers Rail Act, which substantially reduced regulation of the rail industry (lessened control of rates, eased merger guidelines, etc.).

  18. Note that the timing of the votes for these acts prevented there from being any lame duck members of congress.

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Authors and Affiliations

  1. Department of Economics, Gonzaga University, Spokane, WA, 99258, USA

    Kevin E. Henrickson

  2. Department of Economics, University of Oregon, Prince Lucien Campbell Hall, Room 435, Eugene, OR, 97403-1285, USA

    Wesley W. Wilson

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  1. Kevin E. Henrickson
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Correspondence to Kevin E. Henrickson.

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Henrickson, K.E., Wilson, W.W. Voting, Regulation, and the Railroad Industry: An Analysis of Private and Public Interest Voting Patterns. Rev Ind Organ 43, 21–39 (2013). https://doi.org/10.1007/s11151-013-9402-z

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Keywords

  • Regulation
  • Railroads
  • Public and private interest
  • Voting patterns

JEL Classification

  • K2
  • L9