An Empirical Analysis of Institutional Sclerosis and Managerial Incentives: The Case of Motor Carrier Deregulation

Abstract

According to Olson’s (1982) theory of institutional sclerosis, politically stable societies such as the United States foster the formation of special interest groups whose collective actions can lead to rent seeking behavior and formation of market structures that resemble cartels. The consequences of this process are often deadweight losses to society and a retardation of innovation and economic growth. Government regulation of trucking, railroads, airlines, and public utilities in modern American economic history offer examples of this process (Olson 1982, p. 63). The sclerotic effects of motor carrier regulation and the subsequent mitigation of these effects through deregulation serve as the setting for this study.

The author acknowledges the helpful comments of participants in sessions at the annual meetings of the Public Choice Society in conjunction with the Economic Science Association, the University of Nebraska Accounting Research Colloquium, the Temple University Accounting Research Colloquium, and the Pennsylvania State University Department of Business Logistics Research Colloquium. The comments and suggestions of Dennis Coates and Jim McKeown were also most appreciated. The author takes responsibility for any remaining errors.