Date: 2/22/2018

An independent study finds that partial deregulation of the freight railroad industry in 1980 dramatically improved safety by spurring greater investment in rail infrastructure.

Published in the international journal Review of Industrial Organization, the findings by George Mason University economists Jerry Ellig and Patrick A. McLaughlin show that federal economic regulation imposed on railroads in the decades prior to 1980 depressed investment in maintenance by reducing the profitability of railroads. Poorly maintained track and equipment are less safe.

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The authors say the era of excessive economic regulation also encouraged unnecessary switching, which is the breaking up and reassembly of cars into different trains. Switching is a complex, labor-intensive activity that can increase the risk of injuries and accidents. Reducing the number of switches reduces the opportunity for mishaps.

A new era of deregulation ushered in tremendous safety improvements in the 1980s.

The removal of much economic regulation substantially improved safety by altering railroads’ investment and operating behavior,” the authors write.

The groundbreaking Staggers Rail Act of 1980 deregulated most rail rates and made it easier for railroads to abandon unprofitable lines. Railroads, economists and financial analysts have asserted that the removal of regulations ignited a rail renaissance that allowed the freight rail industry to earn sufficient revenue to pour into rail network improvements. Those improvements have provided major safety benefits, observers say.

Rail accident statistics bear out their argument, McLaughlin says: Railroad safety in the United States has improved dramatically since the 1970s. According to McLaughlin and Ellig’s study and data from the Federal Railroad Administration Office of Safety Analysis, the total number of accidents on today’s seven Class I railroads and their predecessors plummeted from more than 11,000 in 1978 to 1,867 in 2013. Over the same period, revenue ton-miles doubled. The number of injuries declined steeply over the same period — from 1,486 in 1978 to 166 in 2013.

Regulators have argued that stepped-up safety regulations help explain the improved safety performance. But after detailed analysis, Ellig and McLaughlin concluded that the improved safety resulted from the partial economic deregulation, not increased safety regulations.

FRA safety regulation had its biggest impact on railroad safety before 1980, the authors write, “When economic regulation curtailed railroads’ incentives to operate safely and make investments that would improve safety.” The authors conclude: “[C]hanges in safety regulation post-Staggers appear to have little marginal effect on safety.”