By: Veronique de Rugy, Mercatus Senior Research Fellow
Policymakers still anxious about what deregulation looks like for infrastructure can look to the freight railroad industry as an example. Following its deregulation in the 1980s, railroad productivity soared, allowing most railroads to become profitable while reducing shipping rates for most commodities. Most of these gains occurred because regulation removed rigidities that prevented railroads from reducing costs. Matching payment with use as directly as possible and allowing prices to vary with demand are two other lessons that can be learned from the railroad industry’s success.