Evolution of Railroad Economics

This paper reviews major themes in the evolution of railroad economics over the past century and a half. The earliest writings emphasized links between railroads and economic development generally. Increasing returns and their implications for market structure and efficiency became a rationale for public intervention (regulation or government ownership). Railway rate theory was the precursor to modern multiproduct pricing theory, and railroads were the data source and focus for the development of cost function estimation. The economic analysis of regulatory performance and subsequent deregulation in North America were models of modern applied economics. The persistent problem of rail market power in some markets still stimulates debate about policy interventions to either regulate or stimulate competition to promote efficiency.