Grantham University Wk 2 Economic Regulation of Transportation Paper

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Business Finance

Grantham University

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  1. Discuss the rationale for the economic regulation of transportation.
  2. How has common law provided a basis for the government’s regulation of transportation in the United States?
  3. Discuss the role of antitrust laws in transportation during the regulated versus deregulated eras.
  4. How do the police powers of the Constitution affect transportation?
  5. Analyze the major issues addressed by the ICC Termination Act national transportation policy statements.
  6. Unlike may industrialized nations, the United States has fostered private ownership of transportation companies. What is the rationale for private ownership?


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The economic regulation of transportation
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The rationale for the economic regulation of transportation
Economic regulation has a long history in the freight and passenger transportation
industries, contributing significantly to GDP. Both state ownership and public control of
private enterprises have been used to regulate the industry. The primary justification for
regulation is that most modes of transportation require substantial permanent infrastructure,
which results in economies of scale and increases the possibility of market power abuses
associated with natural monopolies. There is also fear in some modes of transportation,
particularly roadways, that the second-best pricing required to cover infrastructure costs may
result in significant deadweight loss, necessitating public provision via two-tier tariffs (such
as license fees). The transportation system in the United States is designed to facilitate the
safe, sustainable, and cost-effective movement of people and products. When infrastructure
expenditures are implemented effectively, they result in widespread prosperity for the
American people and businesses (Knieps et al., 2020). Transport plans develop due to
transportation's critical role in virtually every aspect of a country's commercial, social, and
political operations.
From interventionist to liberal, governments consider transportation as a vital
component of economic success. The transportation system is critical to the advancement,
development, and shaping of the national economy (Knieps et al., 2020). Numerous local
development programs are built on transportation, such as the Appalachia Project in the
1960s in the United States and the European Union's current Trans-European Networks
(TENs) structure.
How the common law provided a basis for the government’s regulation of
transportation in the United States:

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The federal government began regulating surface freight movement more than a
century ago with the founding of the Interstate Commerce Commission (ICC) to regulate
railroad activity in 1887. By requiring the Interstate Commerce Commission to set prices that
gave a "reasonable rate of return," the Transportation Act of 1920 essentially cartelized the
railroad business. The ICC was empowered to regulate entry, exit, mergers, minimum rates,
intrastate rates, and the issuance of new instruments. Regulation, according to studies,
considerably increased prices and rates (Knieps et al., 2020). Without oversight, shippers said
that not only were rated lower, but service qual...


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