RAIL REGULATION IN PERSPECTIVE
Introductory Presentation Comments, July 2010
The Reconstructive Recommendations of a Debilitated Rail Economist
I am speaking with you today as I await the results of a biopsy.
And, I share this for two reasons.
First, the freight rail industry is a family. Not just any family. It's my family. Over the course of 3 years, I have come to know so many of you all - shippers and carriers and legislators and union members and regulators alike - and understand that many of you have faced - and overcome - similar challenges....
...and oftentimes not, I'll remind you, without the help of the "family".
Second, I believe my experience offers an important allegory.
Two months ago I was training for a triathlon and two months ago the US freight rail industry was accelerating beyond recession . I worked out for 2 hours a day and maintained enviable nutrition while the industry maintained 100K carloads a day and encouraging reinvestments. At the time, my doctor described me as the healthiest "29-year-old" he had ever seen, while international analysts described the industry as the healtiest it had ever seen.
And, now I await medical news while the industry awaits legislative news and we realize that - for better or worse - some of the more fundamental aspects of our functioning may change.
Indeed, within any complex organism, the smallest catalysts may beget the largest and least understood ramifications.
So I urge us - as a family - to get it right.
Why?
Because I have an unusually large heart.
Like the industry's.
And for me
It's not a metaphor.
My heart is just
freakishly
big.
And as such, I'm afforded a highly unusual 95 beats per minute recovery rate, meaning that, upon fatigue, my capacities to re-engage are three times the average human's.
Why? Years of strenuous exercise have inadvertently increased its size and performance. By working it hard, I've increased my capacity to work it even harder.
The same holds true for the freight rail industry. It has become lean and efficient through the many difficult decades of regulatory experimentation. And, as a result, a sense of "family" was honed through depravation. And, as a result, that "family" is now poised to enjoy the recognition it deserves as an underapprecited determinant of international competitive advantage.
But US freight trains may now be re-reouted - as may my athletic aspirations - by the seemingly smallest of aberations.
This is due to the fact that highly capital-intensive networks remain as sensitive as a human body to seemingly insignificant change. We are all familiar with the explanation of how a price "decrease" in areas of high demand elasticity (such as west virginia) can "metasticize" as price "increases" in areas lof low demand elaticity (such as Atlanta) and - ultimately even as the discontinuation of service elsewhere. But what remains underappreciated is the fact that, much like microorganisms, regulatory "tweaks" can produce even farther-reaching unanticipated consequences. They are simply owed the complex integrity of such a widespread highly capital intensive network and the demand-based pricing it necessitates
Indeed, far too little is known of the ramifications of the legislative and regulatory potentials we debate in an increasingly habitual fashion.
But from established game theory, we do know for certain that there is much more to be derived from an expansion of the pie - unleashing all that unrealized market potential through that creativity the "new" industry demands - than from the renegotiation of extant principal, via remodified regulation.
So it is time for both of us, myself and the industry, in the face of our uncertain futures, to evaluate all that's important and then advance towards it, collectively, and with that singular sense of purpose that challenging times demand....
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Freight Rail
Regulation
2010
