Who watches the watchmen? Assessing potential regulatory capture through an examination of historical Surface Transportation Board (STB) decisions on shipper/railroad disputes
Date
2023-01-31
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Journal ISSN
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Type
Thesis
Degree Level
Masters
Abstract
This thesis will examine a series of historical decisions made by a major U.S. regulatory body, the Surface Transportation Board (STB) in the surface freight transportation sector. As a federal regulator overseeing a major industry, the STB (and the ICC before it) were created to operate as a neutral economic regulator acting in the public interest, managing relationships and disputes between surface railroads (in this case, railroads) and their shipper customers. But understanding the incentives and consequences described by Stigler (1971) in the context of economic regulation and capture, in particular the U.S. freight rail sector continues to operate under some controversy because of the questionable regulatory objectivity of the STB as the railroad regulator (Gallamore, 2014). Much of the prior regulatory research about the STB has focused on its scope along with key issues resulting from the agency’s long term regulation of the rail sector (Goldman, 2022), as well as the impact of regulation on the operation and management of the U.S. freight rail system. Other related literature tries to gain insight on decision processes as well as rationalizing the outcomes of the STB decisions over various freight disputes (Warren, 2018). But in spite of this body of research, to our knowledge there have been few if any analytic attempts to assess the fairness or objectivity of the STB regulatory decisionmaking. One interesting feature of the STB crucial to our assessment is that the agency maintains an online compendium or database of its decisions, going back well into the 1990’s and overall numbering into the thousands. As a qualitative database it can be difficult to use for analytics, but it is detailed and allows us to set up both empirical and qualitative assessments of regulatory objectivity. A further underlying factor in formulating this thesis was the effort required to identify and code the sub-set of relevant STB decisions that were both thematically consistent (i.e. rate disputes between a railway and a shipper) as well as independent over time to the present. This extensive vetting yielded individual decisions/data points that were used to conduct our initial statistical analysis and subsequent qualitative work.
After reviewing related literature on assessments of regulatory objectivity in other industries, the empirical part of the thesis estimates various statistical tests (randomness tests, tests of distributional differences) on the case decision data to identify whether or not the data were generated by a neutral decision-maker. To supplement the statistical analysis and to help facilitate understanding of the reasonability and justifiability of STB decisions, we further qualitatively analyze the same cases to add insight on regulatory behavior. Overall, we hope this study will contribute to a better understanding about the decision-making process of a major U.S. economic regulator. Further, we hope this work might help improve STB performance by improving future objectivity in regulatory decision-making within the US freight rail sector.
Description
Keywords
Surface Transportation Board, Rate Dispute, Regulatory Capture
Citation
Degree
Master of Science (M.Sc.)
Department
Agricultural and Resource Economics
Program
Agricultural Economics