Freeman

ARTICLE

A Reviewers Notebook: Instead Regulation

FEBRUARY 01, 1982 by JOHN CHAMBERLAIN

For all its good work in pushing tax cuts and putting a hold on some forms of public spending, the Reagan Administration may be missing a bet in failing to give deregulation a high priority on its list of “musts.” The costs of regulation are so far-reaching that they must challenge the over-issue of money as a cause of stagflation. If they could be done away with, the drain on the federal budget would be considerably lightened, and David Stockman, Reagan’s budget director, might find his labors considerably more rewarding.

Fortunately, the way to a widespread dismantling of our regulation agencies has been charted in a collection of eleven searching essays by experts assembled by Robert W. Poole, Jr. of the Reason Foundation of Santa Barbara, California. The book, Instead of Regulation: Alternatives to Federal Regulatory Agencies (Lexington Books, D. C. Heath and Co., 125 Spring St., Lexington, Mass. 02173, 404 pp., $25.95), could, if its recommendations were to be acted upon, make eleven regulatory bureaucracies superfluous.

Lest his readers might feel that he is dealing with political impossibilities, Poole makes Stephen Breyer’s and Leonard Stein’s account of an already partially accomplished airline deregulation the leadoff piece in his collection. A phaseout of the powers of the Civil Aero nautics Board has already begun, with the Board itself ticketed for burial in 1985. Despite many anguished predictions that small cities would lose their access to air transport, the airline deregulation has been followed by an explosive growth of local-service and intrastate airlines. Former local-service carriers such as U.S. Air (once called Allegheny), Hughes Airwest, Texas International, Piedmont, Frontier, Ozark and Republic flew 32 per cent more revenue-passenger miles in 1979 than they did in 1978.

Deregulation Under Way

The airline success is not the only evidence that deregulation acts as an energizing prod. We are still paying for an expensive Department of Energy, but the lifting of controls on oil prices has already had its effect on well-drilling in the U.S. “lower 48" states. And trucking deregulation has already been authorized, with some semblance of compliance in the matter of accepting new entries in a field dominated by the Teamsters Union.

The successes enumerated by Mr. Poole’s contributors, however, are only a bare beginning. In spite of the start on truck deregulation, George Hilton, in his essay on “Ending the Ground- Transportation Cartel,” laments that the Interstate Commerce Commission—the daddy of all our regulatory agencies—still prevents a real revolution in surface transportation. Containerization, which gets rid of stevedoring costs, has brought new vitality to ocean shipping, but it has yet to hit the railroad freight business. If there were no ICC to prevent it, Mr. Hilton thinks there might be a proliferation of “true intermodel shipping companies.” These would lease track rights from railroads, and freight would move to the ultimate consignee in containers that could be off-loaded between train and trucks with a minimum of strain.

In the Energy Field

The new oil wells that are being drilled as a result of the lifting of price controls give pleasure to Alan Reynolds, but his essay on “A Free Market in Energy” reminds us that we are still a long way from an uncontrolled energy market. Natural gas has not yet been deregulated. And there are continuing threats of investment controls. If Senator Teddy Kennedy could have his way, horizontal divestiture would be forced on oil companies to prohibit their entry into coal, uranium, oil shale, solar and geothermal competition. Divestiture, says Mr. Reynolds, would be “an attempt to hold capital hostage—a form of political allocation of capital.”

When it comes to communications, we are technologically ready to end the current monopoly of the airwaves that is perpetuated by the Federal Communications Commission. The FCC has discriminated against pay-as-you-see TV for years, but the claims of cable-TV could not be denied forever. The use of satellites in broadcasting means that programs can be “bounced” into backyards anywhere. Property rights in wave lengths could be established without fear that a few companies would gain eternal monopoly positions. Ida Walters, in her essay on “Freedom for Communications,” makes a most persuasive case for freedom in TV and radiobroadcasting. Her efforts to tell us how monopolies in local telephone service can be ended are labored, and it is not entirely clear to this reader how established phone facilities could be shared between competing companies without some degree of regulation.

Airline Safety

Mr. Poole’s essay on airline safety suggests that if air traffic control were to be turned over to private companies, such as Radio Schweiz in Switzerland, we might get better service with the taxpayer relieved of the cost. And the inspection of aircraft might be more trustworthy if private insurance companies were to do the job.

There is even a case for competition in pollution control and for establishing liability laws combined with free market insurance methods of bringing safety to drug manufacture. It will take time for Mr. Poole’s contributors to be heard in appropriate Congressional committee hearings. But Mr. Poole’s book makes a glorious beginning. It will have its impact in saving us a big part of the $100 billion per year which Council of Economic Advisors Chairman Murray Weidenbaum says we now spend on maintaining 136 federal regulatory agencies employing 141,000 people who might be more productively employed in private industry.

ASSOCIATED ISSUE

February 1982

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