Railroading is a Weird Technology.

Railroading, as a technology, is really weird.

Before that gets anyone upset (some of you), let me explain. What I mean more specifically is overland transportation (or the poorly named “surface transportation”) is, as a concept, really weird. Especially when compared to other modes of transportation.

Think about this, if you want to ship something across the ocean, you pay somebody for maritime shipping services. By and large, the concept of maritime shipping services is the same, and has been for centuries, regardless of your specific circumstance. Somebody has a boat that is going where you need, and you pay them to take your freight or passengers on their boat. The rules of engagement, while complicated by international relations, are simplified by the nature of the technology. You need a boat, you need a crew, you need fuel etc. The basic formula is the same if you are transporting intermodal containers from Asia or oil from Hormuz. With respect to technology, a bulker, a tanker, a RoRo, and a container ship are all the same- radar, engines, fuel, steel, personnel.

So, now that I’ve probably got my maritime colleagues yelling, let me talk about airlines.

Airlines are the same. If you have to fly people or goods somewhere, there is only one way to do it. You need a plane, you need trained pilots, you need a place to take off and land. Flying the plane is not simple or easy, but understanding the system is, there is no alternative to flying a plane if you must fly something or someone somewhere (no you can’t talk to me about SpaceX right now, sit back down).

When I was a younger man, I rode Amtrak a lot. At Penn Station in Newark NJ, I would wait for my train to arrive in the art deco masterpiece of a main waiting room. On the walls are medallions which illustrated the great transportation technologies of humankind. On land, as the illustrations artfully remind us, the transportation options are only limited by your imagination. Basic technologies include, in approximate chronological order, walking, horseback riding, elephant riding, wagons, trams, iguanas (not recommended), railroads, pipelines, and trucks. When we talk about overland transportation, the simple airline and maritime models completely fail us (no there are not iguana or elephant medallions unfortunately).

While instances of airline travel and maritime travel directly competing with each other are limited or non-existent, instances of overland transport technologies competing among themselves are almost universal. In an abstract sense, there is a choice to be made on how to ship your amazon prime package, possibly by truck or maybe iguana, and a decision gets made about which one is better based on other variables, cost, time, quality.

It’s tempting to think about overland transportation technology as continually evolving in a linear fashion, with wagons representing an improvement over horses representing an improvement over walking and so on. The linear model is easy but it’s wrong, instead, overland transport technologies, especially the last three in the series, have branched out into different special sub-types. Need something immediately? Use a truck. Need to move a lot of one kind of liquid? Use a pipeline. Need to move lots of tonnage really far? Use a railroad. This paradigm does not exist in the air, or on the seas.

Like a Venn diagram however, these technologies both stand apart from each other and also overlap. One could say, overland transportation as a whole slightly overlaps with both maritime and aviation transportation in specific use cases, think an inland waterway or a coast-to-coast flight where overland options were available. But unlike aviation and maritime modes, which largely consist of a single technology and a single regulatory structure, overland transportation also overlaps with and competes with itself.

Railroad competition is a hot button issue this year and a lot of really smart people are simultaneously trying to define and redefine what overland freight competition means. As we know from earlier, overland modes complete with each other as rival technologies, and together with other modes. At the same time, the reason we have planes, trains, ships and trucks all coexisting is because no single mode has a natural monopoly over any other mode.

The fundamental issue of “who competes with who” has been around for generations, don’t think it’s new. Many recently retired and present-day professionals in this field share the beliefs of Louis Brandeis, US Supreme Court Justice from 1916-1939. Brandeis might have looked out over today’s field of overland transportation and been shocked at the level of consolidation of its services and the market power of its firms. Brandeis would firmly subscribe to the notion that “railroads must complete with railroads!”. Partially true.

But what happens when one of the other overland modes of transportation captures the market and strikes a death blow to railroads as they engage with each other in the competitive death match the Brandeisians prefer? What happens when railroads are held to different moral standards than other overland modes (pricing, public image, infrastructure)? When happens when we forget that railroading is simultaneously a technology that maintains its own in-built market share, but also is subject to the significant pressures of other modes?

If there was ever a technology that should be examined through the lens of the Consumer Welfare Standard (the Chicago School anti-trust doctrine that emphasizes competitive effects over structures), overland transportation- trucking, pipelines, and railroading- are it. We know railroading is already at a competitive disadvantage to trucking, as railroads have to pay for their own infrastructure. We know that railroads are at a competitive disadvantage to pipelines, which cross the entire continent without artificial divisions and terminals. We know railroading has greater potential than any other technology to change the way people move freight for the better- but we know that it has not been able to achieve that potential.

I am a believer in the railroad as a technology, but we can't wonder why the nation’s railroads are not achieving their potential if policies to incentivize other overland modes continue without balance. We need to remember how these technologies interact and the incentives that govern each of them.

Should railroads compete with railroads? Should railroads complete more with other modes? The answers to those questions are, like much of todays news, weird.