The ‘Railroad Problem’ and the Interstate Commerce Act

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Review of Industrial Organization




The emergence of railroads presented a problem for the developing economic profession. Railroads, by their very nature, often had a localized monopoly. The check that competition was expected to impose on firm behavior was singularly lacking. At the same time, railroads in the United States were national in scope and thus affected interstate commerce. The Interstate Commerce Act and the Commission spawned by the Act represented the first halting steps towards coping with the monopoly power that was a consequence of the Second Industrial revolution. In this paper, the views of prominent economic and legal thinkers regarding the proper legal framework for railroads are reviewed.