Policy Documents

Extending Deregulation: Make the U.S. Economy More Efficient

Robert W. Crandall –
January 1, 2008

Since the 1970s, deregulation has succeeded in increasing overall economic welfare and sharply reducing prices , generally by about 30 percent, for transportation—including air travel, rail transportation, and trucking—and for natural gas and telecommunications. Few industries remain subject to classic economic regulation in the United States. To help remove some of the last vestiges of such controls, the next President should:

• promote full deregulation of all voice telephone services

• oppose “network neutrality” initiatives for broadband telecommunications that would interfere with pricing innovations designed to relieve network congestion

• within the electricity sector, support market reforms (such as real-time pricing) and incentives for expanding or preventing overloads in transmission grids and distribution networks and allow states to proceed at a measured pace in deregulating electrical generation

• promote competition among airports and privatization of air traffic control in order to improve the pricing of airport landing rights and reduce air traffic congestion

• back “open skies” or “cabotage” approaches to international air travel and allow more foreign investment in domestic airlines Even more important, the next President should act to restrain government interference in markets that does not quite amount to classic economic regulation.

Examples of beneficial strategies for such regulatory reform include: auctioning more of the electromagnetic spectrum; encouraging efficient pricing of water to take into account the highest-value uses of water and facilitate conservation; and proposing the use of some federal interstate highway funds for demonstration projects for congestion-pricing on major urban highways.