The Economics of Railroad Safety

Stemming from the traditions of industrial organization and law and economics, this text examines the exact nature of the railroad "safety problem": how much safety should be provided; what might hinder obtaining such a level of provision; and what we can do about it. Discussion of safety is often infused with emotion. By contrast, the author uses a logical approach to laying out the economics of safety, allowing the informed reader to understand what constitute the main issues. Therefore, while the book deals specifically with freight railroads, the theory is applicable to all forms of transportation. The text is divided into three main sections. The first section puts the railroad safety issue into context. The second section provides a consideration of the economics of safety. The objectives of the third section are to discuss why the market may not produce the socially-optimal level of safety, and to present the range of policy responses that might be deployed to deal with any market failures.