Jerry Ellig

Railroad Deregulation and Consumer Welfare

Railroad deregulation under the Staggers Act of 1980 generated rate reductions, service enhancements, and other improvements in economic welfare. These benefits appear to be widely shared. There is a low likelihood that some captive shippers pay rates that exceed the rates they would have paid under regulation, some evidence that some captive shippers have paid rates that regulators would judge “unreasonable,” and strong evidence that captive shippers pay higher rates than non-captive shippers. The source of deregulation’s benefits is as noteworthy as their size and distribution. The principal benefits of railroad deregulation stem from cost reduction, not just a closer alignment of prices with pre-deregulation cost levels.

The Quality and Use of Regulatory Analysis in 2008

This paper assesses the quality and use of regulatory analysis for economically significant regulations produced by federal agencies in 2008. A nine-member research team used a six-point (0-5) scale to evaluate regulatory analyses according to criteria drawn from Executive Order 12866 on Regulatory Planning and Review, Office of Management and Budget Circular A-4 on Regulatory Analysis, and scholarly research. Principal findings include: (1) The average quality of regulatory analysis, though not high, is somewhat better than previous regulatory scorecards have shown; (2) Quality varies widely; (3) The biggest strengths in the analyses are accessibility and clarity; the biggest weakness is retrospective analysis; (4) Budget or transfer regulations receive much lower-quality analysis than other regulations; (5) A minority of the regulations contain evidence that the agency used the analysis in significant decisions; (6) Quality of analysis is positively correlated with the apparent use of the analysis in regulatory decisions; (7) The analyses contain many examples of - best practices; and (8) Greater diffusion of best practices could significantly improve the overall quality of regulatory analysis.

The Politics of Wine: Trade Barriers, Interest Groups, and the Commerce Clause

We investigate the contemporary impacts of the commerce clause of the U.S. Constitution by focusing on recent changes in state laws governing interstate direct shipment of alcohol. The elimination of interstate trade barriers, consistent with the intent of the commerce clause, clearly facilitates efficient markets. More specifically, in 2003, the state of Virginia legalized direct wine shipping to consumers from out-of-state sellers, and by 2004, the average price differential between online sellers and bricks-and-mortar stores in Northern Virginia was approximately 26–40% lower than in 2002. Virginia bricks-and-mortar retailers also began pricing their products as a function of interstate shipping costs following the legalization of direct shipment. These findings regarding the elimination of trade barriers serve as a guidepost to policymakers in various states who need to revise their laws in response to the Supreme Courts 2005 ruling striking down discriminatory direct shipment bans. The distributive consequences of these legal changes should induce intense political competition and mobilization among producers, consumers, retailers, and other affected parties. Consideration of these recent political debates over changes in alcohol regulatory structures within Virginia, Illinois, and several other states provides an illustration of the impacts of interest group competition on lawmaking and the political consequences of the commerce clause.

Market and Nonmarket Barriers to Internet Wine Sales: The Case of Virginia

We discuss the political and legal environment surrounding Internet wine sales, and consider the arguments in the debate over direct shipment bans on wine by investigating the wine market in the Northern Virginia suburbs of Washington, DC. Using a sample of wines identified by Wine and Spirits magazines annual restaurant poll, we find that 15 percent of wines available online were not available from retail wine stores within 10 miles of McLean, Virginia during the month the data were collected. Our results also indicate that Virginias direct shipment ban, which was in place until 2003, prevented consumers from purchasing some premium wines at lower prices online. Aggregate cost savings depends on the consumers shopping strategy, the price per bottle, the quantity of wine ordered, and the shipping method chosen. For the entire sample, online purchase could result in an average savings of as much as 3.6 percent or an average premium of as much as 48 percent. A comparison shopper who considers both online and offline retailers could save an average of 1.6-9.7 percent. These results help explain why consumers and producers have found it worthwhile to challenge interstate direct shipment bans, which tend to benefit wine wholesalers.

Scale, Scope, and Regulation in the Texas Gas Transmission Industry

This article describes and analyzes the Texas Railroad Commissions regulatory policies for the intrastate gas transmission industry, paying special attention to the impact of direct utility competition on scale and scope economies. Our econometric results suggest that most firms operate at substantial decreasing returns to scale, and the largest firms suffer the biggest diseconomies of scale. There are economies of scope between types of gas sales, but diseconomies of scope when a pipeline combines transportation with multiple categories of gas sales. These results suggest that the Texas Railroad Commissions liberal policies on entry and private contracting have not resulted in inefficient entry.

Regulatory Process, Regulatory Reform, and the Quality of Regulatory Impact Analysis

Numerous regulatory reform proposals would require federal agencies to conduct more thorough analysis of proposed regulations or expand the resources and influence of the Office of Information and Regulatory Affairs (OIRA), which currently reviews executive branch regulations. We employ data on variation in current administrative procedures to assess the likely effects of proposed regulatory process reforms on the quality and use of regulatory impact analysis (RIA). Many specific types of activity by agencies and OIRA are correlated with higher-quality analysis and greater use of analysis in decisions, and the effects are relatively large. Our results suggest that greater use of Advance Notices of Proposed Rulemakings for major regulations, formal hearings for important rules, articulation of retrospective review plans at the time regulations are issued, and expansion of OIRA’s resources and role may improve the quality and use of RIAs.

Price Effects and the Commerce Clause: The Case of State Wine Shipping Laws

In the wake of Granholm v. Heald, numerous states passed new laws to regulate interstate direct shipment of alcohol that would seem to contradict the spirit, if not the explicit content, of the Commerce Clause. We build on existing scholarship analyzing the empirical impacts of direct shipment barriers to identify how these new laws are likely to influence local market conditions. Drawing on new data that measure posted winery prices and aggregate production levels in 2002 and 2004, we demonstrate how many of these new laws would be expected to effectively diminish, if not altogether remove, the benefits that would normally accrue to consumers from legalized interstate direct shipment of wine. Although empirical analysis of price effects currently plays a very limited role in dormant Commerce Clause cases, our analysis suggests how price data can be used to ascertain whether a state restriction constitutes discrimination against out-of-state economic interests.

Has GPRA Increased the Availability and Use of Performance Information

The underlying logic of the Government Performance and Results Act (GPRA) suggests that federal programs should be evaluated based on empirical evidence that they actually produce the intended outcomes. This study applies the same logic to GPRA itself, investigating empirically whether GPRA may have increased the availability and use of performance information in federal agencies. Better GPRA performance reporting is correlated with greater availability and use of several kinds of performance information by federal managers in the programs and operations they supervise. The results are statistically significant and relatively large. Correlations are especially significant for types of activities GPRA sought to encourage, such as output and outcome measures and use of performance information to allocate resources, set priorities, and develop measures and goals. These findings are consistent with the theory that GPRA has indeed prompted improvements in the availability and use of performance information in the federal government.

Does Haste Make Waste in Regulatory Analysis

Most federal agencies must conduct economic analysis when proposing major regulations. This paper uses a new data set scoring the quality of analysis accompanying proposed regulations in 2008 to assess whether some types of regulations receive more thorough analysis than others. Previous scholarship speculates that “midnight regulations” receive less thorough consideration, and the Office of Management and Budget asserts that agencies rarely estimate benefits and costs of “transfer” regulations that describe how agencies will spend or collect money. Our tests find that “midnight” regulations proposed after June 1, 2008, and “transfer” regulations both have significantly lower-quality analysis.

Preventing a Regulatory Train Wreck: Mandated Regulation and the Cautionary Tale of Positive Train Control

When Congress passes legislation that mandates prescriptive regulations, legislators are under no obligation to understand the problem they are trying to solve, assess alternative solutions, or understand the benefits and costs of their choices. Passage of the positive train control mandate in response to several high-profile train accidents amply illustrates how haphazardly the legislative branch can authorize regulations. Congressional hearings and committee reports on the Rail Safety Improvement Act of 2008 contain no analysis of the causes and extent of the safety problem, alternative solutions, and the benefits and costs of alternatives to this