This essay reviews Jonathan Baker’s important book, The Antitrust Paradigm: Restoring a Competitive Economy, to frame the debate over appropriate antitrust policy and enforcement. Baker argues that competition is inadequate in many US markets and that antitrust could and should be strengthened to restore competition and benefit consumers. Baker presents an unrelenting critique of what he believes is the University of Chicago’s harmful influence on what was once an effective antitrust policy. I compress Baker’s book into four issues that economists can debate and I offer an alternative view that is more supportive of the current state of industry competition, the efficacy of market forces, and the case for limited antitrust intervention. (JEL D22, K21, L11, L13, L40)

The objective in this paper is to survey the literature in transportation economics, exploring two basic themes; first, the conceptual developments in the analysis of supply and demand, which recognizes noteworthy aggregation biases in the empirical work on aggregate data and indicate that a correct analysis of the issues should take place at a highly disaggregated level; second, the use of these conceptual developments to evaluate efficiency aspects of transportation pricing, investment, and the impact of government regulation on resource allocation and distribution in the transportation sector. It is important to acknowledge that the survey is based on research throughout the world but our institutional perspective and, to some extent, the topics that are covered is based largely on the U.S. experience. (Author)

Transportation is a vital sector of the U.S. economy based on consumers', firms', and government's enormous expenditures in money and time and on its effect on virtually all other sectors in the economy. I assess the performance of the transportation system and consider how it could be improved by analyzing whether the United States has the optimal mix of public and private provision. The empirical evidence indicates that our hugely important transportation system has been compromised by various government policies and the significant welfare costs motivate either vastly improving public provision or expanding the role of the private sector. (JEL H44, H54, H76, L91, L98, R41, R48)

The economics of information has identified an important role for government to correct situations where competition is not sufficient to reveal valuable information to consumers. Archon Fung, Mary Graham, and David Weil's Full Disclosure: The Perils and Promise of Transparency provides a thorough discussion of government-mandated disclosure policies. I use their book to frame an empirical assessment of whether these—and other information policies—have significantly reduced the costs to consumers created by imperfect information. My conclusion, which calls for more research, is that government information policies have amounted to weak solutions in search of a problem.

ECONOMIC DEREGULATION of American industry is one of the most important experiments in economic policy of our time.1 In 1977, 17 percent of U.S. GNP was produced by fully regulated industries.2 By 1988, following ten years of partial and complete economic deregulation of large parts of the transportation, communications, energy, and financial industries that total had been cut significantly-to 6.6 percent of GNP.3 The political forces behind the decision to change the market conditions under which roughly $600 billion of U. S. output is produced were strong and varied, but according to political scientists Martha Derthick and Paul Quirk (1985, p. 36), deregulation would never have occurred if economists-especially microeconomists-had not generally supported it through their research.4 In retrospect, it is fair to ask: were microeconomists able to develop a theoretical and empirical framework to explain regulation and its effects and to form predictions of deregulation's effects? Were they able to predict the actual effects of deregulation? This paper surveys the evidence to address these questions and of-

[Previous work in the demand for freight transportation has followed an aggregate approach without any consideration of the underlying behavior of the individuals who actually make mode-choice decisions. In this paper, we analyze mode-choice behavior at the level of the individual decision maker with the purpose of applying the results to various issues related to intermodal competition. Based on a theory of shipper/receiver behavior, a random expected utility model suitable for econometric analysis is developed and estimated. Data for the empirical analysis consists of a large number of shipments covering a wide range of commodities, lengths of haul, and origin-destination pairs. The transport modes considered in the analysis are regulated and unregulated motor freight and rail. The central conclusion is that each mode has an opportunity to attract a substantial amount of traffic in particular markets through either service or price competition. In general, however, it appears that the opportunities for attracting traffic are greater through lower rates than improvements in service quality.]

Alfred Kahn was a major force behind regulatory reform that initially benefited air travelers and subsequently consumers in other industries by placing greater reliance on markets than on regulators to allocate resources. Kahn also believed that effective governance was important for deregulation's success. In this paper, I argue that such governance has not occurred in practice and that problems that persist in partially deregulated industries are more likely to be solved by full deregulation and, if necessary, privatization than by government intervention.

States' requirements that lawyers obtain a license to practice law, as well as American Bar Association (ABA) regulations of legal practice, constitute barriers to entry to the legal profession. In this paper, we argue that eliminating entry barriers in legal services would generate benefits that are similar to those resulting from deregulating U.S. network industries (i.e., transportation, communications, and energy.) Specifically, prices would fall as competition from incumbent firms and new entrants intensifies; in the long run, competitive forces and operating freedom would incentivize firms to produce innovations that significantly benefit consumers and the broader economy.

PERHAPS of utmost importance to the longterm structure and performance of the railroad industry are the large-scale corporate mergers which are currently pending or in the planning stage. Though railroad managers and the Congress have apparently been very enthusiastic about the benefits of rail mergers,' this enthusiasm is not shared in the conclusions of retrospective studies on the topic. For instance, Gallamore (1969) and Sloss, Humphrey and Kruttner (1975) concluded that recent mergers have had little success in achieving anticipated cost savings. Unfortunately, these studies do not shed much light on the social desirability of rail reorganization as they fail to measure the benefits which accrue to shippers through mergerinduced improvements in the quality of rail service. In a recent paper, Levin and Weinberg (1979) used post-merger changes in market shares to measure the effect of mergers. They found that end-to-end mergers did increase the market shares of the firms in the sample, whereas parallel mergers did not. In their analysis, increases in market share are assumed to reflect social benefits; however, as acknowledged by the authors2 and demonstrated by Spence (1975), changes in a firm's performance are not likely to be a sufficient criterion for determining the social value of service quality improvements. In general, an analysis of railroad mergers is complicated by the fact that one is analyzing a network industry. That is, performance in the rail industry (and other network industries such as telecommunications, trucking, and electricity) is generally dependent upon operations by a number of distinct firms which jointly produce the final output. In rail freight transportation, for instance, roughly 70% of total car-miles consists of interline service (i.e., involves two or more carriers). Unfortunately, previous analyses of the rail industry have failed to incorporate two critical features of the industry: the network interdependencies among carriers and links in the network, and the effects of differences in service quality upon users of the rail system. In this paper, we explicitly recognize that rail costs and service quality are significantly affected by market competition and/or coordination among rail carriers. From this perspective, we attempt to estimate the potential consequences of rail mergers, vertical or parallel, respectively. We measure separately two classes of potential effects of rail mergers: the cost savings which might be realized by rail carriers (through increased operating efficiencies and improved capacity utilization) and the improvements in service quality which would potentially accrue to the users of the rail system. In the next section, we identify the economies which can be potentially realized through horizontal and vertical mergers. In section III we develop the framework within which the cost and service-related benefits are estimated and describe our data base. The empirical results are presented and interpreted in section IV. Finally, the implications of the results for public policy toward mergers are discussed in the concluding section.