Agricultural Economics Department


Date of this Version



(c) 1970 University of Nebraska


As early as 1907 the Interstate Commerce Commission held extensive hearings on freight car shortages. At frequent intervals ever since, Congress and the commission have addressed themselves to the problem of freight car supply with considerable vigor but meager results. Allegations of an inadequate supply of freight cars have been widespread in recent years. The decline in the number of freight cars is easy to document: between 1959 and 1968, the number of cars used in grain transport (boxcars and covered hopper cars) declined by 26%. If, however, consideration is given to changes in car capacity and car miles per day, then grain car supply, as measured by ton-miles of grain transported, actually increased by 14 % during this 10-year period. Furthermore, a study conducted by the Interstate Commerce Commission in 1969 revealed that, on an average day in 1968, there were three boxcar I? and covered hopper cars available in the Midwest Region for everyone ordered by shippers. Nevertheless, on this same average day, shippers received only 75 to 80% of the freight cars ordered, owing to malfunctioning of the car allocation system. When freight cars move beyond the lines of the owning railroad, the railroad having possession must pay the owning railroad a car-rental charge known as "per diem." The Association of American Railroads and the Interstate Commerce Commission have relied upon an inflexible and inadequate car-rental charge and a comprehensive body of "car-service rules" and "car-service orders" to secure return of freight cars to owning roads or to points of greatest "need," as defined by the AAR and the ICC. Thus car allocation, at least during periods of heavy demand, is reminiscent of the decision-making process in a centrally planned socialist system. If a car-rental exchange market were to be established, carrental rates would be determined by competitive bidding. Freight cars would then move toward points of greatest shipper demand and the ICC would find it unnecessary to issue arbitrary orders to influence car distribution. Moreover, whenever such competitively-determined rates rose above the prospective daily ownership costs of new freight cars, it would provide an incentive for the acquisition of additional freight cars. Such a car-rental exchange market could be administered by the Car Service Division of the AAR, free from the political considerations which now play a major role in freight car distribution.