Deregulation Legislation: Definition & Examples

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  • 0:05 Deregulation
  • 1:10 Airline Deregulation…
  • 2:41 Motor Carrier Act of 1980
  • 3:37 Staggers Rail Act of 1980
  • 4:22 Lesson Summary
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Lesson Transcript
Instructor: Beth Loy

Dr. Loy has a Ph.D. in Resource Economics; master's degrees in economics, human resources, and safety; and has taught masters and doctorate level courses in statistics, research methods, economics, and management.

This lesson covers deregulation legislation of the 1970s-80s in the United States. Learn what led to changes in pricing, consolidations and mergers, and services. Find out how the Airline Deregulation Act, Motor Carrier Act, and Staggers Rail Act cut certain industries loose.

Deregulation

With the creation of new technology and transportation methods, old laws designed to regulate an industry can become outdated and harmful to businesses. Deregulation is the removal of laws and regulations that are perceived to be hindering the growth of an industry. For those who believe in a free market, deregulation makes perfect sense. A free market is one where supply and demand determines prices, and the market drives the economy. The more regulation an industry has, the less of an effect market forces will have on its development and the less efficient it will be.

This can be good or bad, depending on your point of view. Leah is an economist who believes deregulation is bad for an industry. Sam, on the other hand, supports deregulation and thinks that businesses should be able to adapt to changing economic conditions. This lesson focuses on the deregulation of several American industries in the 1970s-80s. Let's begin with looking at the laws that spurred industry changes and see whether Leah or Sam's ideas are closer to what actually happened post deregulation.

Airline Deregulation Act of 1978

The Airline Deregulation Act of 1978 was born as a result of excessively high fares for flights. Even with the high fares, airlines had no control over the price of tickets or what routes would be flown. The act removed restrictive regulation and gave airlines the ability to set their own fares and determine the routes that fit them the best. Despite the added freedom deregulation would offer, many airlines actually opposed the changes.

Leah agreed with the dissenting airlines, saying that deregulation would be bad for the industry. She believes that when an industry is deregulated, customer service suffers and safety is ignored. Sam, on the other hand, thinks that when industries are deregulated, their costs go down, innovation will be stimulated, competition will be increased, and smaller airlines will consolidate into more dynamic larger ones. It's his belief that all of these would contribute to a more efficient and reasonably priced airline industry.

The Airline Deregulation Act was one of the first laws designed to deregulate an industry. Interestingly enough, both Leah and Sam were right about its long term effects. Chaos and improvements were felt throughout, but prices did drop to the point that many more Americans could afford to fly. Although airlines were able to maximize their flight times and passenger numbers, customers had to deal with increased delays, additional fees, and less service. Airlines were also hit hard by events such as terrorism and disease scares and posted large yearly losses as a result.

Motor Carrier Act of 1980

The Motor Carrier Act of 1980 focused on the trucking industry. A previous law, the Motor Carrier Act of 1935, had put heavy regulations on the industry. The barriers to entry for new trucking companies were insurmountable for some, and mergers were nearly impossible. As a result, many trucking companies went bankrupt. Costs rose and extensive red tape resulted in extreme inefficiencies.

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