Three years after the disaster in East Palestine, Ohio, Congress has brought back the Railway Safety Act. It’s also focused on the wrong priorities.
The issue isn’t whether Washington can add another loud rail-safety mandate. It’s whether the bill steers investment toward the technologies and operational improvements that are actually, quietly, reducing risk.
On that test, too much of the act falls short. Three pieces of research — two new ones offering a broad insight about the economics of shipping, and an older one laying out the implications for safety — explain why.
In the first new study, Bentley Coffey, Pietro Peretto and I develop an economic growth model that treats transportation not as a side sector but as part of the innovation process itself. In most growth models, goods move to market as if by magic. In the real economy, they do not. Most everything you consume was shipped at least once, if not multiple times. Manufacturers can improve products and processes, but if getting goods to customers is too expensive, the gains from innovation eventually hit a wall.
The flip side is encouraging. When innovation includes transportation, growth becomes self-reinforcing. Better transportation expands markets and raises the return to manufacturing innovation. Better manufacturing raises the value of improving transportation.
Policies that raise transportation costs therefore do more than burden one industry. They slow the spread of innovation through the whole economy. And that includes innovations that increase safety, like autopilot did for commercial aviation in the 1980s.
A companion paper asks what regulation does to that process in the real world. Using decades of data across air, rail, truck and water freight, we find that regulatory accumulation functions like a compounding tax on moving goods. It lowers labor productivity in every freight mode.
When it comes to the railroads Congress is targeting with this bill, more regulation also significantly depresses fuel and capital productivity. In our simulations, a five percent increase in rail regulatory restrictions caused rail unit costs to rise by 2.3 percent and rail volumes to fall by 4.1 percent in the first year alone. And because productivity growth is slower, the damage does not disappear in year two. It persists and compounds.
Crucially, these higher transportation costs do not simply reshuffle freight from one mode to another. The pie gets smaller. Total freight activity falls. That means policymakers should be even more cautious than usual about adding regulation to rail and other freight modes. The costs do not stay inside the targeted sector. They ripple through supply chains and the broader economy.
My earlier study with Jerry Ellig helps explain why all of this matters for safety as well as growth.
Ellig and I found that the Staggers Act, which removed some economic regulations of US railroads, was associated with improved railroad safety. Meanwhile, subsequent expansions in safety regulation made only marginal contributions to safety once railroads were freer to allocate capital. Accidents fell from more than 11,000 in 1978 to 1,867 in 2013 even as revenue ton-miles doubled.
The most plausible reason is also the most intuitive one. Railroads with healthier finances and more operational flexibility could invest more in track, equipment, maintenance, and technology.
Taken together, these papers point to an uncomfortable conclusion for supporters of the Railway Safety Act: safety and productivity are often complements, not tradeoffs.
The same investments that make railroads more efficient — better defect detection, better track and equipment, better logistics, more reliable operations — also make them safer. And any policies that siphon resources into compliance-heavy mandates leave less capital for those safety-enhancing investments.
That should shape how Congress thinks about this bill. Some parts of the act move in the right direction. Its defect-detection provisions (especially the requirement for risk-based plans for hot-bearing and related detection systems) are closer to what modern research would recommend. So are measures that improve hazardous-material information and emergency response. Those provisions target identifiable failure modes and improve the underlying system.
Other provisions look like mere theater: visible, politically attractive, and not connected to actual risk reduction. The bill’s blanket two-person crew mandate is the clearest example. No sound evidence justifies it, as the Federal Railroad Administration itself admitted in 2016 when it could not “provide reliable or conclusive statistical data to suggest whether one-person crew operations are generally safer or less safe than multiple-person crew operations.” And there’s a reason for that: When railroads make changes to operations, such as reducing crew size on specific routes, they evaluate the overall system’s safety. When they reduce crew size, it is because they made investments in other safety layers, such as positive train control, that permit the same or even better safety performance with a smaller crew.
The new studies sharpen that point. Even when the safety benefit of a staffing mandate is uncertain, the cost is not. In this industry, higher labor and compliance costs mean less money for wayside detectors, acoustic bearing monitors, predictive maintenance, track renewal, and other investments that directly target accidents and actually improve safety.
The same logic may apply to the bill’s more prescriptive inspection mandates, including designated inspection locations and extra daily locomotive inspections. Of course inspections matter — as long as they are needed inspections and Congress is not just mandating a process. Without strong evidence of a safety payoff, it may satisfy Washington’s taste for visible action while undermining the capital deepening and technological upgrading that have historically delivered both better performance and better safety.
Not all rail safety regulation is misguided, but the burden of proof should be much higher than what Congress usually assumes. If transportation is a system-wide input into growth, and if regulatory accumulation’s effects on growth compound over time, lawmakers should favor rules tightly tied to actual performance and that preserve room for investment and innovation. They should be skeptical of prescriptive mandates that raise the cost of moving freight without comparable evidence of benefit.
The Railway Safety Act is mostly the latter — regulations that would impose costs without improving safety. If it passes, these new studies indicate that the economic and safety consequences will be much larger than the compliance costs imposed on railroads.
