Deck 9: Regulating Business

Question 1

What were the causes of the Metrolink accident?

Answer 1

Regulations are the set of rules and laws which is mandatory by law to adhere and follow by the setoff individuals, business, or industries to which it targets. Regulations in market are necessary to control the actions of businesses which, if left uncontrolled, would cause harm to society, environment, customers, and other stakeholders.
The case here is about a train accident which caused because of collision between a passenger train and cargo train. The reason of accident was told to be non-adherence of rules and carelessness of passenger train engineer. It also discusses the issue of installing a safety system which has higher cost than monetary benefit but, would have saved few lives.
The causes of the train accident discussed in the case study are as follows:
• The engineer who was piloting the train was using mobile phone which was prohibited.
• The engineer failed to radio in the signals two times before the accident which led to this tragedy.
• The modern safety systems in railroads i.e. positive control system could have helped in stopping train Accident. But it was not installed because this system was very costly and was not considered cost effective.
• The failure of the performance measures and the scrutiny system to identify the potential problem which was signaled in his behavior several times before.

Question 2

What could have been done to prevent the accident? Was management deficient? Were regulators deficient? Should either have been doing anything differently?

Answer 2

Regulations are the set of rules and laws which is mandatory by law to adhere and follow by the setoff individuals, business, or industries to which it targets. Regulations in market are necessary to control the actions of businesses which if left uncontrolled would cause harm to society, environment, customers, and other stakeholders.
The case here is about a train accident which was caused, because of collision between a passenger train and cargo train. The reason of accident was told to be non-adherence of rules and carelessness of passenger train engineer. It also discusses the issue of installing a safety system which has higher cost than monetary benefit but could have saved few lives.
The accident could had been prevented if there was system like positive train control in system which leaves little space for human error. The implementation of proper performance measures and the system to supervise drivers to identify the potential problem, like the ones which were signaled in his behavior several times before, by the engineer.
The management was deficient because despite of no cell phone rule in the pilot cabin, engineer was caught few times with the phone, but they did not take strict action and ignored the issue just by counseling the engineer. Similarly, there has been times in the past when the engineer did not radio in the signal which is a mandatory thing, but again management was not so serious about it.
Regulators were also deficient because NTSB was advocating to implement a modern system. It would had reduced the chances of such tragedies, but regulators were avoiding and denying it, as it was considered to be a cost ineffective measure.
No party has been doing anything differently, their deficiencies were the cause which caused this accident. If it was not the case, then accident could had been avoided.

Question 3

Is the cost of positive train control justified by the likely safety gains for passengers?

Answer 3

The regulation of railroad safety received greater focus after the Metro Link, ML train accident in 2008. Government regulation in the form of Rail safety improvement act necessitated the implementation of an automatic system, the positive train control, PTC. It is an interconnected network of digital data and controls meant to prevent train accidents by allowing remote operators to take control of trains from on-board engineers. Though expensive to run and maintain, PTC systems are very effective.
In 1990, Congress considered action on PTC but a study done by Federal Rail board Administration, FRA showed that the cost of controls was in excess of safety benefits. The rail safety improvement act of 2008 was passed after the ML and seven other train accidents. The FRA undertook a new benefit-cost study which revealed that based on net present value assumptions, the PTC costs over twenty years would be in the range of USD 9.6-13.3 billion. However the safety benefits would be only in the range of USD 440-674 million. Hence the cost of controls would be more than 20 times the benefits.
In hindsight, PTC appears to be an expensive regulatory program. It will increase shipping rates, consumer prices and rail passenger fares. One needs to determine whether the rail safety improvement act justified. FRA's projection of safety benefits assumes that train controls will produce a 60 percent reduction in costs of rail accidents that includes casualties, delays, emergency response and damage to track and equipment. Other potential benefits (which are not monetized) include capacity to run more trains, savings in diesel fuel, and reduced pollution from diesel exhaust. However these benefits are uncertain and cannot account for the deficit between costs and benefits for 20-25 years. FRA's projected cost estimates over 20 years include wayside and locomotive components and on-going maintenance. This is a high cost burden. Expansion of regulatory measures on railroad industry that most often struggles for achieving profitability brings into question its feasibility.
The rail safety improvement act of 2008 and by extension the PTC show that the cost-to-benefit comparison is not favorable. Viewed objectively, this interpretation could be correct. However it is also true that today the rail passengers are relatively much safer and the railroads could very well register efficiency gains. On ML's part there have been no passenger fatalities since the accident in 2008. The element of human error which was widely prevalent earlier in train accidents has now been eliminated by the introduction of PTC. Besides this the cost of human life lost as a result of failure to upgrade rail systems is far greater than the cost of any system such as the PTC meant to instill confidence in the passengers and the rail drivers alike. Viewed subjectively and with the possibility to recover the costs over a period of 20-25 years, the cost of positive train control is justified by the likely safety gains for passengers.

Question 4

Did the Federal Railroad Administration fairly value a statistical life at $6 million?

Question 5

Is money spent to regulate railroad safety being spent in the most efficient way to reduce risks of death and injury in society?

Question 6

Were the railroads justified in opposing legislation to mandate train controls?

Question 7

Is video recording in locomotive cabs an invasion of privacy? Should unions oppose it?