News from the Tennessee Valley Business
SUNDAY, MARCH 25, 2007

Harness market to increase safety at train crossings?

Nine days later, the crossing where Greenbrier Road in Limestone County meets the Norfolk-Southern line looks the same as it did before Gerald Dean Jernigan drove farm equipment into the path of a train March 16.

Jernigan, of Athens, had value. The 67-year-old left behind a wife, two sons and four daughters. He was a volunteer firefighter and a longtime employee of Limestone Farmer’s Cooperative.

He had no economic value, however, to Norfolk-Southern. We know that because the crossing had no automated gates — nearly foolproof in preventing collisions — before the accident, and it has no gates after. That’s not to say the company does not care. But from a shareholder perspective, nothing about the accident justifies the expenditure of money to avoid a future collision. Jernigan will not merit a footnote on Norfolk Southern’s annual report.

Johnny Harris, chief of Division 1 of the Alabama Department of Transportation, said funding for crossing guards is limited and comes entirely from taxpayer funds.

“Their position,” Harris said of the railroads, “is we were here first. You’re crossing us; we’re not crossing you.”

Railroads are happy to install crossing gates, Harris said, provided someone else pays for them.

“Strict liability” is a liability scheme in which the defendant must pay damages for an accident even if it was blameless. It may offend our concept of fairness, but it provides economic efficiencies. By shifting the cost of a social goal — avoidance of death — to a profit-seeking entity, it harnesses the market’s powers of risk assessment and innovation. It also, of course, increases that entity’s costs.

Under the current system, Harris explained, bureaucracy controls. To improve protection at the crossing, Limestone County officials would have to complain to Division 1. If those complaints are substantive enough, Division 1 will complain to DOT’s Montgomery headquarters. Then DOT will conduct a study which, because federal dollars are involved, will be seconded by another.

Crossing gates, from a railroad’s perspective, are not a recoverable cost. The train, lawmakers have proclaimed, has the right of way. Economic considerations push the railroad away from protective devices.

Jernigan violated the train’s right of way and thus his death is of minimal economic consequence to the railroad. Is society, however, content with a railroad system that does less than it could to protect the traveling public?


One approach to the conflicting evaluation of life — Norfolk Southern’s economic evaluation versus that of society — is bureaucratic. DOT protects life, but does not harness the market in doing so. Sparingly applied, strict liability is a rudder that steers private enterprise toward societal goals.

Let’s say that the railroad knew in advance it had to pay $200,000 — whether to the family or as a penalty to the state — for any crossing fatality, regardless of fault. How would it react?

For one, the market would force it to seek effective ways to avoid collisions. If crossing gates are the best thing going, it would erect more of them. Or maybe there’s a better mousetrap out there; the market, not regulators, would help find it.

Strict liability also removes politics from something it is notoriously bad at: risk assessment. A governmental bureaucracy’s reaction to a railroad crossing death has everything to do with the senatorial district in which it occurred. The market, on the other hand, can push players to evaluate the fatality not on its vote-gathering potential, but on its likelihood of recurrence.

The status quo is golden for Norfolk Southern and other railroads. They bear no financial consequence when drivers interfere with their right of way.

There is an engine more powerful than the one that pulled a train through the Greenbrier crossing: the market. Should we harness it?

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Eric Fleischauer
Capital considerations

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