From Rate Regulation to Financial Control: Accounting and Public Policy at the Interstate Commerce Commission, 1887–1933

This paper focuses on the Interstate Commerce Commission's (ICC's) application of accounting to achieve public policy goals for the U.S. railroad industry. The ICC began in 1887 with a mandate to ensure competition in the transportation industry, with rate oversight as one tool. During the Progressive Era, from 1901 to 1921, the ICC used accounting to ensure rate equity; a second implicit goal was to reduce the rail industry's informational asymmetries to investors, morphing over time to ensuring a reasonable return to investors. In the 1920s, the ICC used accounting to reduce securities speculation, facilitate regional rail consolidation, and govern industry finance. This accounting-based model of regulation continued until the Great Depression of the 1930s, when new economic circumstances called into question the ICC's ability to serve the most pressing public policy concerns. The technologies used by the ICC, however, continued to be exploited by other regulatory bodies.