The decline of the American railroad is explored to gain a better understanding of the nature and consequences of decline, as well as to assess implications for higher education. The following issues are addressed: changes that occurred in the railroad's environment between the early twentieth century and the present; the kind of adaptation that railroads made to this environmental change; and inferences that can be drawn for higher education as it enters an era of decline. There are several important similarities between the past environment of the railroads and the anticipated environment of higher education. Each industry has lost or will likely lose a significant share of its market over a period of years. A second similarity is the effect of extensive government regulation upon the regulated industry. A third similarity is that previously negotiated railroad labor contracts severely limited management flexibility at precisely the time when more flexibility was needed. There are analogies to tenure and to departmental prerogatives at a time when significant shifting of resources is required. However, higher education has the option of reducing its resource commitment, achieving equilibrium between resources and enrollment at a lower level, and continuing its educational function at a contracted scale of operation. (SW)