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American Econometric Economic Essay Growth History In Railroad

Railroads and American Economic Growth: Essays in Econometric History. By Robert William Fogel. (Baltimore: The Johns Hopkins Press, 1964. Pp. xv, 296. Notes, tables, maps, figures, charts, appendixes, selected bibliography, index. $6.95.)

In this work Professor Fogel has dealt some devastating blows to many widely held beliefs about the magnitude of the railroads' contribution to the development of the American economy during the last century. He is additionally skeptical of W. W. Rostow's thesis about the take-off period between 1843 and 1860 when presumably this nation moved into "self-sustained growth."

Some of the findings of the book will not be new to economic historians who have read earlier efforts of Professor Fogel, especially "A Quantitative Approach to the Study of Railroads in American Economic Growth" which appeared in the Journal of Economic History in June, 1962. Scattered writings of other economists and historians have given inklings of the thesis to which the author devoted himself. All this, however, is scarcely preparation for the frontal assault. A reading of the Preface is likely to cow a skeptic. Fogel has acknowledged help from so many outstanding minds in economics and history that a timid reader will be overwhelmed by the opposition and reluctant to question the findings. Beyond this, Professor Fogel has anticipated rejoinders of critics. Within the book, and especially in the final section, he deals with expected objections with great certitude, skill, and perspective.

Fogel sets out to question the "axiom of indispensability of the railroads," and he refuses to accept the thesis that the railroads were largely responsible for much of the nation's development, especially that of the agricultural West. He is skeptical about the value of the chronological record of railroad achievements and about early utterances of railroad officials as well as those of contemporary scholars. Fogel sets out with modern statistical techniques and mathematical models to ascertain what the contribution of the railroads was in the last century, especially as it relates to agricultural commodities. In addition, he analyzes the significance of the railroad industry to iron and steel. Using great imagination, Fogel measures what the costs of transport or "social saving" would have been in any given year if, instead of utilizing the actual cost of shipping agricultural goods, the nation had utilized the alternative of water and wagon transport.

A doubting Thomas can naturally conjure all sorts of objections to Fogel's efforts only to be dismayed by discovering that Fogel was aware of the same dilemmas and has with great ingenuity circumvented most of them. He utilizes the year 1890 for most of his computations and divides his analysis into two parts. The first involves inter-regional movement of four commodities-wheat, corn, pork, and beef-which accounted for 90 per cent of the tonnage of such shipments. The second deals with twenty-seven commodities for determination of the intra-regional social saving. He ultimately establishes several figures based on varying assumptions, but this review will use $214 million as the upper limit by which the railroads changed the potential production of the economy through a reduction in the cost of transporting agricultural products as compared with using water and wagons. Professor Fogel is not necessarily scaling down the role of transportation, only the role of railroads. He points out succinctly that there had been considerable development of agriculture beyond the Appalachians before the railroads had come into being and that much of the settlement would have continued in the absence of railroads. Some of his maps show that a canal and river sytsem could have served most of our sources of agricultural production up to the turn of the century, exceptions being parts of Illinois, Iowa, Nebraska, and Kansas, which would have been impaired to a slightly greater extent than other producing areas. Lack of railroads might have reduced per capita income of the 1890 population of 63,000,000 about $3.40 or from $190 to something under $187.

No one should jump to the conclusion that Fogel is so naive as to think that the nation does not show the profound effects of the existence of the railroads in the particular form and location of our cities. He would counter by indicating that we might well have had institutions showing equally proper adaptation to the particular technologies and routes of commerce. The author reverts back to an earlier period to concentrate on the Rostow thesis and shows that the iron and steel industry had already undergone substantial expansion long before 1843 and that the demands of the railroads did not necessarily dominate the output of the metal industries. He notes that in 1850 the tonnage devoted to nails was substantially in excess of that devoted to rails. He would argue that the stimulus to take off was not as narrow in its source as had been presumed nor as restricted in the time period. By implication Rostow was simply misled by bad research of economic historians whose studies he unwittingly accepted.

The book is filled with examples of incredible ingenuity, perspective, and familiarity with literature of the time as well as the present. One has a sneaking suspicion that the best attack upon the book could be written by Fogel himself and that he could perhaps do two volumes of criticism easier than he could do a second volume on the same thesis. Few books warrant closer study than this. The sparkling and bristling style is certain to sustain interest. Readers may be dubious as to whether or not even Fogel made enough provision for the low quality of some of his raw data. Yet his efforts cannot be thrust aside or rejected. Anyone who teaches the history of this period or even speaks of it in conversation, no matter how much his affection for the romance of the rails, is sure to temper future utterances.

L. Leslie Waters, Indiana University

Railroads and American Economic Growth: A "Market Access" Approach

Dave Donaldson, Richard Hornbeck

NBER Working Paper No. 19213
Issued in July 2013
NBER Program(s):Development of the American Economy, Development Economics, Economic Fluctuations and Growth, International Trade and Investment

This paper examines the historical impact of railroads on the American economy. Expansion of the railroad network may have affected all counties directly or indirectly - an econometric challenge that arises in many empirical settings. However, the total impact on each county is captured by changes in that county's "market access," a reduced-form expression derived from general equilibrium trade theory. We measure counties' market access by constructing a network database of railroads and waterways and calculating lowest-cost county-to-county freight routes. As the railroad network expanded from 1870 to 1890, changes in market access were capitalized into county agricultural land values with an estimated elasticity of 1.1. County-level declines in market access associated with removing all railroads in 1890 are estimated to decrease the total value of US agricultural land by 64%. Feasible extensions to internal waterways or improvements in country roads would have mitigated 13% or 20% of the losses from removing railroads.

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19213

Published: Dave Donaldson & Richard Hornbeck, 2016. "Railroads and American Economic Growth: A “Market Access” Approach," The Quarterly Journal of Economics, vol 131(2), pages 799-858. citation courtesy of

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