Railroads and Economic Change

CHAPTER THEME

Few developments have captured the attention of historians and contemporary observers quite like the railroad. Fast and powerful, reaching everywhere, the railroad came to dominate the American landscape and the American imagination. Trains became the symbol of modern America, epitomizing America’s economic superiority in an industrializing world.

To stipulate the many important influences of the railroad would generate a list of unmanageable proportions. We will confine our attention to four main questions:

1.  Were these continent-spanning investments built ahead of demand, or were railroads followers in the settlement process?

2.  How did the builders get their capital? Large land grants, both federal and state, and other means of financial assistance were given. Were these land grants needless giveaways or prudent uses of empty spaces? How important were they in the overall picture?

3.  Another factor of great importance was the growth of government intervention in the economy as manifested in railroad regulation, both at the state and federal levels. Key legal interpretations paved the way for new economic controls by government. Was there a capture of the regulatory process by railroad management, or did regulation primarily benefit users? (Recall Economic Reasoning Proposition 4, institutions matter, in Economic Insight 1.1 on page 9.)

4.  Finally, what impact did the railroad have on the overall growth rate of the economy? Was it only marginally superior to other modes of transport, or was it indispensable to American prosperity? Was the pace of productivity advance observed for the railroad during the antebellum period (see Chapter 9) sustained during the postbellum period?

These questions have been asked by every generation of economic historians since the railroads were built. As we shall see, the answers have sometimes changed as new sources of data have been exploited and as new tools of analysis have been applied (Economic Reasoning Proposition 5, evidence and theory give value to opinions).