Productivity Advance and Slowdown

The rapid but slowing pace of growth in construction is also seen in the gains in railroad productivity. As shown in Table 16.2, total factor productivity of the railroad somewhat more than doubled in the 40 years between 1870 and 1910. As in other maturing sectors and industries, the railroad experienced a continued but slowing advance. As observed in chapter 9, the pace of total factor productivity advance was so rapid between 1840 and 1860 that it doubled in this early 20-year period.

The sustained rapid growth of output relative to inputs was due primarily to two sources of productivity advance. First, as shown by Fishlow (1965, 2000), were additional gains from economies of scale in operation, accounting for nearly half of the productivity advance of the railroads at that time. The other half resulted from four innovations. In order of importance, these were (1) more powerful locomotives and more efficient freight cars, which tripled capacity; (2) stronger steel rails, permitting heavier loads; (3) automatic couplers; and (4) air brakes—these latter two facilitating greater speed and safety.

Despite the expected slowing of the railroad’s productivity advance, it continued throughout the period up to World War I. It averaged 2 percent annually and exceeded the pace of productivity advance for the economy as a whole, which was approximately

1.5  per unit per annum. The railroads were not, in themselves, the cause of America’s rapid economic progress in the nineteenth century, but for several generations of Americans, they symbolized the ceaseless wave of entrepreneurial energy and technological advance that was the cause of progress.

TABLE 16.2 PRODUCTIVITY IN THE RAILROAD SECTOR, 1870-1910 (1910 5 100)

Note: To link these measures to similar ones before the Civil War, see Table 9.4 in chapter 9. Source: Adapted from Fishlow 1972b, 508.