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Railroads and American Economic Growth: Essays in Econometric History

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In this important early work of historical economics Fogel examines the impact of railroads on the 19th c. US economy, concluding that it was not the main driver of growth, only contributing a small fraction to GDP.

Railroads greatly lowered the cost of transport, from 24 cents per ton-mile by wagon to less than one cent for rail, although the Civil Engineers criticized the wagon rate as too high but the CE's did not include the driver's time. David Ames Wells (1891) gave an example which from which the cost by wagon can be calculated at 16 cents per ton-mile.

Fogel presented an argument that the economy could have grown almost as much using water transportation by an extension of the canal system to include proposed projects that were abandoned with the advent of rails. However, as Fogel admits, the pattern of settlement would have been different. Also, Fogel overlooks the fact that some water routes would have been many times longer than rail routes. Also, railroads were essential for moving coal and iron ore and without them a place like Birmingham, AL could not have become a steel center after the Civil War.

According to Fogel, railroads did not use as much iron as had been generally assumed, consuming only about 25% of production, while nails, hardware, shovels and other tools used more iron. When steel rails were mass produced in the 1870's they quickly replaced iron rails that only lasted 10 years. In "A Nation of Steel (Misa) and "Men, Machines and Modern Times" (Morison) we are told that almost all of the steel went to rails. The expansion of railroads was dramatic after the introduction of steel, with a near doubling of mileage each decade from 1870-90.

The book contains numerous graphs and tables to support Fogel's analysis.

Although I don't agree with Fogel I do appreciate this work. The fact that canal building stopped abruptly and that there was a railroad building frenzy speaks volumes as to their importance; however, I somewhat agree with Fogel's main conclusion that railroads were not the main driver of growth, but only partly based on his evidence. Also, internal combustion transport would not have been developed any sooner as Fogel assumes because we lacked adequate technology for finding and drilling for oil.

Having read a lot of economic history and the history of technology, I feel that economic growth would have been set back 40 years without railroads even if we could have gotten to the internal combustion powered highway transportation system sooner. Even today rail transport remains much cheaper than trucks, although the gap was narrower before the conversion from steam to diesel locomotives ca. 1950s. Rail uses one third as much fuel per ton-mile of freight as trucks and takes far less labor.

For the best descritpion of the economy during the period from 1870-1890 see David Ames Wells' "Recent Economic Changes and their Effect on the Distrbution of Wealth and Well Being in Society".