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American Railroads and the Transformation of the Ante-bellum Economy

Author(s):Fishlow, Albert
Reviewer(s):Majewski, John

Classic Reviews in Economic History

Albert Fishlow, American Railroads and the Transformation of the Ante-bellum Economy. Cambridge, MA: Harvard University Press, 1965. xv + 452 pp.

Review Essay by John Majewski, Department of History, University of California – Santa Barbara.

Albert Fishlow and the Road to the New Economic History

Albert Fishlow’s 1965 book, American Railroads and the Transformation of the Ante-bellum Economy, received widespread praise when it was initially reviewed. Jeffrey Williamson considered it “as the ripest fruit thus far to come from the vineyard of the new economic historian.”[1] Stuart Bruchey similarly ranked American Railroads as “the finest product of the ‘new’ economic history.”[2] Fishlow’s impressive evidentiary base and his carefully drawn conclusions have made American Railroads an enduring classic that is still cited today. There is more to the story of American Railroads, though, than that of well-crafted scholarly work. The book’s forty-year career is a window from which one can glimpse the transition from the “Old Economic History” to the “New Economic History.”

American Railroads is Fishlow’s award-winning Harvard dissertation written under the supervision of Alexander Gerschenkron. Fishlow’s project was, to say the least, ambitious for a graduate student: he wanted to systematically evaluate the impact of railroads on the antebellum economy. Fishlow started by calculating the social savings of railroads, which can be roughly defined as the railroad’s reduction in freight and passenger rates over the next best alternative. Calculating the social savings of antebellum railroads, given the period’s uneven statistical sources, presented Fishlow with an immense challenge. His statistical appendices, which totaled more than 150 pages, indicate how rigorously he tackled the problem. The quantitative element of American Railroads reflected the rise of the New Economic History, which was transforming their field through the use of formal models and sophisticated statistical techniques. Gerschenkron, in fact, also served as mentor for Paul David and Peter Temin, two other distinguished contributors to the New Economic History.[3]

Fishlow’s conclusions, though, differed significantly from those of Robert Fogel, often considered the leading figure of the cliometrics revolution. Fogel famously argued that railroads made a relatively small contribution to U.S. economic growth in 1890. Fishlow, on the other hand, estimated the social savings of railroads in 1859 was 4 percent of GNP. Extrapolating to 1890, Fishlow calculated, produced social savings of least 15 percent of GNP, far higher than Fogel’s estimate of 5 percent. The key difference rested on the way each defined social savings. Fishlow estimated the social savings by comparing railroads to actual alternatives available in the antebellum period. Fogel, on the other hand, calculated the social savings of railroads to a vast system of improved roads and canals that nineteenth-century Americans might have built in the absence of railroads. Fogel, in essence, compared railroads to an economy that did not exist. What William R. Summerhill calls “Fishlovian” and “Fogelian” counterfactuals have different strengths and weaknesses.[4] Fishlow’s method generally results in upper-bound estimates of social savings, but avoids what Fishlow called “[t]he inherent difficulties of measuring what never occurred” (p. 58).

If Fishlow and Fogel philosophically disagreed over the nature of social savings, their work nevertheless had much in common. Both criticized W. W. Rostow, who claimed that antebellum railroads constituted a “leading sector” that induced widespread industrialization via backward linkages to coal, iron, and machinery. Such bold claims, in fact, initially sparked Fishlow’s interest in railroads, and his book provides a devastating critique. Fishlow shows, for example, that most locomotives in the antebellum period burned wood, which meant that railroads used a surprisingly little coal. As for iron, Fishlow demonstrates that railroads accounted for only 20 percent of net consumption in the 1850s. Twenty percent was certainly significant, as Fishlow notes, but hardly revolutionary. Nor did railroads single handily create the machinery industry. Fishlow argues that the production of locomotives created “no strategic breakthroughs” in steam engine design and production (p. 152). Steamboats, in fact, demanded far more in the way of large, sophisticated engines.

In Fishlow’s account, Midwestern farmers and agricultural processing industries (such as flour milling) benefited the most from railroads. Railroads led to the creation of new farms and the growth of towns and cities that could market and process the growing surplus of grains, hogs, and cattle. Fishlow persuasively argued that these railroads were not built ahead of demand. Midwestern railroads, in fact, ran through densely populated areas, which intensified development in locales best suited for commercial agriculture. Almost from the very beginning, these railroads made substantial profits, which one would not expect from developmental enterprises built ahead of demand. Private capital markets (with occasional help from local governments) financed most Midwestern railroads, thus confirming that investors expected these companies to make money sooner rather than later.

Fishlow’s argument has important implications for understanding the relationship between government policy and economic development. Since antebellum railroads generally made money, investment from the national or state governments was not important. To the extent it occurred at all, government investment led “to excess and wasteful construction” (p. 310). The U. S. case showed that investment in railroads — an example of “social overhead capital” — produced high social rate of returns, but only in the context of a vibrant market economy. Fishlow presciently warned that underdeveloped nations — especially those “wracked with large and unproductive agricultural sectors, illiteracy, concentrations of wealth, frequently wasteful government intervention” — should avoid mechanistically investing in “social overhead capital” to magically replicate the U. S. experience (p. 311). The generally poor record of large-scale infrastructure projects in many parts of Africa, Asia, and Latin America underscores the salience of Fishlow’s point.[5]

Fishlow’s conclusion foreshadowed a shift in his research to contemporary development issues, where he often focused on Brazil and other Latin American nations. The influence of American Railroads, not surprisingly, subtly waned. The comparison with Fogel’s Railroads and American Economic Growth is instructive. Whereas Fishlow’s book remained an expensive hardback, Fogel’s book was published in paper, suggesting a wider readership in undergraduate courses and graduate seminars. Fogel, of course, never shied away from debate and controversy. His 1979 article “Notes on the Social Saving Controversy” — which defended his previous arguments with new evidence and new models — effectively gave him the last word in the debate.

That Fogel’s book received more sustained attention than Fishlow’s attests to its greater appeal to up-and-coming cliometricians. Fogel formally modeled his conception of social savings. Equations fill entire pages of Railroads and American Economic Growth, and even the book’s subtitle, Essays in Econometric History, has a strong cliometric flavor. Fishlow, on the other, eschewed formal models expressed as algebraic equations. Instead of running regressions, Fishlow presented most of his statistical evidence in descriptive tables. As D. McCloskey has argued, Fogel’s provocative rhetorical approach — which combined the confrontational approach of a courtroom lawyer with the technical apparatus of a cutting-edge scientist — appealed to new generation of economic historians.[6]

One might think that the practitioners of the old economic history would embrace Fishlow’s work as a more conservative alternative to Fogel’s aggressive counterfactual models. Alfred Chandler, for one, certainly found Fishlow’s approach more compatible with own view that railroads fundamentally transformed the American economy. Many other traditional economic historians, though, criticized Fishlow’s conclusions. Carter Goodrich, in particular, believed that Fishlow had underestimated the importance of government action. Goodrich considered himself part of the “American System” synthesis that stressed the importance of government investment in the early American economy. Goodrich seriously questioned few of Fishlow’s specific findings, but argued that the broader history of internal improvements — whether the canals of the Early Republic or the transcontinental railroads of the Gilded Age — showed the necessity of government investment.[7] Goodrich’s critique subtly changed the question from the role of railroads in the antebellum period to the role of government in the nineteenth century economy. That, of course, is a far different question than Fishlow asked, and one that has still not been fully answered to this day. If Goodrich’s critique did not undermine Fishlow’s evidence or analysis, it highlighted the profound differences between cliometricians and those using more traditional historical methods. Politics, ideology, and culture — not counterfactuals and social savings — most interested Goodrich and his intellectual heirs.

Here, then, is the bittersweet career of American Railroads. Fishlow’s impressive scholarship was not quite econometric enough to hold the attention of economists, yet proved too statistical to appeal to the more traditional economists and historians. One might interpret the fate of American Railroads as a cautionary tale of the troubles that befall interdisciplinary scholarship in an age of specialization. Such a dire assessment is unwarranted. Fogel may have grabbed the headlines, but Fishlow’s careful analysis and extensive research have provided scholars with a treasure trove of hard-earned knowledge. That Fishlow’s book is included in this series testifies to its significance. In his preface to American Railroads, Fishlow apologized (in 1965!) for writing yet another book about railroads. Future generations will certainly acknowledge their debt to Fishlow’s work as they write their own histories of railroads and government policy.


1. Jeffrey G. Williamson, Economic History Review, (April 1967): 196.

2. Stuart Bruchey, American Historical Review, (April 1967): 1098.

3. For more details on Gerschenkron’s Harvard workshop, see Eugene N. White’s interview of Fishlow in Samuel H. Williamson, John S. Lyons, and Louis P. Cain (eds.), Reflections on the Cliometric Revolution: Conversations with Economic Historians (forthcoming, 2006).

4. William R. Summerhill, Order against Progress: Government, Foreign Investment, and Railroads in Brazil, 1854-1913 (Stanford: Stanford University Press, 2003), 215-16.

5. William Easterly, The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics (Cambridge, MA: MIT Press, 2001), 25-44.

6. D. N. McCloskey, The Rhetoric of Economics (Madison: University of Wisconsin Press, 1985), 113-137.

7. Carter Goodrich, “Internal Improvements Reconsidered,” Journal of Economic History, (June 1970): 289-311.

John Majewski is an associate professor in the history department at UC Santa Barbara. He is the author of A House Dividing: Economic Development in Pennsylvania and Virginia before the Civil War (Cambridge University Press, 2000), and is currently writing a book on the political economy of Confederate secessionists. He thanks John Lyons and Robert Whaples for their helpful comments on this review.

Subject(s):Transport and Distribution, Energy, and Other Services
Geographic Area(s):North America
Time Period(s):19th Century