Mon Sep 25 11:15:40 EDT 2006
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.
Notes:
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.
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