The Early British Railway System, the Casson Counterfactual, and the Effectiveness of Central Planning
Essays in Economic & Business History, vol. 34, 2016, pp. 60-94.
25 Pages Posted: 17 Jul 2014 Last revised: 1 Jun 2016
Date Written: July 15, 2014
Can industrial policy be effective when dealing with a revolutionary new technology? Mark Casson's recent book, "The World's First Railway System," offers the intriguing claim that a slight dose of central planning by the British government in the 1840s would have produced a dramatically more efficient railway system for that country, with reductions of cost and mileage in the 25-35% range. Unfortunately, this part of Casson's work is based on the false assumption that the early Victorians shared our views on the nature of demand for railway service and on economic growth. A study of the railway planning process used in the 1840s refutes Casson's thesis. That process was based on several mistaken notions. It is actually likely (as was claimed by some experts in the early 1850s) that central planning in the 1840s would have led to an even less efficient system than the one produced by the decentralized, competitive, and admittedly wasteful historical procedure.
Keywords: industrial policy, railroad system planning, gravity models
JEL Classification: E27, E37, G14, L92, N23, N73, O33, O38, R41, R42, R48, R53
Suggested Citation: Suggested Citation