Research Of Fogel's Theory Of The Relation Between Railways And American Economic Growth

The article describes the counterfactual way used by Fogel, the representative person of the econometric history in detail. He imagined that without the railway, water route would have been the best substitution for the rail. He began with the shipment of the agriculture commodity and proposed the concept of the social saving. From the viewpoint of the interregional distribution and the intraregional distribution, he estimated the social saving in the way of econometric, basing on the social saving to measure the contribution of the rail to the economic development of the America, and concluded that the rail was not indispensable to the economic development of the America, instead, the water route would have been a good substitution for the rail. However, Fogel's theory of the relation between railways and American economic growth has some limitations. He just explained how much the transportation cost is which railways can save when railways transported the same amount of goods. More importantly, he neglected the rail's effect on enlarging the extent of market and didn't realize the rail's role from the angle of economies of scale. This article draws on Young's theory about the relation between the division of labor among industries and market size, and analyzes how the rail brought about the economies of scale from three points in the nineteenth century: the possibility of speed economy, the unified market in America, the infrastructure of modern developed economies and modern industrial enterprises. At last, this article gets the conclusion of that the transportation infrastructure, as the rail, is the necessary precondition for the development of economy.