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The Independent Institute
Working Paper #42

Development of the American Railroad Network During the Early 19th Century
Private versus Public Enterprise


Abstract: The article reviews the history of state intervention in banking, canals and other transportation industries during the early part of the 19th Century. This history concluded in failure, and - in many states - in state constitutional amendments that restricted state borrowing and investments in banking and industry. The article also conducts an econometric analysis of the development of the railroad networks in 28 states, finding that state borrowing contributed to little if any additional miles of railroad, but that adoption of constitutional amendments codifying the principles of laissez-faire contributed significantly.


Clifford F. Thies is the Eldon R. Lindsay Professor of Economics and Finance at Shenandoah University.