Railroads and American Economic Growth

In his classic paper on the significance of railroads to American economic development, Leland Jenks distinguished three principal avenues of influence: (1) The railroad was what Jenks called an “innovating idea” with important psychological impact “manifested in a wave-like profusion of new enterprise of many sorts.” (2) The railroad and railway construction and maintenance were a stimulus to the industrial and financial sectors of the economy. The railroad not only stimulated the iron and steel, timber, and other industries directly but “encouraged innovations in financial enterprise.” (3) Finally, the railroad contributed directly to the generation of national income through the rendering of transportation services. Although on this last point Jenks despaired that, “There appears to be no satisfactory technique for giving a precise measure to the extent of this contribution.”