Railroads and Land Grant Policy
By Lloyd J. Mercer
2002/11 - Beard Books
1587981548 - Paperback - Reprint -  317 pp.

Railroad aficionados and students of American 19th century economy will learn much about the economic rationality of the land grant policy with regard to the railroad behemoths that criss-crossed our country.

Publisher Comments

Category: Real Estate | Maritime & Transportation

Of interest:

Land Use Policy in the United States

Railroad, Rates and Regulations

Railroads: Rates-Service-Management

Railway Problems

Transcontinental Railway Strategy, 1869-1893: A Study of Businessmen

Railroads: Finance & Organizations

This noteworthy book deals with federal land grants made from the public domain to a number of states to build transcontinental railroads during the nineteenth century. The railroad land grants were a significant intervention by the government in the operation of the economy and are frequently viewed as a simple matter of government gifts to business. This study aims to refute the legend that these land grants to private companies benefited the companies more than society as a whole. It also attempts to illuminate the effect of the railroad land grants on economic efficiency and to put the income and wealth distribution of the railroad land grants in perspective.

From Choice

Mercer (University of California, Santa Barbara) focuses his attention on seven western carriers--the Central Pacific, Union Pacific, Texas & Pacific, Santa Fe, Northern Pacific, Great Northern, and Canadian Pacific--that received various amounts of public real estate. These companies generally constructed lines through unsettled regions and used the 'building ahead of demand' notion as an effective argument for public largess. But, according to Mercer,this was not sufficient reason for the massive land grant subsidy. Indeed, the presence of financial backing led to excess construction." 

From R.G. Rennie - Choice 

The first work to explore carefully the economic rationality of a monumental episode in federal support to the private business sector. . . . Since much of this book is an empirical evaluation of the land grant issue, the generalreader will find it too detailed and complicated. Yet for the advanced student of American business history, this study should be required reading. The nine appendixes, totaling 112 pages, are highly technical, although they are a valuable and convincing dimension of the Mercer thesis.

From Peter J. George - Business History Review 

Professor Mercer concludes that, 'On balance, the land grant policy was good for society in terms of economic efficiency.' His conclusion is ably supported in this book. Although not written with much dramatic flavour and flourish, Professor Mercer's book clearly states his hypotheses and his results are carefully and cogently argued. It represents the definitive study of the economic efficiency of the railroad land grant system.

From Book News: 

Mercer (economics, U. of California at Santa Barbara) assesses the economic efficiency of the land grant subsidies to the large U.S. railroad systems in the 19th century. He limits his analysis to the relationship of the social and private rates of return on investment in the land grant railroads to the opportunity costs of capital. He argues that, for five of the seven systems studies, it was beneficial to the economy to transfer public goods to the railroad owners. Annotation (c)2003 Book News, Inc., Portland, OR

Lloyd J. Mercer is currently teaching economics at the University of California Santa Barbara. He has both a Ph.D. and M.A in Economics from the University of Washington, a B.S. in Agriculture and a M.A. in Agricultural Economics from Washington State University. He has written extensively on land grants and railroads as well as on general economics topics. Photo from back cover.

Other Beard Books by Lloyd J. Mercer:

List of Figures x
List of Tables xi
Preface xv
1. Introduction
Land Grants: Government Intervention in the Market 1
Subsidy, Profitability and Railroad Investment 3
The Railroad Land Grants 6
Historiography of the Land Grants 8
Objectives of the Study 15
2. Economic Issues in Railroad Land Grant Policy
Building Ahead of Demand 19
External Economics from Railroad Operation 20
Railroads as Natural Monopolies 22
Capital Market Imperfections 24
Hypotheses of the Land Grant Advocates 26
Railroad Land Grants and the Distribution of Income  29
Summary 31
3. Building the Land Grant Railroads 
The Central Pacific System 32
The Union Pacific System 38
The Texas and Pacific System 43
The Atchison, Topeka and Santa Fe System 47
The Northern Pacific System 52
The Great Northern Railway  System 56
The Canadian Pacific System 60
Summary 67
4. Private Rates of Return
Subsidy Unnecessary 75
Subsidy Necessary but Inadequate 84
Subsidy Necessary and Adequate 87
Summary 97
5. Social Rates of Return
Intraregional Benefits 99
Interregional Benefits 100
Passenger Benefits 105
The Social Returns Stream 107
Tests of Hypothesis B1 and B2 108
6. Building Ahead of Demand
Test of the Fishlow Hypothesis for the Land Grant System Estimation of Investment Demand 123
Capacity Utilization 133
The Overbuilding Hypothesis 136
Building Ahead of Demand 138
7. Summary
Economic Rationality of Land Grant Policy 142
Building Ahead of Demand 146
Evaluation of the Railroad Land Grant 147
Appendix A: Investment Expenditure 150
Appendix B: Capital Earnings 178
Appendix C: Net Land Grant Revenue 190
Appendix D: Zero Rent Perimeters 206
Appendix E: Intraregional Benefits 227
Appendix F: Interregional Benefits 233
Appendix G: Passenger Benefits 240
Appendix H: Loan Subsidy Cost 254
Appendix I: Capital Stocks 259
Index 263

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