Chapter 8: Transportation, Internal Improvements and Urbanization

Summary Transportation, internal improvements and urbanization proceeded in notable ways during the antebellum period of U.S. history, some of which was guided by government and the rest of it by market forces. Government planners rationalized their involvement by claiming that the U.S. territory was too large and the population relatively sparse. Government was needed to bring in sufficient capital to advance internal land and water transportation.

Key Terms and Concepts Business cycle Gallatin Plan Social savings Communication Mixed enterprises Technology transfer Economic planning Negative externalities Transportation Efficiently Positive externalities Turnpikes Externalities Productivity Urbanization

Teaching Tips 1. During the antebellum period of U.S. history, ask students to compare and contrast the associated costs and benefits of fostering the growth of a manufacturing site under different transportation scenarios (roads, turnpikes, canals, steamboat, and railroad). Ask them to explain how the net benefits of each shifted over time given the circumstances of the period. Identify some of the key factors behind each shift. 2. Define the business cycle. Explain how business cycles affect internal improvements and transportation. Discuss how different sectors respond to changes in aggregate market conditions. Explain that any one industry, e.g. railroads, must contribute a significant share to total GDP if it is to lead the business cycle versus follow it. 3. Many historians claim that antebellum railroads were typically built ahead of demand by risk- taking entrepreneurs seeking private profits in the future. Discuss the evidence that Albert Fishlow (1972) presents against this claim. Highlight the role of government money in transportation investment. 4. Discuss the controversy focused on the role of railroads in contributing to the growth and development of the U.S. economy during its antebellum years. Bring in Robert Fogel’s (1964) 5. work on the social savings created by railroads and discuss what these savings thus imply. 6. Discuss the Gallatin Plan and highlight the federal government’s attempt to design and implement a national transportation plan to ease the flow of goods, services and resources. Explain that this federal plan failed to be implemented out of fear that it was unconstitutional for the federal government to use funds in this way. State and local governments assumed a redistributive role and took on similar investments. Discuss the economic effects of transportation investment by government, pricing set by government, regulation and other public policies on individual behaviors as they apply to private transportation investments. 7. Define externalities and urbanization. Ask students to compare and contrast the positive and negative externalities associated with urban living.