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Collective hallucination and inefficient markets: The Railway Mania of the 1840s [pdf] (umn.edu)
93 points by winstonsmith on Jan 14, 2018 | hide | past | web | favorite | 18 comments

That's a fun read. Too much Brontë sisters, too little Isambard Kingdom Brunel, until page 187, where the author goes after Brunel for being a high-cost builder. Way too much about some fictional work on the subject, which the authors even go to the trouble of rewriting their way.

He gets how important the Liverpool and Manchester Railway (1830) was. I've pointed to that for years as the moment when the Industrial Revolution got out of beta. There were railroads and steam locomotives before that, but they were one-off demos or in-house operations. The Liverpool and Manchester was all steam locomotives (no horse-drawn vehicles), with double tracks, signals, switches, schedules, and tickets. At last, people could buy a ticket and go someplace. As the author points out, once it got running, it was quite profitable.

So, of course, everybody wanted to copy it. Hence the railway mania. I'm amazed that the author had trouble finding materials on that subject, but apparently he searched for the phrase "railway mania" and didn't get enough hits. Strange. Oh, and on page 189, there's "(in fact, got continued growth)", a phrase from an outline never filled in.

Brunel was indeed a high-cost builder. Most of his works are still standing and in regular use, even those coming up on two centuries old. Railway mania was enormously profitable for Britain, although many railroad stockholders did not do as well. Railroads probably paid off better than aviation - commercial aviation, over its entire life, has been a net loss to investors.[1]

If you want to read about 19th century railways, both Stanford University and the San Francisco Mechanics Institute have good collections.

[1] https://www.amazon.com/Sporty-Game-High-Risk-Competitive-Com...

> Railway mania was enormously profitable for Britain, although many railroad stockholders did not do as well.

You could say the same about the investors who funded the city-to-city fiber network in the US in the 1990s.

In both cases, the investors left us with a legacy of useful infrastructure.

I'm trying to figure out what legacy the cryptocurrency boom will leave us. Buildings full of rapidly obsolescing ASICs and GPUs in remote corners of the world?

Cynically? A bunch of entropy.

Optimistically? One of the newly minted millionaires will go on to do something great, like the people who built the fiber net.

Realistically? Who knows...

They seem to have strengthened (maybe even reinvigorated) AMD singificantly during an otherwise financially very uncertain time.

Fun side note: The value of tulip exports from the Netherlands in 2016 was €214 million.


More articles on financial mania by the same author: http://www.dtc.umn.edu/~odlyzko/doc/bubbles.html

In some ways, the channel tunnel was a recapitulation of this - the budget overrun meant that there was no way it could ever realistically provide a return to investors or even creditors, so most of the original financers lost out. But after restructuring it makes a viable operating profit.

Anyone have an updated opinion of wether Jerry Brown's California Railway Mania will be worthwile? Haven't read about it in a few years.

What I find is a lot of people that complain about the California High Speed rail aren't aware how large a project it is. Some parts are expensive and technically challenging, like bores through the San Gabriels. Or just expensive, 13 mile Pacheco Pass Tunnel[1]. But there are other things, like the grade separation work in the central valley or the Caltrain electrification project that needs to be done anyways. These are also rolled into the final price tag.

And a big part of the system isn't about 2-3 hour train rides between LA and SF. More half hour commuter train service in the LA basin and between Morgan Hill, San Jose, SF. The fast rail between LA and SF is really about not having to expand a dozen airports which are near or over capacity. 10 X 2 billion ea is ~$20 billion.

Yeah so big project with a lot of facets with economic effects on people and other infrastructure that doesn't exist yet. Make it hard to do a realist balance sheet analysis. Even it is a bit of white elephant, better than the F35 or the Nuclear Weapons moderation program at $1T and $700M respectively.

[1] There is a water tunnel running through the same section, so frankly doable. Just $$$.

CAHSR does have some major issues:

* The useful part of the project is doing the rail connections across the mountains, which is unfortunately the expensive part. For various reasons, the project started with building the section in the Central Valley, which is the most useless part of the project by itself. If the project is killed without connecting to either SF or LA, then it really will be a useless white elephant.

* The best routing is far from obvious. The only easy way out of LA is roughly I-10 to Palm Springs, but that's the wrong direction for anything other than Phoenix and maybe Las Vegas. This means the decision is going to be contentious, and every person drawing the transit fantasy maps is going to be upset at it, thus spending more time bickering and less time supporting the project.

* The cities aren't very well set up for mass transit to take advantage of HSR. This is particularly true for non-SF/non-LA--Sacramento, San Jose, San Diego, Las Vegas, Phoenix (latter two aren't in CAHSR's plans, but they're easily close enough to have branches and are constantly suggested as useful extensions--see above point). Even LA and SF are fairly bad in where the "downtown" station ends up relative to major business districts,

* As a megaproject, CAHSR ends up attracting lots of little related projects that balloons the cost. Not only is it about creating a grade-separated electrified rail from SF to LA, it's about building an entirely new underground rail station, etc. The project becomes about trying to justify why you need to spend billions more on other desiderata rather than thinking about how to make do without those add-ons.

> The fast rail between LA and SF is really about not having to expand a dozen airports which are near or over capacity.

No, it's really about reducing the growth in North-South personal and passenger freeway traffic and reducing expected capital and maintenance costs to handle that; that's pretty much the entire basis of the cost justification.

Is there an equivalent report for US market?

I see what you did there

The difference is that railroads actually had utility outside of illegal transactions.

Private transactions between sovereign individuals globally and instantly.

How many sovereign individuals are there in the world though? Surely less than 200.

I can dream that it may reach a point where everybody is.

Follow up: blockchain mania 2010-2020

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