The Erie Canal

Daniel Gross has a very nice review of the excellent:

Peter Bernstein (2005), Wedding of the Waters: The Erie Canal and the Making of a Great Nation (New York: Norton: 0393052338).

Gross writes:

The Erie Canal was an engineering triumph, to be sure. But Bernstein notes that it was also an economic triumph. This was one of the first great American examples of network effects—later seen with the telegraph, telephone, and ultimately the Internet. Connecting more and more people through a system makes the individuals more productive and capable and makes the network itself a powerful economic force.

The canal made possible the settlement of the upper Midwest and transformed the nation's "primary axis from north-south to east-west." Clinton's ditch turned canal towns into seaports, the Hudson Valley into an industrial zone, and the Midwest into a breadbasket. Happiest of all was New York City, which became the central span in the "bridge between the inexhaustible supplies of grain from the Midwestern United States and the inexhaustible demand for food from Europe." In the quarter century after the wedding of the waters, the nation's growth rate rose to a whopping 4.6 percent a year, compared with 2.8 percent annually for the period from 1800 to 1825.

Of course, it took the railroads, the telegraph, and a strong national currency to create a truly integrated national market in the late 19th century. But Bernstein's case is pretty convincing. Oddly, he shies away from the greatest—and seemingly most obvious—historical lesson of the Erie Canal: the necessity for direct government involvement in building the expensive commercial arteries that have been so vital for economic growth. Left entirely to its own devices, the private sector likely never would have produced the Erie Canal, the railroads, the interstate highway system, or even the Internet.

Comments

[Bruce Webb]

Especially the Internet. The physical core of the Internet was ARPAnet, nee DARPAnet which was originally conceived as an alternative communication network in the event of a nuclear war knocking out other telecom. The evolution of the Internet into what we know today was an unintended byproduct of defense researchers using DARPAnet to pass along academic communications along with their test messages. The intellectual structure of the Internet was formed at pioneering sites like the WELL and transformed into a worldwide phenomenom at CERN, but the physical infrastructure came right from the darkest heart of Cold War government spending.

[spencer]

But there are losers as well. The opening of the canal coincided with the start of the industrial revolution in New England. But because the midwest land was so much better you could ship that grain to New England
and still sell it cheaper then the New England farmer could on his poor soil. So the New England farmer was forced off the land and had to send his daughters to work in the Lowell Mills. So the canal was a factor in creating cheap labor for the new industrial revolution.

If you now drive through New England you see stone walls running through the woods where the land that was cultivated at the time of the American Revolution was deserted 50 years later. Most of the New England forest is second growth on previously farmed land
pecause of the construction of the canal.

When I first moved to New England and found all the stones in the ground when I tried to garden I realized why the New England farmer had his reputation.

[John Emerson]

Recently doing genealogy stuff I was able to deduce that a couple of generations of my ancestors worked on the Erie Canal. They were scattered at various locations connected to the canal, including the spur that went to Lake Ontario at Oswego.

The settlement pattern of upstate NY was decided by the canal. Albany, Syracure, Utica, Rochester, and Buffalo are all right on it.

[Sudha Shenoy]

1. All the canals in England were privately built. Amongst other things,they were an essential element in carrying coal cheaply to the industrial areas, & in carrying foodgrains to all areas.

2. The road network in England was also privately-built - as 'turnpikes' with their feeder roads.

[theCoach]

"the greatest—and seemingly most obvious—historical lesson of the Erie Canal: the necessity for direct government involvement in building the expensive commercial arteries that have been so vital for economic growth."

The Bush administration is using a similar argument to advance their policies, instead focusing on the give-aways to corporate titans to build the railroads. Without crony capitalism, this nation would not have prospered, the argument goes.

[Randolph Fritz]

Why, one could imagine a world in which network effects are the dominant system of production.

Nah...

[wkwillis]

The canal dropped the price of wheat in New York City by a factor of seven according to some estimates. It was much more expensive to build than railroads, but much cheaper to use for freight. Made a profit, too.

Arnulf Grubler wrote a fascinating book on infrastructure like canals, railroads, etc. Good guy to read up on. He's at Yale and Vienna.

Don't forget the Ohio canal connecting Lake Erie to the Ohio/Mississippi/Missouri riversheds. The Ohio canal accelerated growth in Ohio urban industries was one of the reasons why Ohio was the post civil war dominant state (displacing Virginia) in presidential politics. Urban Democrats offset rural Republicans and the electoral votes caused by the urban populations made it a must have vote in the elections. Kind of like for whoever one the last election.

[Eric in Detroit]

In a park near me north of Detroit are the remnants of a private effort to build a canal from Lake St. Clair to Lake Michigan. Without the deep pockets and coercive power of a government, they ran out of money before they got even a third of the way. The rise of the railroads eventually killed it entirely.

Even today, though, the Straights of Mackinac are closed for most of the long winter. A canal across the "palm" of the state would close much later in the year and open much earlier.

[Barry]

Although the western railroads were subsidized largely by donation to the railroads of alternate section "lieu" lands surround the track areas (and, presumably donation of the track lands themselves), the Great Northern was not the beneficiary of such subsidies. A lot of the donated land was not used to build the railroads in question, as the land, itself, wasn't worth much as or before the roads were constructed, particularly as alternate sections were available for homesteading, without cost.

The Great Northern could and settle homestead farmers immediately around its line and didn't have to sell land. As farmers settled near the railroad, they produced grain which produced railroad revenue as it was carried to markets back east.

[Chip Poirot]

Network effects? What network effects? How could canals have transformed the axis from north south to east west. If we had built more canals instead of more railroads, we would have developed north to south instead of east to west. If we hadn't built the erie canal we would have built a turnpike instead. So clearly, the erie canal was an isignficant factor in the settling of the Midwest.

(That is sarcasm just in case anybody hasn't seen my posts before. I just couldn't resist a chance to take a cheap shot at counterfactuals and the New Economic History).

[Les Brunswick]

The internet--yes. But I read a few years ago that 60% of the public believes that Microsoft invented the internet.

[JR]

Re Bruce Webb's comment: Actually the original name was the ARPAnet. ARPA was the "Advanced Research Projects Agency" of the Department of Defense. The original purpose of the ARPAnet was not communication. It was to permit defense contractor (including university) researchers to access available computing power that was otherwise unused. Remember that big computers were rare and hugely expensive, so computing power was a scarce resource. If you were designing a new A-bomb or ICBM at MIT's Lincoln Lab you could do your job much faster if you could parcel out your computations to big computers at Stanford and Michigan and elsewhere. The ARPAnet was designed to maximize the workload of big computers by having researchers put their jobs in a queue and sending the tasks automatically to the computer with the capacity to handle each in order. This meant a central server that could acccept a task from a researcher, communicate continuously with all the networked computers to tell how busy each was, send the job out to the right one, accept the results, and relay them back to the original researcher. The users, many of whom were graduate students and junior faculty, almost immediately realized that because transmission of very large amounts of data among the computers was continuous, the same network could be used for immediate transmission of dinky little text messages at virtually zero burden on the system and at no cost to the users - and the early communications were as much for pure pleasure as for work (e.g., one of the first list-serves was for science fiction). So the internet was the result of a combination of government funding for weapons of mass destruction and the playful instincts of a handful of very bright adolescents.

[JR]

Well, okay, adolescents is an exageration. But if you've ever hung out with electrical engineering grad students you'll agree that their emotional age is pretty much adolescent even if they're in their 20's.

[battlepanda]

The England example is very different. You are talking about a much more highly settled area. It's possible for a network to grow from smaller canals that are profitable without a big network. This would not be so in the states. In a Libertarian Paradise, large infrastructure projects like the Erie Canal would simply not exist.

Here's another problem I have with hardcore Libertarians who nevertheless wants the government to build roads and defend borders. The fact that they think government should build roads is a tacit admission that there are some infrastructure creation projects that the private sector cannot provide. Yet instead acknowledging that their dogmatic rejection of government power is confounded by this example, they prefer to think that there is something somehow special about the exceptions and continue to reject support for other infrastructure building projects by the government e.g. public transportation.

[Sudha Shenoy]

Trade & exchange networks have always existed - even (especially) in Palaeolithic times. It was the continued _growth_ of these networks that eventually made turnpikes & their feeder roads, & a canal _network_, -- both necessary _&_ profitable.

[Bruce Webb]

http://www.albany.edu/ltl/using/history.html
ARPANET/DARPANET.
"Indeed, the Internet was created by the Department of Defense’s Advanced Research Projects Agency (DARPA) to link computers at Stanford, UCLA, UC Santa Barbara, and the University of Utah so that artificial intelligence researchers at these sites could collaborate on projects funded by the military. “DARPAnet,” as the resulting network was called, ensured the safe transport of data between mainframe computers at different strategic locations by creating alternate communication routes in case of bomb attack and by decentralizing functions so that no single computer could be targeted."

Google searches give varying results. But the above quote jibes with my recollections at the time, the 'D' in DARPAnet was a negative attractor for most students, even engineering students in the late seventies and early eighties at key institutions like Cal and Stanford, so they dropped it right about the time I got my first network account.

And the official DARPA site states http://www.arpa.mil/body/arpa_darpa.html
that it was started as ARPA on Feb 7, 1958, was changed to DARPA on March 23, 1972, was switched back to ARPA on Feb 22, 1993, and then back again to DARPA on Feb 10, 1996. The basic research was oriented towards a start state in 1969, so certainly ARPANET would have been the original name, but by the time that distributed computing became a reality DARPANET was the term in popular use, at least to the extent that talk about networking could be called 'popular'.

But the basic point remains: the Internet was not a private industry indeavor, it originated with defense contracts.

[Robert Waldmann]

Well at least we still have the Erie canal.

While commenters here have been discussing the central importance of DARPA in enabling us to share our thoughts and insights (and waste time) the Bush administration has been gutting the DARPA long run research budget
http://tinyurl.com/5xc3r.

I bet all the DARPA funded researchers who just laughed when the Bush 2000 campaign claimed that Al Gore said he invented the internet are laughing out of the other side of their mouths now.

Lets have a long run over/under bet. What do you think this shift of priorities will do to the present value of US GNP. My guess is down $1,000,000,000,000 but that's mainly because I like round numbers.

[anne]

http://www.nytimes.com/2005/04/02/technology/02darpa.html?pagewanted=all&position=

Pentagon Redirects Its Research Dollars
By JOHN MARKOFF

SAN FRANCISCO - The Defense Advanced Research Projects Agency at the Pentagon - which has long underwritten open-ended "blue sky" research by the nation's best computer scientists - is sharply cutting such spending at universities, researchers say, in favor of financing more classified work and narrowly defined projects that promise a more immediate payoff.

Hundreds of research projects supported by the agency, known as Darpa, have paid off handsomely in recent decades, leading not only to new weapons, but to commercial technologies from the personal computer to the Internet. The agency has devoted hundreds of millions of dollars to basic software research, too, including work that led to such recent advances as the Web search technologies that Google and others have introduced.

The shift away from basic research is alarming many leading computer scientists and electrical engineers, who warn that there will be long-term consequences for the nation's economy. They are accusing the Pentagon of reining in an agency that has played a crucial role in fostering America's lead in computer and communications technologies.

"I'm worried and depressed," said David Patterson, a computer scientist at the University of California, Berkeley who is president of the Association of Computing Machinery, an industry and academic trade group. "I think there will be great technologies that won't be there down the road when we need them."

University researchers, usually reluctant to speak out, have started quietly challenging the agency's new approach. They assert that Darpa has shifted a lot more work in recent years to military contractors, adopted a focus on short-term projects while cutting support for basic research, classified formerly open projects as secret and placed new restrictions on sharing information.

This week, in responding to a query from the staff of the Senate Armed Services Committee, Darpa officials acknowledged for the first time a shift in focus. They revealed that within a relatively steady budget for computer science research that rose slightly from $546 million in 2001 to $583 million last year, the portion going to university researchers has fallen from $214 million to $123 million....

[P.M.Lawrence]

Nice reasoning, but some of the facts are wrong and there is an inadvertent bait and switch in the final results.

First off, people have misunderstood the different factors in English canal building; they didn't start out as short lengths of transport canal, but for water management. I wrote up the area and it is at John Quiggin's site at http://www.johnquiggin.com/archives/00001388.html (or maybe just "001388"? This is from memory).

Second, New England started off much more fertile; it's just that extensive use reduced soil fertility.

Third, the Erie Canal did NOT make the midwest a breadbasket. Most of European demand was met through the Mississippi; Trollope records that farmers were reduced to burning Maize for fuel with the collapse of grain exports at the beginning of the US civil war.

Fourth, none of the effects produced by the Erie Canal were in fact created by it, rather they were transferred to within the USA. Every single thing would have happened better and more efficiently if it had been allowed to develop privately and with free trade. Only, New England and New York wouldn't have intercepted the gains that would naturally have developed in and around the St. Lawrence and (to a lesser extent) the Mississippi.

Thus, the fallacy in the conclusion is the implied "... of the USA", etc. The Erie canal most certainly did benefit the USA - that is not in dispute - but it did not maximise growth, it diverted what free trade and private enterprise would have done far better. It was a triumph of the protectionist spirit, though not emerging in that form that time.

[Sudha Shenoy]

Certainly some early canals in the 17th century were built for drainage in the Fens & the like, but the bulk of the canal _network_ was constructed in the 18th century for transport. Similarly, rivers were 'improved' for purposes of navigation in the late 17th & the 18th centuries. There is a considerable (standard) literature on this. It is a routine topic in British economic history.

[P.M.Lawrence]

Oops, JQ rearranged his site. My material on UK canals is now at http://jownquiggin.com/index.php/archives/2003/7/15/pm-lawrence-on-canals-and-railways/.

SS, I'm afraid that thumbnail sketch above was insufficient to bring across the main points, which you should find at that site.

Briefly, the first UK canals were drainage works, then these and individual navigation works on existing rivers added value to a semi-natural system. Only after that did network effects come in. Certainly, the vast majority of canals were indeed built for transport purposes - but the system did not need to be bootstrapped beyond criticality on individual navigation value alone.

I wasn't talking why most English canals were built, but how they got transformed into a full blown system. They reached that point long before most of them got built.

An aside: I notice the incorrect suggestion that roads in England got started on the back of private turnpikes. They didn't, that was the upgraded system that came in around the 18th century. Roads were formerly built and maintained by "statute labour", a form of labour obligation surviving from the middle ages and generally considered a tax. It became obsolete outside the Channel Islands by the 17th century, although it survived as the corvee or robotnik on the continent (where it could usually be commuted for cash payments).

[P.M.Lawrence]

Damned typos. I meant http://johnquiggin.com/index.php/archives/2003/7/15/pm-lawrence-on-canals-and-railways/.

BTW, water management includes supply of water to cities and towns as well as drainage, e.g. London's 17th century "new river".

[Sudha Shenoy]

Yes of course there were roads before the turnpike system. It was the continued growth of traffic which made it necessary to have the main arteries turnpiked, with an associated network of feeder roads. Previously, parishes were responsible for the stretches of road passing through them. Naturally these roads were not the best, although adequate for 17th century traffic. It was in the 18th century that turnpiked roads were repeatedly upgraded as newer techniques were developed, eg macadamising. This system was then further improved in the 19th century.

Certainly different canals were built for different purposes at different times in different regions. But it was the _continued_ growth of a pre-existing & already expanding interregional trade network which made navigational canals both possible & successful. The two networks grew together. Drainage (for agricultural purposes) & water supply, were needed in specific areas; transport facilities, in other --many more -- areas.(Fen drainage made possible specialist horse-breeding, for example, as well as adding to pasture & arable in East Anglia.)

[anne]

Interesting exchange.

[JR]

Re ARPA and the internet again: the system was designed to allow communication of data among _computers_ -- it was not intended for communication of information among human beings. That was an unintended development. Once there were massive amounts of data being automatically routed and tranmitted to remote locations, the human users of the network realized that they could adapt it to transmit text messages to each other at no noticeable cost. They did the necessary work on their own time, for fun. Because this was happening in the universities of 30 years ago, there were no security or copyright cops to shut the student and junior faculty users down. Also, ARPA was the least military- and most research-minded institution in the DoD, so they didn't try to impose discipline on it either.

The point is that the internet emerged as a form of play. That origin still shapes the characteristics of the web-- that information "wants to be free," that news, music, images, data, opinion, and all the rest are freely available to all of us. Try to imagine what the internet would be like if it had originated as a planned project of the DoD.

[wkwillis]

It probably would have looked like the French minitel system if it had been designed.

[John Emerson]

"Second, New England started off much more fertile; it's just that extensive use reduced soil fertility."

Chicken Little.

[P.M.Lawrence]

When I said that New England started off more fertile than extensive agriculture left it, I wasn't suggesting anything Chicken Littleish about the future - no ultra-Greeny implications there, since I wasn't extrapolating.

SS, I believe we are in broad agreement, just differing in what we were trying to bring out. For instance, when I commented on statute labour, all I was trying to bring out was that English roads had already been through a phase of being supported from "taxes" (although in many important respects labour obligations are not actually taxes). And yes, you are right about the paleolithic beginnings of all this; I suppose you know that the drove roads in regular use until quite late had their origins in the Stone Age? And the Tarr Steps in Devon are still of use to foot traffic.

[John Emerson]

I was kidding. If it happened in the past, maybe we should think about the future too.

[Sudha Shenoy]

1. I was just trying to separate agricultural, urban, & transport investments. The early modern period saw considerable agricultural investment - eg, in improved pastures, water meadows, convertible husbandry, etc. This was the other side of increasing regional specialisation & exchange - in grains, fruit, market gardening, different types of livestock products, different types of wool, etc., etc.The drainage of the Fens & the associated specialisations there - eg, in sheep,barley, etc. - were part of this widespread investment & trade, which increased in the late 17th century.

The early modern period also saw considerable regional specialisation & exchange in industrial products - a huge variety of textiles, clothing items such as gloves & knitted stockings, metal items such as cutlery, pots & pans, & a range of miscellaneous consumer items, such as different types of pottery, etc. The requisite ranges of inputs were also traded - eg the vast varieties of wool & yarn, dyestuffs, iron bars, & the like.

2. Both agricultural & industrial specialisation & exchange intensified far beyond these levels in the 18th century; so much so that the road network was also improved beyond recognition, & a new inland water transport network was created.

3. Urban areas began expanding even further in the late 17th century - ie, urban investment began rising. This included housing, retail shops, warehouses, water supply.

-- Thus I wished to stress historical context & economic function, as distinct from common physical features.

4. There is ample evidence of trade in such items as axes, obsidian, shells & beads, etc. in Palaeolithic times.In Neolithic times & especially later, transhumance was an important component of _subsistence_ production. In the late 17th & 18th centuries, cattle were driven from the fattening areas to the urban consuming areas. The very wide network of droving routes incorporated the early transhumance routes. The functions & context were of course different, though some physical routes were the same.