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- Title
Social Rates of Return on American Railroads in the Nineteenth Century.
- Authors
McClelland, Peter D.
- Abstract
The article focuses on the social rates of return on investment in the U.S. railroads during the 19th century. Producer surplus in railroads is equivalent to gross receipts minus all relevant costs. Those costs must include the opportunity cost of capital to society, or the capital invested in railroads multiplied by some measure of the social productivity of capital in other forms of investment. In theory social saving should include all costs incurred by society, not just expenses borne by the private entrepreneur who builds the railroad. A charge for the opportunity cost of capital should therefore be incorporated into each of the cost curves defined above. The appropriate charge would be the gross capital invested multiplied by the marginal social productivity of capital in available alternative. One effect of railroad building was to force a sharp reduction in the transport charges of other carriers. Estimates of average social rates of return are difficult to make, primarily because the externalities associated with a given investment project are difficult to measure.
- Subjects
UNITED States; RATE of return; RAILROADS; CAPITAL investments; CAPITAL costs; OPPORTUNITY costs
- Publication
Economic History Review, 1972, Vol 25, Issue 3, p471
- ISSN
0013-0117
- Publication type
Article
- DOI
10.2307/2593433