Ramblings & ephemera

Railroads & tolls

From Andrew Odlyzko’s “Pricing and Architecture of the Internet: Historical Perspectives from Telecommunications and Transportation“:

Railroads were the dominant industry of the 19th century. … Early railroad charters, in both England and the U.S., were modeled after canal and turnpike charters, and almost uniformly envisaged that railroad companies would not be carriers themselves. Instead, they were expected to offer their facilities for use by carriers that would carry goods and passengers in their own wagons over the rails. Still, these charters specified tolls that varied greatly depending on the nature of the cargo. … For example, the very first parliamentary act for a railway was enacted in 1801. (Previous railways had been on private property, but in this case, as in subsequent ones, promoters were asking for the right of eminent domain to acquire the necessary land.) Between the endpoints of the railway, “chalk, lime and other manures were charged at the rate of three-pence per ton per mile; coals, corn, potatoes, iron and other metals, fourpence; and all goods not specified, sixpence” (p. 45 of [13]). …

Although some railroads did operate with other companies’ equipment on their rails for decades (and modern ones do so extensively), there was a relatively quick shift in the 1830s and 1840s towards railroads being exclusive carriers. There were technical reasons promot- ing such a shift (safety was jeopardized with multiple operators and primitive technology), but there is evidence that desire for greater control over pricing by railroads was also a major consideration [64]. Once railroads became carriers, they could engage in much more extensive price discrimination than allowed by the toll structure in their charters. And, propelled by the economics of their industry, with high fixed costs, railroads did engage in massive price discrimination, including personal discrimination. The result was massive political movements leading to government regulation [62,65].

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