Demand forecasting: lessons from early railways

The British Railway Mania of the 1840s was by many measures the greatest technology mania in history. Total railway investment came to about a quarter of British GDP during that period. And at the end, when the Mania collapsed, investors as a whole were big losers. The reason that the big Railway Mania of the 1840s was as destructive as it turned out to be is that it was preceded by a "little" railway mania of the mid-1830s. It was little only by comparison, as it involved capital investment of about an eighth of British GDP. The basic story, as outlined above, is well known to economic historians. What is not known is what lay behind the differing outcomes of those two episodes of investor exuberance. The engineers underestimated costs both times (although by less in the later, larger, mania). On the other hand, demand forecasting in the investment mania of the 1830s turned out to be extremely accurate, more accurate than modern projections tend to be, even though it was based on very limited evidence, and on some false assumptions. As a result, unlike essentially all other big manias, it was in retrospect seen as rational, in that the railways built as a result were successful both technologically and financially. But the methodology that worked to well in the 1830s failed in the 1840s, for reasons that should have been, but were not, anticipated.

Language

  • English

Media Info

  • Pagination: 14p
  • Monograph Title: Joint carrier-receiver response to cordon pricing, time-distance pricing, and comprehensive carrier-receiver policies

Subject/Index Terms

Filing Info

  • Accession Number: 01384495
  • Record Type: Publication
  • Source Agency: ARRB
  • Files: ATRI
  • Created Date: Aug 22 2012 4:36PM