ECON 20 Lecture Notes - Lecture 7: Externality, Diminishing Returns, Marginal Utility
11 May 2020
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The real economic benefit of railroads is pertaining to cargo and goods being shipped . Prior to 1840, most goods were still being shipped by water. By 1840, there were about as many miles of railroads as there were canals, and by 1850 there were twice as many railroads as canals. Where railroads built ahead of demand: we just build railroads to where there is a huge demand of goods (already populated) . Or we build railroads and people congregate around there (people going to the railroads) : one view is that railroads pulled the economy out west smaller railroads built in the. If railroads were not immediately profitable then they were built ahead of demand. After the network starts to grow, the value of every network multiplies (telephones also an example of this) Railroads carry a huge positive externality everyone in a town benefits from the railroad bc there is a decrease in price of goods.
