Summary of Project Plan
The industrial revolution is usually considered a market-driven process. We hypothesize that state policies designed to mitigate market failure played a much more significant role in the Industrial Revolution than the historiography currently suggests. We plan to investigate: the scale of the effects of state policies; the specifics of the regulatory mechanisms; and how the institutional mechanisms evolved over a 200-year period, both because market and technological conditions changed and (we suspect) because regulations were generally tightened up over time.
Our focus is on transport infrastructure in the 18th and 19th centuries, which were the formative years for state intervention. Parliament implemented a general policy whereby it authorized trusts and joint stock companies to improve infrastructure through tolls and related powers. This approach, similar to public-private partnerships today, led to the building of extensive road, canal, port, and railway networks. Parliament did more than just authorize projects however. It also regulated through toll caps and including provisions on compulsory purchases of land and capital structure.
Policies toward shipping evolved differently. In the late 17th century there was a legacy of 'bad' interventions by the royal government. These included extractive duties on coal shipped coastwise, the absence of docks on the Thames, largely to protect the monopoly privileges of the Lightermen, and the purchase of offices by coal meters, of whom there were never enough on the Thames, leading to long delays. We will investigate three state interventions: the funding of lighthouses via a levy on passing ships; the provision of accurate coastal charts as a public good, and the progressive elimination of rent-seeking activities from the early 19th century.
Our project will begin by measuring the total productivity gains of the new networks/routes made possible by state interventions. We proceed in three steps: The first is to measure transport costs between several hundred towns in England and Wales at three benchmark dates, 1680, 1830, and 1911. This multi-modal model incorporates historical data, geography, and infrastructure digitized in Geographical information Systems (GIS). Second, we examine the effect of government interventions on transport costs through our multi-modal model. These include counterfactuals where certain networks were not built. Third, we will examine how state regulation of these networks increased their efficacy.
This project is appropriate for Keynes funding because it uses history to study the design of incentive systems to reduce the incidence and significance of market failure.
