Collective hallucination and inefficient markets: The Railway Mania of the 1840s [pdf]

More articles on financial mania by the same author: http://www.dtc.umn.edu/~odlyzko/doc/bubbles.html

That's a fun read. Too much Brontë sisters, too little Isambard Kingdom Brunel, until page 187, where the author goes after Brunel for being a high-cost builder. Way too much about some fictional work on the subject, which the authors even go to the trouble of rewriting their way.

He gets how important the Liverpool and Manchester Railway (1830) was. I've pointed to that for years as the moment when the Industrial Revolution got out of beta. There were railroads and steam locomotives before that, but they were one-off demos or in-house operations. The Liverpool and Manchester was all steam locomotives (no horse-drawn vehicles), with double tracks, signals, switches, schedules, and tickets. At last, people could buy a ticket and go someplace. As the author points out, once it got running, it was quite profitable.

So, of course, everybody wanted to copy it. Hence the railway mania. I'm amazed that the author had trouble finding materials on that subject, but apparently he searched for the phrase "railway mania" and didn't get enough hits. Strange. Oh, and on page 189, there's "(in fact, got continued growth)", a phrase from an outline never filled in.

Brunel was indeed a high-cost builder. Most of his works are still standing and in regular use, even those coming up on two centuries old. Railway mania was enormously profitable for Britain, although many railroad stockholders did not do as well. Railroads probably paid off better than aviation - commercial aviation, over its entire life, has been a net loss to investors.[1]

If you want to read about 19th century railways, both Stanford University and the San Francisco Mechanics Institute have good collections.

[1] https://www.amazon.com/Sporty-Game-High-Risk-Competitive-Com...

Follow up: blockchain mania 2010-2020

> Railway mania was enormously profitable for Britain, although many railroad stockholders did not do as well.

You could say the same about the investors who funded the city-to-city fiber network in the US in the 1990s.

In both cases, the investors left us with a legacy of useful infrastructure.

I'm trying to figure out what legacy the cryptocurrency boom will leave us. Buildings full of rapidly obsolescing ASICs and GPUs in remote corners of the world?

What I find is a lot of people that complain about the California High Speed rail aren't aware how large a project it is. Some parts are expensive and technically challenging, like bores through the San Gabriels. Or just expensive, 13 mile Pacheco Pass Tunnel[1]. But there are other things, like the grade separation work in the central valley or the Caltrain electrification project that needs to be done anyways. These are also rolled into the final price tag.

And a big part of the system isn't about 2-3 hour train rides between LA and SF. More half hour commuter train service in the LA basin and between Morgan Hill, San Jose, SF. The fast rail between LA and SF is really about not having to expand a dozen airports which are near or over capacity. 10 X 2 billion ea is ~$20 billion.

Yeah so big project with a lot of facets with economic effects on people and other infrastructure that doesn't exist yet. Make it hard to do a realist balance sheet analysis. Even it is a bit of white elephant, better than the F35 or the Nuclear Weapons moderation program at $1T and $700M respectively.

[1] There is a water tunnel running through the same section, so frankly doable. Just $$$.