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Steel rails versus iron rails: Evidence from Canada
%XPLORATIONS
1N ECONOMIC
HISTORY
21, 169-175 (1984)
Steel Rails versus Iron Rails: Evidence from Canada ANN Department
M. CARLOS
of Economics, Huron College, and University of Western Ontario, London, Ontario, Canada
1. INTRODUCTION
In recent issues of this journal, the slow diffusion of steel rails in the United States has been examined. Atack and Brueckner (1982) argued that the slow adoption of this new technology was the result of industry inertia. Harley (1983) points out that the incorporation of the scrap value d iron rails into the analysis changes the results. Now the slow diffusion of steel could have been a cost-minimizing decision. However, this result ;lepends on the average life span of an iron rail, a key unknown in the discussion. Atack and Brueckner (1983) subsequently argue that if the life span was short enough, inertia returns as the primary cause of this slow diffusion process. Thus the debate between inertia and cost-minimizing behavior still remains to be settled. The purpose of this paper is to provide more information on this issue by examining the diffusion of steel rails in Canada from 1870 to 1880. The Canadian experience differed quite substantially from that of the United States. Steel rails were adopted in Canada at an earlier date and Ihe evidence suggeststhat this was a cost-minimiiing choice. This earlier adoption resulted from a number of interrelated factors. In particular, lower iron and steel prices, a lower value for scrap iron, and probably 3 shorter average rail life in Canada explain the rapid adoption of steel in Canada relative to the United States. 2. THE CANADIAN
EVIDENCE
In contrast to the United States the adoption of steel rails in Canada occurred very rapidly By 1875 (when systematic collection of railroad began) 43% of rails laid were in steel.’ By 1880/1881,60% were in steel. ’ In the early 187Os, the move into steel was dominated by four companies; the Grand Frunk, the Great Western, the Canada Southern, and the Intercolonial. In 1875 they xcounted for 99.91% of all steel rails laid. By 1880, their contribution had declined to 56%. 169 0014/4983/84 $3.00 Copyrigbt 0 1984 by Academic Press, Inc. AU rights of reproduction in any form reserved.
170
ANN
M.
CARLOS
This rapid transformation from iron to steel is documented in Table 1 and contrasts sharply with the information provided by Atack and Brueckner (1983, Table 2). Their table shows that only by 1890 were 80% of the rails steel, whereas in Canada this percentage was reached by 1883. The cost minimizing choice of rail faced by the Canadian companies will be examined in the same manner as Atack and Brueckner and Harley. A company’s choice of iron or steel will depend on which rail produces a lower uniform annual payment 6~). (k - S)Y y = rk + (1 + r)g - 1
(1)
where g is the rail life span, r the cost of borrowing, k the price of a rail, and s the scrap value of a used rail. The main sources of data used were the Reports of the Directors of the Grand Trunk Railway Company for the period 1865 to 1880 and the Railway statistics presented in the Sessional Papers of Canada from 1875 to 1880. The prices of both iron and steel rails were lower in Canada than in the United States. In 1870, iron rails were $31.76 a ton in Canada and $72 a ton in the United States, while steel rail prices per ton were $58.20 and $106.75, respectively. By 1880the differential between iron and steel rail prices in Canada had all but disappeared, being $31 and $33, reIron
TABLE 1 and Steel Rails in Canada
Year
Iron rail (miles)
Steel rail (miles)
Total rail (miles)
1875 1876 1877 1878 1879 1880 1881 1882 1883 1884 1885 1886 1887 1888 1889 1890
2746 2758 2784 3258 3177 3157 2661 1984 1725 1601 1228 1220 1175 1038 786 665
2055 2374 2765 3583 3814 4050 4935 6086 7341 8348 9545 10303 11157 11664 12539 13339
4801 5132 5549 6841 6991 7207 7596 8069 9066 9950 10773 11524 12332 12702 13325 14004
Source. M. C. Urquhart series
S24-38.
and K. A. H. Buckley,
Historical
Percentage steel of total 43 46 50 52 55 56 65 75 81 84 88 89 90 92 94 95
Statistics of Canada, p. 528,
ADOPTION
OF STEEL RAILS IN CANADA
171
spectively. In the United States the prices were $49 and $67.50.2 The lower prices in Canada reflect in part the fact that in 1870 the Canadian industry did not experience tariff protection.3 The tariff situation in the United States was very different. Prior to 1870 steel rails faced an ad valorem duty of 45%. With the Tariff Act of 1870 this ad valorem tariff was changed to a specific duty of $28.00 per ton, which implied an ad valorem equivalent of a little over 45% when the British price was $50.00 per ton which it was in 1870. However, once the British price began to fail, as it did in 1873, the specific duty became very much heavier in proportion to price. By 1877 with a British price of $31.00 per ton, this specific duty almost doubled the price of steel rails in the United States. Due to complaints, Congress lowered the specific duty on steel rails to $17.00 per ton in 1883 (Taussig, p. 179; pp. 221-222). Interestingly it is after 1883 that steel rail adoption speeds up in the United States (Atack and Brueckner, 1983, Table 2). Both new iron and steel rails were imported from Great Britain, but Canadian companies normally purchased rerolled Canadian iron rails than new. Thus the price of a rerolled rail was the one incorporated in the analysis. Steel rails were purchased from, either or both, Barrow Hematite Steel Company or the Ebbw Vale Company, and imported. The scrap value of iron rails was $12 a ton, considerably lower than the corresponding American price of $45 a ton; the value as a percentage of the replacement iron rail price was lower also in Canada. This scrap iron price is that given in the Grand Trunk Reports, while the American price represents the valuation at the steel mills and might therefore be an overevaluation. It would appear that in Canada the opportunities to sell scrap iron may have been less. In fact, the Steel, Iron and Railway Works Company which “patched” iron rails and made forgings had closed by 1870/1871 because of “the adoption of steel rails” (Bartlett, 1885) p. 34). The Toronto Rolling Mill and Iron Works closed in 1873 as a result of “the substitution of steel for iron rails” (Bartlett, 1885, p. 34). Finally, the rate on floated debt was 8% and this has been taken as the cost of borrowing, consistent with the U.S. studies.4 The cost-minimizing choices are given in Table 2 and are represented grapbicaily in Fig. 1. Figure 1 shows that the minimum range of values necessary to justify the purchase of steel rails in Canada in 1870 lies within the range far ’ The prices for iron and steel rails in 1870 were obtained from the Reports of the Grand Trunk Railway Company of Canada; those for 1880 came from the Sessional Paper of Canada. The American figures were taken from Harley (1983). ’ Until 1867 iron and steel rails faced a 10% ad vu&em tariff. This tariff bad pushed the companies into generally using rerolled rather than new imported rails. 4 This 8% was the rate on floated debt, taken from the Railway Statistics, 1874. The rate on bonded debt was 6%.
172
ANN M. CARLOS
Minimum
TABLE 2 Life Expectancies of Steel Rails Necessary to Justify Their Purchase
Life of iron rails (years)
1
2
4
6
8
10
28.9 25.3
a a
a a
1870 PI = $6.55; Ps = f12.00; iron scrap = f2.50; r = 8% No tracklaying cost a. Steel scrap = 0 b. Steel scrap = f2.50
3.1 2.4
6.4 5.2
14.6 12.4
Note. a = 7.25 years. Steel infinite life span.
the United States presented by Harley (1983). The estimated superiority of steel to iron rails was thought by Canadian companies to be in the range of 5:l (Currie, 1957, p. 189). The same is assumed by Atack and Brueckner (1983). Thus for any iron rails lasting less than 7 years, steel was the cost-minimizing choice. As the calculations show and as Atack and Brueckner (1983) correctly point out, the average life span of an iron rail is critically important in any decision to change from iron to steel. Fogel presents an estimating equation for the average (mean) life of an iron rail in years (L)
L = 11.306 - 0.113T
(2)
where T is given in units of 10,000 ton-miles per mile of road (Fogel, 1964, p. 172). Using Canadian data on ton-miles per miles of road (Grand Carlos, 1870
I\"/v\d
Canada
1870
A-B
1870
I
FIG. 1. Relative durability above which steel rails minimized cost 1870.
ADOPTION
OF STEEL RAILS IN CANADA
173
Trunk Reports), Eq. (2) implies that the average life of an iron rail for the period 1871-1875 was approximately 7 years for Canada rather than Fogel’s estimate of 10.4 for the United States cited by Harley (1983). Neither Atack and Brueckner nor Harley calculate average rail life in the United Statespresumably becauseof insufficient data on traffic density. The unknown average rail life in the United States seems to be, nevertheless, the key variable in their disagreement. That the average rail life in Canada was less than 10 years also receives support from a report prepared by Captain Tyler for the directors of the Grand Trunk in 1867.5 Captain Tyler complained that “[tlhe life of all these rails ought, . . ., to have averaged a6 least ten years” (Tyler, p. 54). Tyler estimated that the actual average life for the best track laid was less than 8 years, with some having a life span less than 5 years (Tyler, pp. 52-54). A number of factors cooperated to reduce iron rail life in Canada, One factor which could not be avoided was the excessive expansion and contraction of the rails from the temperature extremes. It was not just that the lines could be frozen for 4 to 5 months but that frost heaving occurred n-regularly. The problem of the Canadian climate was compounded by the low standards of construction used. The ballasting and drainage of the track bed were inferior. Captain Tyler wrote that “the Grand Trunk Railway was not well-ballasted originally, and comparatively little bas since been done to make up the deficiency” (p. 47). These problems faced ah the railway lines built at this time.6 Such construction methods are consistent with the fact that Canadian railroads received subsidies on the basis of railway mileage constructed rather than freight carried. Such a subsidy regime creates an incentive to build maximum mileage to minimum standards (Carlos and Markusen, 1983). The low standards of construction were a problem not only of the track bed but also of the rails used. Many rails originally were bridge (or U) rails of 63 lb and were too light for the use they received. Again Captain Tyler’s report points out that the Company seemed unable to get good quality (i.e,, long-lasting) iron from rails either from Great Britain or rerolled in Canada (Tyler, pp. 51-53). The steel rails used prior to 1870 hid not suffered from this problem. Quite apart from the quality of rail and road bed, the average rail hfe 5 In 1866, Captain Tyler and a number of other prominent sharehoiders questioned the competency of the Board and management of the company. In reply the Eoard, after conferring with these shareholders, asked Captain Tyler, a railway engineer by profession, to go to Canada and report on the situation. Tyler subsequently became president of the company (1876-1895). 6 Currie (1957) thoroughly documents the faults in the construction of the Grand Trunk Railway, the Great Western Railway, and in the many feeder lines (Chapters III and VIII especially).
174
ANN M. CARLOS
in Canada was lowered below Fogel’s 10.4 years because the average density of traffic on Canadian rail lines was probably higher than in the United States, as suggested above. In Canada, the early railways were built as through lines thus carrying a fairly heavy uniform distribution of freight. In the United States the picture is clouded by the fact that we are examining a far larger region and by the fact that within that region we are examining the average railroad behavior. 3. SUMMARY The results shown in Fig. 1 and in Table 2 argue that steel was a costminimizing choice for railroad companies in Canada by 1870, given the assumed 5: 1 ratio of steel rail life to iron rail life and an average life for the latter of less than 7 years. The evidence in Table 1 shows that there was a very rapid switch from iron to steel over the decade from 1870. This evidence suggests that there is no case for the inertia argument in Canada. It is possible that there was inertia in the United States but not in Canada. Such a situation is possible if the two countries were completely separate entities. But this was not the case. First, the Canadian lines were built as through lines to carry freight from the American midwest to the Atlantic seaboard and were thus in direct competition with American lines. The vigorous competition which resulted can be seen in the freightrate situation of the 1870s. Second, there was some degree of overlapping ownership between the Canadian and American railroads. Both the Grand Trunk and the Great Western owned lines in Michigan and in New England, while the Canada Southern was organized under the presidency of Milton Courtwright of Erie, Pennsylvania. At least for those railways with overlapping ownership, it seems reasonable to assume that decisions were made in the same fashion on both sides of the border. REFERENCES Atack, J., and Brueckner, J. K. (1982), “Steel Rails and American Railroads, 1867-1880.” Explorations in Economic History 19, 334-359. Atack, J., and Brueckner, J. K. (1983), “Steel Rails and American Railroads, 1867-1880: Reply to Harley.” Exploration in Economic History 20, 258-262. Bartlett, J. H. (1885), Manufacture Consumption and Production of Iron, Steel, and Coal, in the Dominion of Canada. Montreal: Dawson. Carlos, A. M., and Markusen, J. R. (1983), “Subsidies to Railway Building: Allocative Issues Involving Increasing Returns to Scale,, Monopoly Pricing and the Pattern of Land Use.” Working Paper, Department of Economics, University of Western Ontario. Cunie, A. W. (19.57), The Grand Trunk Railway of Canada. Toronto: Univ. of Toronto Press. Fleming, S. (1867), The Znzercolonial: A History, 1832 to 1867. Montreal: Dawson. Fogel, R. W. (1964). Railroads and American Economic Growth, Baltimore, Md.: Johns Hopkins Press. Grand Trunk Railway Company of Canada, Report of the Directors to the Bond and Stockholders and Statement of the Revenue and Capital Accounts, 1871-1880. London: Waterloo and Sons.
ADOPTION
OF STEEL RAILS IN CANADA
175
Grand Trunk Railway Company of Canada (1867), “Mission of Enquiry to Canada.” Report of Captain Tyles on the Conditions and Prospects of the Grand Trunk Railway. Harley, C. K. (1983), “Steel Rails and American Railroads 1867-1880: Cost Minimizing Choice. A Comment on the Analysis of Atack and Brueckner.” Explorations in Economic History 20, 248-257. Sessional Papers of Canada (1870-1880) Railway Statistics (1875-1880). Ottawa: King’s Printers. Taussig, F. W. (1914), The Tariff in History of the United States, 6th ed. New York/ London: Putman. Urquhart, M. C., and Buckley, K. A. H. (1965). Historical Statistics of Canada. Toronto: Macmillan & Co., Canada.
1N ECONOMIC
HISTORY
21, 169-175 (1984)
Steel Rails versus Iron Rails: Evidence from Canada ANN Department
M. CARLOS
of Economics, Huron College, and University of Western Ontario, London, Ontario, Canada
1. INTRODUCTION
In recent issues of this journal, the slow diffusion of steel rails in the United States has been examined. Atack and Brueckner (1982) argued that the slow adoption of this new technology was the result of industry inertia. Harley (1983) points out that the incorporation of the scrap value d iron rails into the analysis changes the results. Now the slow diffusion of steel could have been a cost-minimizing decision. However, this result ;lepends on the average life span of an iron rail, a key unknown in the discussion. Atack and Brueckner (1983) subsequently argue that if the life span was short enough, inertia returns as the primary cause of this slow diffusion process. Thus the debate between inertia and cost-minimizing behavior still remains to be settled. The purpose of this paper is to provide more information on this issue by examining the diffusion of steel rails in Canada from 1870 to 1880. The Canadian experience differed quite substantially from that of the United States. Steel rails were adopted in Canada at an earlier date and Ihe evidence suggeststhat this was a cost-minimiiing choice. This earlier adoption resulted from a number of interrelated factors. In particular, lower iron and steel prices, a lower value for scrap iron, and probably 3 shorter average rail life in Canada explain the rapid adoption of steel in Canada relative to the United States. 2. THE CANADIAN
EVIDENCE
In contrast to the United States the adoption of steel rails in Canada occurred very rapidly By 1875 (when systematic collection of railroad began) 43% of rails laid were in steel.’ By 1880/1881,60% were in steel. ’ In the early 187Os, the move into steel was dominated by four companies; the Grand Frunk, the Great Western, the Canada Southern, and the Intercolonial. In 1875 they xcounted for 99.91% of all steel rails laid. By 1880, their contribution had declined to 56%. 169 0014/4983/84 $3.00 Copyrigbt 0 1984 by Academic Press, Inc. AU rights of reproduction in any form reserved.
170
ANN
M.
CARLOS
This rapid transformation from iron to steel is documented in Table 1 and contrasts sharply with the information provided by Atack and Brueckner (1983, Table 2). Their table shows that only by 1890 were 80% of the rails steel, whereas in Canada this percentage was reached by 1883. The cost minimizing choice of rail faced by the Canadian companies will be examined in the same manner as Atack and Brueckner and Harley. A company’s choice of iron or steel will depend on which rail produces a lower uniform annual payment 6~). (k - S)Y y = rk + (1 + r)g - 1
(1)
where g is the rail life span, r the cost of borrowing, k the price of a rail, and s the scrap value of a used rail. The main sources of data used were the Reports of the Directors of the Grand Trunk Railway Company for the period 1865 to 1880 and the Railway statistics presented in the Sessional Papers of Canada from 1875 to 1880. The prices of both iron and steel rails were lower in Canada than in the United States. In 1870, iron rails were $31.76 a ton in Canada and $72 a ton in the United States, while steel rail prices per ton were $58.20 and $106.75, respectively. By 1880the differential between iron and steel rail prices in Canada had all but disappeared, being $31 and $33, reIron
TABLE 1 and Steel Rails in Canada
Year
Iron rail (miles)
Steel rail (miles)
Total rail (miles)
1875 1876 1877 1878 1879 1880 1881 1882 1883 1884 1885 1886 1887 1888 1889 1890
2746 2758 2784 3258 3177 3157 2661 1984 1725 1601 1228 1220 1175 1038 786 665
2055 2374 2765 3583 3814 4050 4935 6086 7341 8348 9545 10303 11157 11664 12539 13339
4801 5132 5549 6841 6991 7207 7596 8069 9066 9950 10773 11524 12332 12702 13325 14004
Source. M. C. Urquhart series
S24-38.
and K. A. H. Buckley,
Historical
Percentage steel of total 43 46 50 52 55 56 65 75 81 84 88 89 90 92 94 95
Statistics of Canada, p. 528,
ADOPTION
OF STEEL RAILS IN CANADA
171
spectively. In the United States the prices were $49 and $67.50.2 The lower prices in Canada reflect in part the fact that in 1870 the Canadian industry did not experience tariff protection.3 The tariff situation in the United States was very different. Prior to 1870 steel rails faced an ad valorem duty of 45%. With the Tariff Act of 1870 this ad valorem tariff was changed to a specific duty of $28.00 per ton, which implied an ad valorem equivalent of a little over 45% when the British price was $50.00 per ton which it was in 1870. However, once the British price began to fail, as it did in 1873, the specific duty became very much heavier in proportion to price. By 1877 with a British price of $31.00 per ton, this specific duty almost doubled the price of steel rails in the United States. Due to complaints, Congress lowered the specific duty on steel rails to $17.00 per ton in 1883 (Taussig, p. 179; pp. 221-222). Interestingly it is after 1883 that steel rail adoption speeds up in the United States (Atack and Brueckner, 1983, Table 2). Both new iron and steel rails were imported from Great Britain, but Canadian companies normally purchased rerolled Canadian iron rails than new. Thus the price of a rerolled rail was the one incorporated in the analysis. Steel rails were purchased from, either or both, Barrow Hematite Steel Company or the Ebbw Vale Company, and imported. The scrap value of iron rails was $12 a ton, considerably lower than the corresponding American price of $45 a ton; the value as a percentage of the replacement iron rail price was lower also in Canada. This scrap iron price is that given in the Grand Trunk Reports, while the American price represents the valuation at the steel mills and might therefore be an overevaluation. It would appear that in Canada the opportunities to sell scrap iron may have been less. In fact, the Steel, Iron and Railway Works Company which “patched” iron rails and made forgings had closed by 1870/1871 because of “the adoption of steel rails” (Bartlett, 1885) p. 34). The Toronto Rolling Mill and Iron Works closed in 1873 as a result of “the substitution of steel for iron rails” (Bartlett, 1885, p. 34). Finally, the rate on floated debt was 8% and this has been taken as the cost of borrowing, consistent with the U.S. studies.4 The cost-minimizing choices are given in Table 2 and are represented grapbicaily in Fig. 1. Figure 1 shows that the minimum range of values necessary to justify the purchase of steel rails in Canada in 1870 lies within the range far ’ The prices for iron and steel rails in 1870 were obtained from the Reports of the Grand Trunk Railway Company of Canada; those for 1880 came from the Sessional Paper of Canada. The American figures were taken from Harley (1983). ’ Until 1867 iron and steel rails faced a 10% ad vu&em tariff. This tariff bad pushed the companies into generally using rerolled rather than new imported rails. 4 This 8% was the rate on floated debt, taken from the Railway Statistics, 1874. The rate on bonded debt was 6%.
172
ANN M. CARLOS
Minimum
TABLE 2 Life Expectancies of Steel Rails Necessary to Justify Their Purchase
Life of iron rails (years)
1
2
4
6
8
10
28.9 25.3
a a
a a
1870 PI = $6.55; Ps = f12.00; iron scrap = f2.50; r = 8% No tracklaying cost a. Steel scrap = 0 b. Steel scrap = f2.50
3.1 2.4
6.4 5.2
14.6 12.4
Note. a = 7.25 years. Steel infinite life span.
the United States presented by Harley (1983). The estimated superiority of steel to iron rails was thought by Canadian companies to be in the range of 5:l (Currie, 1957, p. 189). The same is assumed by Atack and Brueckner (1983). Thus for any iron rails lasting less than 7 years, steel was the cost-minimizing choice. As the calculations show and as Atack and Brueckner (1983) correctly point out, the average life span of an iron rail is critically important in any decision to change from iron to steel. Fogel presents an estimating equation for the average (mean) life of an iron rail in years (L)
L = 11.306 - 0.113T
(2)
where T is given in units of 10,000 ton-miles per mile of road (Fogel, 1964, p. 172). Using Canadian data on ton-miles per miles of road (Grand Carlos, 1870
I\"/v\d
Canada
1870
A-B
1870
I
FIG. 1. Relative durability above which steel rails minimized cost 1870.
ADOPTION
OF STEEL RAILS IN CANADA
173
Trunk Reports), Eq. (2) implies that the average life of an iron rail for the period 1871-1875 was approximately 7 years for Canada rather than Fogel’s estimate of 10.4 for the United States cited by Harley (1983). Neither Atack and Brueckner nor Harley calculate average rail life in the United Statespresumably becauseof insufficient data on traffic density. The unknown average rail life in the United States seems to be, nevertheless, the key variable in their disagreement. That the average rail life in Canada was less than 10 years also receives support from a report prepared by Captain Tyler for the directors of the Grand Trunk in 1867.5 Captain Tyler complained that “[tlhe life of all these rails ought, . . ., to have averaged a6 least ten years” (Tyler, p. 54). Tyler estimated that the actual average life for the best track laid was less than 8 years, with some having a life span less than 5 years (Tyler, pp. 52-54). A number of factors cooperated to reduce iron rail life in Canada, One factor which could not be avoided was the excessive expansion and contraction of the rails from the temperature extremes. It was not just that the lines could be frozen for 4 to 5 months but that frost heaving occurred n-regularly. The problem of the Canadian climate was compounded by the low standards of construction used. The ballasting and drainage of the track bed were inferior. Captain Tyler wrote that “the Grand Trunk Railway was not well-ballasted originally, and comparatively little bas since been done to make up the deficiency” (p. 47). These problems faced ah the railway lines built at this time.6 Such construction methods are consistent with the fact that Canadian railroads received subsidies on the basis of railway mileage constructed rather than freight carried. Such a subsidy regime creates an incentive to build maximum mileage to minimum standards (Carlos and Markusen, 1983). The low standards of construction were a problem not only of the track bed but also of the rails used. Many rails originally were bridge (or U) rails of 63 lb and were too light for the use they received. Again Captain Tyler’s report points out that the Company seemed unable to get good quality (i.e,, long-lasting) iron from rails either from Great Britain or rerolled in Canada (Tyler, pp. 51-53). The steel rails used prior to 1870 hid not suffered from this problem. Quite apart from the quality of rail and road bed, the average rail hfe 5 In 1866, Captain Tyler and a number of other prominent sharehoiders questioned the competency of the Board and management of the company. In reply the Eoard, after conferring with these shareholders, asked Captain Tyler, a railway engineer by profession, to go to Canada and report on the situation. Tyler subsequently became president of the company (1876-1895). 6 Currie (1957) thoroughly documents the faults in the construction of the Grand Trunk Railway, the Great Western Railway, and in the many feeder lines (Chapters III and VIII especially).
174
ANN M. CARLOS
in Canada was lowered below Fogel’s 10.4 years because the average density of traffic on Canadian rail lines was probably higher than in the United States, as suggested above. In Canada, the early railways were built as through lines thus carrying a fairly heavy uniform distribution of freight. In the United States the picture is clouded by the fact that we are examining a far larger region and by the fact that within that region we are examining the average railroad behavior. 3. SUMMARY The results shown in Fig. 1 and in Table 2 argue that steel was a costminimizing choice for railroad companies in Canada by 1870, given the assumed 5: 1 ratio of steel rail life to iron rail life and an average life for the latter of less than 7 years. The evidence in Table 1 shows that there was a very rapid switch from iron to steel over the decade from 1870. This evidence suggests that there is no case for the inertia argument in Canada. It is possible that there was inertia in the United States but not in Canada. Such a situation is possible if the two countries were completely separate entities. But this was not the case. First, the Canadian lines were built as through lines to carry freight from the American midwest to the Atlantic seaboard and were thus in direct competition with American lines. The vigorous competition which resulted can be seen in the freightrate situation of the 1870s. Second, there was some degree of overlapping ownership between the Canadian and American railroads. Both the Grand Trunk and the Great Western owned lines in Michigan and in New England, while the Canada Southern was organized under the presidency of Milton Courtwright of Erie, Pennsylvania. At least for those railways with overlapping ownership, it seems reasonable to assume that decisions were made in the same fashion on both sides of the border. REFERENCES Atack, J., and Brueckner, J. K. (1982), “Steel Rails and American Railroads, 1867-1880.” Explorations in Economic History 19, 334-359. Atack, J., and Brueckner, J. K. (1983), “Steel Rails and American Railroads, 1867-1880: Reply to Harley.” Exploration in Economic History 20, 258-262. Bartlett, J. H. (1885), Manufacture Consumption and Production of Iron, Steel, and Coal, in the Dominion of Canada. Montreal: Dawson. Carlos, A. M., and Markusen, J. R. (1983), “Subsidies to Railway Building: Allocative Issues Involving Increasing Returns to Scale,, Monopoly Pricing and the Pattern of Land Use.” Working Paper, Department of Economics, University of Western Ontario. Cunie, A. W. (19.57), The Grand Trunk Railway of Canada. Toronto: Univ. of Toronto Press. Fleming, S. (1867), The Znzercolonial: A History, 1832 to 1867. Montreal: Dawson. Fogel, R. W. (1964). Railroads and American Economic Growth, Baltimore, Md.: Johns Hopkins Press. Grand Trunk Railway Company of Canada, Report of the Directors to the Bond and Stockholders and Statement of the Revenue and Capital Accounts, 1871-1880. London: Waterloo and Sons.
ADOPTION
OF STEEL RAILS IN CANADA
175
Grand Trunk Railway Company of Canada (1867), “Mission of Enquiry to Canada.” Report of Captain Tyles on the Conditions and Prospects of the Grand Trunk Railway. Harley, C. K. (1983), “Steel Rails and American Railroads 1867-1880: Cost Minimizing Choice. A Comment on the Analysis of Atack and Brueckner.” Explorations in Economic History 20, 248-257. Sessional Papers of Canada (1870-1880) Railway Statistics (1875-1880). Ottawa: King’s Printers. Taussig, F. W. (1914), The Tariff in History of the United States, 6th ed. New York/ London: Putman. Urquhart, M. C., and Buckley, K. A. H. (1965). Historical Statistics of Canada. Toronto: Macmillan & Co., Canada.