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The Adversity/Hysteresis Effect: Depression-Era Productivity Growth in the US Railroad Sector

The Adversity/Hysteresis Effect: Depression-Era Productivity Growth in the US Railroad Sector

Chapter:
(p.579) 12 The Adversity/Hysteresis Effect: Depression-Era Productivity Growth in the US Railroad Sector
Source:
The Rate and Direction of Inventive Activity Revisited
Author(s):
Alexander J. Field
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226473062.003.0018

This chapter takes a close look at the boom–bust pattern that characterizes many industries. During the boom period, there is a dramatic accumulation of physical capital—think of the huge efforts to lay broadband during the Internet boom of the late 1990s—followed by a contraction. The chapter examines the experiences of railroads during the Great Depression. This was a difficult period for the industry: the economic downturn, along with increased competition from automobiles and trucks, led to a sharp contraction in demand for railroads. Moreover, access to capital was largely cut off after a period of heavy expenditures. The industry undertook a major restructuring to utilize labor and capital resources more effectively. Both capital and labor inputs declined substantially. Yet logistical innovation enabled railroads to record slightly more revenue ton-miles of freight and book almost as many passenger miles in 1941 as they had in 1929. Adversity seems to have triggered a wave of innovation in this industry.

Keywords:   boom–bust pattern, hysteresis effect, great depression

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