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How Institutions Create Ideas: Notions of Public and Private Efficiency from Early French and American Railroading

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Document pages: 36 pages

Abstract: During the nineteenth century, very different templates for organizing the economy emerged in Europe and North America. Perhaps the single most important difference across countries concerned the roles of public and private action. Is the state a legitimate and rational participant in decisions about industrial development? Is the state an efficient entrepreneur? Entirely different answers to these questions emerged. I focus on the two countries commonly cited as representing the ideals of private and public industrial leadership, the United States and France. I examine the industry often cited as having set these two countries on different paths, railroading. The Americans and the French developed disparate ideas about the role of the state in industrialization from their experiences with railroads. By 1870, when the main railroad trunk lines had been laid in both countries, these ideas had gelled. Americans gave credit to private capital and initiative for the railroads and took the lesson that the state’s role was to serve as referee in industrial development, leaving it to the private sector to pursue ambitious industrial goals (CALLENDER [1902]). The French gave credit to state finance and initiative and took the lesson that the state’s role was to develop and capitalize important industrial projects, orchestrating the activities of private parties toward national goals (PICARD [1918]). These lessons would affect how each nation developed future industries.

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