OUT of the most prosaic materials, miracles can come. The industrial revolution was created from steam on iron tracks. Our information technology revolution is being made out of silicon on copper tracks.
Robert Miller, a former colleague of mine at the Institute of Economic Affairs, has just published railway.com, a rewarding look at the remarkable parallels between the arrival of railways 150 years ago and the sudden emergence of the internet for us now. Both networks promised to enhance productivity stupendously; yet often the rewards did not go to the original investors.
It might seem a bit strained to compare Isambard Kingdom Brunel and his Great Western Railway with Bill Gates and Microsoft. Look closer and the homologies are arresting.
Remove the top hat, waistcoat and whiskers of Brunel and he is shown to be a man with near identical dilemmas to those of Gates.
The most aesthetically pleasing argument from railway.com is that those who make bad investments are a necessary and valuable part of the market process. When an entrepreneurâs venture fails, he has added to the body of learning. If a scientist falsifies a theory, he is performing a role very much like a businessman.
This adds a certain stature rarely attributed to commerce. I like the idea that an honest effort that finds no customers is still helping the mysterious process we call the market.
Most of academic economics is polluted by the dangerous notion of âperfect competitionâ. It is dangerous because it is so utterly unlike the real world. Capitalismâs great duty is the taking of risks. Success is measured not so much by the virtues of the product but its place in a subtle flux of prices and alternatives. Perfect competition, with its associated poetry of âequilibriumâ is a romantic folly.
This study goes into the close detail of a new technology. How, for example, did Britain choose its railway gauge when the engineers believed a far wider one would work better? It became a matter of necessity for railway companies to carry through-traffic on each otherâs tracks. They resolved it by agreeing standards.
We have just lived through the huge conceit of the internet bubble. It turns out to be all but identical to the railway bubble of the 1850s. Miller makes the telling claim that the evident "waste" of all that money poured into both speculative surges actually achieve