Verified Document

Railroad Land Grants: Economically Justified The American Term Paper

Railroad Land Grants: Economically Justified? The American government's land grant policy and provision of subsidies to private railroad companies in the nineteenth century has been the subject of much discussion by historians and economists alike. However, few writers have examined the economic issues involved in the subsidies in detail, leading at times to the wrong conclusions. Lloyd J. Mercer, a Professor of Economics at the University of California (Santa Barbara) is one of the select few who have attempted to carry out an economic analysis of the land-grants policy in order to determine whether the policy was economically justified and socially beneficial. This paper summarizes the professor's article Land Grants to American Railroads: Social Cost or Social Benefit (1969) by identifying the main thoughts of the author followed by a critical analysis of what he has suggested in the article.

Summary

Professor Mercer disagrees with the commonly held view of most historians that the land-grant policy was overly generous and the private individuals and companies who received the grants and subsidies made huge profits by selling the land, manipulating securities and exploiting the farmers. He is more in agreement with those who have argued that the land grants and subsidies were not very profitable but did provide sufficient attraction for the pioneers to venture into the railroad-building project.

The author then uses the internal rate of return (IRR)

method to calculate the real...

The results of the computation show that there was a small difference of just 1.2 percentage points in the real rate of return to the railroad companies, with and without land-grants, while the social rate of return was substantially higher. The author thus concludes that the land-grant policy of the government, though not perfect, was correct.
Critical Analysis

In my opinion, although a useful addition to the literature available on the U.S. government's land grant policy to the railroads in the 19th century, Professor Mercer's economic analysis of the issue suffers from a major drawback. It fails to recognize the fact that economics is not a precise science like other physical sciences such as physics or chemistry and most economic problems can and do have more than one solution. Similarly, there is no single right method of making an economic analysis since various economic theories, models and tools that are used to analyze a situation contain a number of variables, and simplifications. Hence the results of such economic models are by no means definitive. For example, the internal rate of return, the method used by Professor Mercer to determine the real rates of return to the private railroad companies and the social benefits of the construction of railroads, is just one of the several economic tools for making economic analysis and decisions (other methods for…

Sources used in this document:
Perhaps, due to the reason that economics is not an exact science, the economic theories and analysis of economists often suffer from the personal political leanings of the economist. For example, if an economist is a "leftist" he would tend to favor social welfare and economic equality through his work while a proponent of laissez faire economy would tend to justify minimal government interference in the market through his work. Professor Mercer's analysis of the railroad land grants too seems to suffer from such a bias as he justifies the land grants and subsidies as a profitable deal for the public while ignoring the unsavory aspects of the issue such as price fixing, illegal kickbacks, real estate speculation, tax evasion et al. By the big business interests.

The Internal Rate of Return (IRR) is the discount rate at which the Present Value (PV) of the annual stream of earnings minus the investment costs over the life of the project is zero

See Railroads & Clearcuts Campaign Website [http://www.landgrant.org/]
Cite this Document:
Copy Bibliography Citation

Related Documents

Gilded Age of the United
Words: 3107 Length: 10 Document Type: Essay

While some of the wealthy were philanthropic and socially conscious, most of the business magnates believed their financial success proved them to be the most capable and entitled to the spoils of the success. This created a system of social and economic inequity which created a reaction to the Gilded Age well before the Age itself closed. Impact of and Reaction to the Gilded Age of Big Business The Progressive era

Repurchase Intention in the Hospitality
Words: 3480 Length: 12 Document Type: Term Paper

206) It was likely no accident that Vancouver was chosen as the site of the Globe '90 Conference. The enunciation of such bold guiding principles should of necessity take place in the heart of a region well-known for its environmental treasures. British Columbia's offerings accord with statements of previous tourism conferences in other places. The 1989 conference at The Hague could have had Vancouver Area Tourism in mind when it

Immigration in America: 19th Century
Words: 2190 Length: 6 Document Type: Essay

This doesn't explain why the Irish had such a difficult time, but in America, religious differences are often the cause of intolerance as well. The truth is that without immigrants in the 19th, 20th, and 21st century -- and of course the two hundred years before this, this nation would not be where or what it is today and to remain true to our roots we must accept that

Cuba After Castro Cuba Is
Words: 20759 Length: 80 Document Type: Term Paper

Those officials who did look at the question of Japanese intentions decided that Japan would never attack, because to do so would be irrational. Yet what might seem irrational to one country may seem perfectly logical to another country that has different goals, values, and traditions. (Kessler 98) The failures apparent in the onset of World War II and during the course of the war led indirectly to the creation

U.S. Immigrants the Black and
Words: 1360 Length: 4 Document Type: Essay

The advent of World War II saw and end of the period of economic turmoil and massive unemployment known as the Great Depression, and thus was a time of increased opportunity for many of the nation's citizens and immigrants, but the experiences of some groups during and following the war were far less positive than others. Some of this was due to the different histories that different immigrant groups

European Union Member States Relations With Their Overseas Territories...
Words: 17554 Length: 50 Document Type: Thesis

political framework of EU and OCT European Union (EU) and Overseas Countries and Territories (OCTs) are in association with each other via a system which is based on the provisions of part IV of the Treaty on the Functioning of the EU (TFEU), consisting of detailed rules and measures which are laid down in the document issued on 27th November 2001 title Oversees Association Decision. The expiry date of this

Sign Up for Unlimited Study Help

Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.

Get Started Now