The Introduction of Rail Transport in the Prussian Rhine Province: A Transaction Cost Economic History

Abstract

This paper examines the usefulness of Coasian Transaction Cost Economics for describing the governance outcomes for semi-public markets, i.e. markets where some government involvement is indispensable, and where the government transacts with private parties, or provides the service in-house.

Given the high degree of path dependence in such governance choices, this paper examines the moment of technological innovation, where outcomes are expected to be the least path dependent. To be precise, the case under consideration is the first introduction of rail transport in Germany, in the Ruhe area. This case study is confronted with a bare minimum transaction cost model, i.e. a statement of the minimum requirements that need to be present in order to make a transaction cost model a viable source of understanding.

Keywords: transaction costs, path dependence, economic history, railways

JEL Classification: D23, D63, D70, D71,D72,D78,D83,H40,H54,K22,L33,L92