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82 Cards in this Set

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Who is known as the "Father of American Railroads" and what did he do?
Colonel John Stevens proposed building a RR but could not obtain funding. In 1825, at his own expense, he built a small circular track and a locomotive on his land to prove that it was a practical possibility
What was the name of the RR company that the "Father of American Railraods" started and what year did he start it in?
Camden & Amboy RR and Transportation Company - 1830
What was the name of the train that was shipped to the U.S. from England in 1829?
The Stourbridge Lion - it weighed 7 tons and was too heavy for the trestles so it was never used to haul coal
What was the name of first locomotive to pull cars in the U.S. and who was the engineer?
"The Best Friend of Charleston" was built under the supervision of Horatio Allen and it ran in December of 1830.
Who invented the "T" rail and when?
Robert Stevens (son of Col John Stevens) invented the "T" rail and the hook-headed spike to fasten it on his passage to Europe in October 1830 - both are still used today
What was the name of the locomotive that John Stevens purchased and who put it together?
"The John Bull" was shipped from England in pieces and put together by Isaac Dripps. In November 1831 the New Jersey legislature were the 1st passengers to be hauled by it.
What is Isaac Dripps known for?
He put together the "John Bull" and invented the first tender which was made of a 4-wheeled car with a whiskey cask attached to it. He also invented the 2-wheeled "cow catcher"
Who invented the "flexible-beam truck" or "6-wheels-connected" engine and when?
Matthias Baldwin invented it in 1842. His aim was to use all the locomotive's weight for traction. This design permitted operation on curves without binding any of the wheels
What is the "Irvington" known for and when was it built?
All the elements of the standard steam locomotive are present in this design. It was built in 1852.
What is Franz Anton von Gerstner known for?
He was a German engineer who travelled through the U.S. in 1839 studying and drawing detailed diagrams of canals and RR's.
When did the standard roadbed and track emerge?
In the 1830's - it was qucikly discovered that the RR vehicles should have single-flanged iron wheels with the flange on the inside of the rail
Whys is it better to have the wheels and axle as a single unit?
This design kept the whole unti in gauge much better than allowing the wheels to rotate around a fixed axle
Who is credited with building the first 4-wheeled automobile and what year did he do it?
Gottlieb Daimler - 1886 - In 1894 his engine was used in the 1st automobile designed to place the driving elements in the same position they are in today.
Who invented the "gearbox"?
Louis Renault
When did Ford introduce his automobile?
His first experimental car was built in 1893 and his practical version was built on 1896
What is Charles Kettering known for?
In 1911 he perfected the electric self-starter. He also invented the modern battery ignition system (spark plugs, distributer cap, etc), 4-wheel brakes, ethyl gasoline, freon, and the Diesel locomotive among other things
By WWI what did cars have?
They now had front bumpers, electric horns, rear-view mirrors, foot pedal accelerators, V-8 engines and overdrive
What are the three common threads in the evolution of technology?
1) Multiple inventors - near simultaneous emergence of the same technology in several locations 2) Rapid incremental improvements and 3) "Mature" technology after 20 yrs followed by a long period of relative technological stability
What are the three basic facts of RR competiton in the 19th century?
1) RR's owned the highway and all the vehicle on the highway 2) RR's had high fixed costs and 3) RR's, for political and economic reasons, were not allowed to liquidate
The RR's pricing problem reflected two basic conditions - what were they?
1) The pressure if high fixed costs - costs that did not vary with traffic volume were about 2/3rds the cost of running the RR and 2) the existence of unused capacity
What were the consequences of high fixed costs which in turn created an inexorable pressure to attract traffic?
RR's had considerable flexibility in setting their rates and RR's tended to set prices in relation to cost rather than demand. This in turn led to setting rates that discriminated against persons, places, and types of traffic.
Name three types of discrimination against types of traffic?
1) Value based pricing, 2)Asymmetric traffic, 3) Volume
Explain Value based pricing
Couldn't charge a flat ton-mile rate because the cost of shipping high value finished goods would be too cheap and the cost of shipping bulk freight would be too expensive, thus detailed categories of freight evolved and value based pricing became standard
Explain Asymmetric traffic
Traffic was asymmetric, more freight being shipped in one direction than the other, so it could cost less to ship an identical item from A to B than from B to A
Explain Volume discrimination
Because moving a full as opposed to a partially full car was approximately the same cost, lower rates were charged on carload lots
Explain discrimination against places
It was often the case that P(AD) + P(DC) < P(AC). Oyster case - one town said they would pay $1 per 100 lbs and provide a full car so the RR would make money, but when they couldn't provide enough oysters, the RR went to another town and offered them to pay $0.75 a lb even though they were farther away if they could fill the rest of the car. This allowed the RR to break even instead of lose money
Explain discrimination against persons
B/c of the competitive nature of RR's large suppliers insisted on and got rebates. Henry Flagler negotiated a secret rebate of $.15 per barrel of oil which gave Standard Oil a huge competitive advantage
What are drawbacks?
In some cases shippers were powerful enough to force RR's to not only to get rebates but they were able to force the RR to charge their competitors the published rate and then to give them part of the published rate. Standard Oil forced the RR's to charge $.40 and then to give the $.25 of every barrel
What did William H. Vanderbilt say?
He told the Hepburn Committee that in 1879 all the large shippers that applied ofr special rates normally got them. In 1880 the NY Central system granted 6,000 special rates
What happened due to excess capactiy?
RR's wiht high bonded debt would cut rates to generate cash to pay the interest on their debt therby forcing the stronger, better capitalized, roads to match freight rates. But federal judges were reluctant to allow the physical liquidation of a RR's assests. Most RR's were more valuable left intact and running than they were if they were liquidated.
What did the federal courts develop in the 1870s?
They developed a set of rules known as Equity Receivership so that major corporate enterprises could be reorganized
How did Equity Receivership work?
The court appointed receivers who were allowed to break leases and contracts, withhold interest payments due existing creditors, and obtain interim financing to keep the RR running
What was the basic goal of equity receivership and how was it achieved?
The basic goal was to reduce fixed charges and it was achieved by exchanging old securities for new securities and by assessment - current holders of securities had to invest more capital
What are upset prices?
If an investor decided not to participate in the reorganization then he received a cash payment for his existing securities
What is another way that RR's sought as a solution to bankrupcy?
Another solution was consolidation. This was effectively achieved in the mid to late 1890s by J.P. Morgan and other investment bankers
What is Morganization?
1) New securities were exchanged for the old to bring the debt down to a level such that operating revenue was sufficient to pay the dividends, 2) the RR was reorganized by Morgan's lawyers and skilled RR managers, 3) A voting trust was set up to control the RR
What is a voting trust?
The owners of stock wiht voting rights in the reorganized company had to place their shares in a trust that gave Morgan's associates voting control of the Board of Directors of the RR
What are the economic effects of rebates and drawbacks?
1) Promoted industrial consolidation, 2) Favored big cities with multiple RR lines, and 3) the above led to the development of factory cities in the U.S.
What caused the increase in grain production between 1850 and 1870?
The increase was not due to productivity gains, rather it was due to mor eland being brought into production because of the RRs
Between 1865 and 1896 there was a period of deflation. What did the farmers blame it on?
High RR freight rates, grain elevator companies, middlemen and monopolies in general
What was the primary demand of farmers?
The farmers wanted currency inflation - mainly the free coinage of silver
What was the "Crime of 73"?
Silver was demonitized by an act of Congress just as the western mines came online
What was the Bland-Allison Act and when was it passed?
It was passed in 1878 with the support of a coalition of farmers and mining interests. It obligated the treasury to buy $2-4 million in silver bullion per month, but the treasury only bought the minimum and the price of silver continued to fall
What was the Sherman Silver Purchase Act and when was it passed?
It was passed in 1890 and repealed in 1893. It obligated to treasury to but 4.5 million ounces of silver (the entire output of silver mines). The silver was paid for with U.S. notes whoch could be redeemed in either gold or silver coin but b/c the price of silver was falling they would sell the silver, get the notes, cash the notes for gold and use the gold to buy the silver, etc.
What else was falling beside the rate of deflation?
RR rates fell faster than the general rate of deflation over this period. Commodity prices were deflating as the same rate as freight rates
What did Jeffrey Williamson's 1974 study conclude?
He used spot price differentials which correlate very highly with transportation costs. It showed that freight rates on grain fell faster than the price level
What was Anne Mayhew's change of life argument?
She argued that the farmers' complaints were the result of the switch from a system of subsistence agriculture to a market system of agriculture
What was Robert McGuire's uncertainty and unrest argument?
McGuire supported Mayhew's argument stating that when times were good the farmers didn't protest, but when times were bad they wanted someone to blame
What are the different types of coal?
Peat, lignite, bituminous, and anthracite
What is bituminous coal?
It burns readily and was used as fuel in industry and to fire steam locomotives and in the making of Coke
What is anthracite coal?
It is nearly pure carbon and is very hard and lustrous. It is used as fuel
What is Coke?
Coke is created by a destructive distillation of bituminous coal. When bituminous coal is heated the byproducts are coke, ammonia, coal tar, and coal gas. Coke is a porous fuel with very few impurities and a high carbon content
What is Andrew Carnegie known for?
He is responsible for the changeover from iron to steel rails due to his innovative managment of his iron and steel business. In 1873 steel rails cost $120 a ton but by 1898 the price was down to $17 a ton. The result was cheap high quality steel and by 1910 all the RR tracks were steel.
True or False: By 1920 more people lived in rural areas?
False - more people lived in urban areas
True or False: RRs were the largest single employer before WWI?
What is "value added" mean in relation to mnaufacturing?
It is defined as the difference bewteen the value of the manufactured good minus the cost of materials, energy, and contract work. Value added increased by a factor of 6 betwen 1869 and 1899.
When was the New York Stock and Exchange Board founded?
It was established in 1817 and in the 1860s it became the New York Stock Exchange
Explain the evolution of RRs in regards to Wall Street
In 1835 only 3 RRs were traded on Wall Street, by 1850 38 were traded and by 1855 RR shares accounted for half the negotiable securities in the U.S.
Who was Daniel Drew?
Drew was born on a farm in 1797. He started as a cattle drover and then became an informal banker for cattle drovers. In 1853 he was elected to the Erie RR board and became treasurer in 1854 and becomes an adept stock manipulator.
How did Drew manipulate stocks?
RR directors could issue bonds which could be converted to stocks. Drew used this to manipulate the amount of Erie stock and the price of it. Drew would sell Erie short and then dump stock on the markets to drive down the price and make a profit.
Who was Cornelius Vanderbilt?
He used $100 to buy a small boat and started ferrying freight and passengers, mainly commuters, between Staten Island and Manhatten. He was reliable and charged lower rates than his competitors. In 1863 he got into the RR business and by 1867 he owned several RRs in NY.
Who was Jim Fisk?
His father was a peddler and so he became a peddler too. In 1855 he bought out his father and expanded the business. In 1860 he went to work for a drry-goods firm.
Who was Jay Gould?
In 1852 he became a surveyor and in 1864 he bought most of the bonds and stock of a short line RR. He met James Fisk sometime in 1865-66.
When was the New York and Erie RR founded and built?
It was chartered in 1832 and built in 1834-51
What was the Erie War?
By 1867 Vanderbilt had control of all the RR lines into Manhattan except the Erie. When the Erie Board didn't cooperate with holding up freight rates, Vanderbilt set out to buy it. Drew used convertible bonds to expand the total amount of common stock and by the end Vanderbilt had over 200,000 shares of Erie but Drew, Fisk, and Gould still had the Erie and $7m of Vanderbilt's money
What did Vanderbilt do when he couldn't buy out the Erie RR?
Vanderbilt went to the NY State Court to stop Drew from issuing stock so freely, so Drew, Fisk and Gould fled to NJ. But Drew came back and made a deal with Vanderbilt who got $3.5m in cash and $1.25m in bonds. Fisk and Gould ended up with the bankrupt Erie RR
What reforms were set in place due to the Erie War?
1) Firms had to register with the NYSE and the exchange had to be notified in advance of large issues of stocks and officers could not be short on their own stock, 2) Later underwriters like J.P. Morgan required both periodic and inclusive financial reports, and 3) NYSE required accountants to certify these reports
What was one way that the State tried to regulate RRs?
State politicians soon discovered that uniform or prorata freight charges were impractical. They recognized soon that discrimination against types of traffic was essential.
What is short haul pricing constraint and why was it used?
If A, B, C, and D are cities along a RR line then the rate from A to B must not exceed the rate from A to D. This was used to try to solve the problem of discrimination against places. By 1876 most states had passed laws regulating rates inside their borders.
What are the two court cases regarding RRs and when were they decided?
1) Munn v. Illinois (1877) and 2) Wabash, St. Louis, and Pacific RR v. Illinois (1886)
What was Munn v. Illinois about?
The SC upheld the right of the state to regulate RR rates. Chief Justice Waite said that "when privtae property is devoted to public use, it is subject to public regulation"
What was Wabash, St. Lousi, and Pacific RR v. Illinois about?
In 1886 the SC reversed the Munn v. Illinois decision. The court argued that State RR regulation violated the interstate commerce clause of the Constitution. Only Congress can regulate interstate commerce.
What were the provisions of the Interstate Commerce Act of 1887?
1) The Act outlawed rebates, drawbacks, and pooling. It required RRs to post rates in every depot and station. It also contained the short haul pricing constraint. And finally it set up the Interstate Commerce Commission (ICC) as the 1st federal govt regulatory agency to adjudicate disputes btwn shippers and RRs
What were the social and enforcement problems with the ICC?
Short haul freight rates dropped while long haul rates rose so long haul shippers suffered more loses. Th ICA was vaguely written and could not enforce its decisions. Their decisions could be appealed in federal court which took about 4 years to settle the dispute. During the 1st 10 yrs, 90% of the ICC's rulings were reversed.
What happened to the RR system after 1896?
It was almost totally rebuilt. Btwn 1900 and 1915 the RR mileage and the number of locomotives increased. Tracks were replaced with heavier steel.
What did "progressives" believe?
They believed that freight rates should not be so high as to generate a surplus for the RRs. It was the responsibility of investors to expand the physical plant. Any surplus should go back to the "people." They didn't understand that a surplus could be reinvested in the company.
What was the Elkins Act of 1903?
It made it illegal to ask for a rebate
What was the Hepburn Act of 1906?
It authorized the ICC to set maximum rates and to order RRs to comply after 30 days. It also set up a fast appeals in the federal courts and instructed the courts to accept ICC rulings until evidence was massed to the contrary, so RRs were guilty until proven innocent.
What was the Mann-Elkins Act of 1910?
Federal courts were removed from the process and the ICC was empowered to suspend proposed rate increases. ICC jurisdiction expanded to telephone, telegraph, etc.
What was the Adamson Act of 1916?
It mandated the 8 hour work day on the RRs which substantially increases the labor costs, but the ICC didn't grant rate increases to make up for the costs
What was the state of the RRs by 1917?
Most of the major RRs were bankrupt. The ICC didn't grant rate increases between 1907 and 1917 so by the time RRs were nationalized in 1917 they were bankrupt.
What were the provisions of the Transportation Act of 1920?
It was meant to make up for some of the damage. Congress instructed the ICC to set minimum rates to make certain that RRs had an adequate income. It also granted the ICC more control over entry, exit and consolidation of the RR industry.