An internet connection and a canal could be rather similar.
Internet Connections in the Americas, 2012:
Looking beyond the Americas, South Korea leads the world with the highest proportion of its population having fast internet service (more below).
Shipping Connections Between Cincinnati and New York, first half 19th century:
- In 1817, by river and wagon: 52 days.
- In 1843, by steamboat, canal and railroad: 18-20 days.
- In 1852, by canal and river: 18 days.
- In 1852, by railroad: 6 to 8 days.
But that was not all. The cost plunged. Sending your shipment by land in 1821 would have cost $32 a ton for 100 miles. By rail in 1853, you would have spent less than $4.00 a ton for the same trip.
Nineteenth century shipping speed and the internet are both about infrastructure. Almost 200 years ago, by building a canal network and then railroads, we created a transportation infrastructure that brought us all closer in the US and beyond. Now, with the internet creating an information infrastructure, again, we are even closer because of our accelerated ability to communicate.
During the nineteenth century, a transportation “revolution” enabled a national market and regional specialization to flourish. It permitted us to enjoy David Ricardo’s comparative advantage with producers growing and manufacturing optimally. It fueled economic growth.
Are the fastest and most widespread internet connections also fueling economic growth–or is it the reverse?
Sources and Resources: This Quartz article has a brief summary of this Akamai report,”State of the Internet” that was the source of the above infographic and information on connectivity. For more on worldwide internet facts, you might want to look at this broadband report from the OECD and for David Ricardo and comparative advantage, econlib.org is always useful.
Reading economist Arnold Kling’s explanation of why it will take a very long time to return to normal from Hurricane Sandy, I kept thinking of my own NJ disaster devastated neighborhood with downed trees on roads covered with branches, leaves and wires.
Kling: “You cannot solve problem A without first solving problem B, which requires solving problem C and so on.”
- Problem A: Electricity needs to be restored.
- Problem B: Utility wires and poles have to be removed from the road and replaced.
- Problem C: NJ does not have enough crews to do all of the utility work.
Kling: But then, “because A is not working, problems X, Y and Z emerge.”
- Problem X: Schools are closed.
- Problem Y: Cell phones cannot be recharged at home.
- Problem Z: Traffic lights do not work.
And then, as you can see, B and C, and X, Y, and Z each create a list of their own problems.
Kling: “…my guess is that it will take much longer to get back to normal than people are assuming. In fact, the process will take so long that in the meantime “normal” will have been redefined.”
As economists, what is our bottom line? Infrastructure interdependence takes us to many positive and negative externalities.
The entire Arnold Kling post is here.
You’ve got mail? Maybe not on Saturday. As explained in a Teaching Company lecture (#28), the U.S. Postal Service (USPS) faces competition from UPS and FedEx, from email, faxes, and texts. Their salaries average 30% higher than the private sector, they have massive pension and retirement obligations, and their productivity lags behind national averages. Hemorrhaging money, they have to cut back.
Recently, Bloomberg Businessweek explained the plight of the USPS. Providing amazing service, the USPS delivers mail by pack mule to the Havasupai Indian Reservation in the Grand Canyon and by snow mobile in parts of Alaska. During 2010, its revenues were $67 billion. But it spent much more.
What to do?
Close post offices for economic reasons? Prohibited by federal regulation. Fire employees? Union contracts say no. Eliminate Saturday mail delivery? Congress has to say yes. Union concessions? A new contract with 250,000 postal workers includes a no-layoff provision, a 3.5% raise during 4 1/2 years, and 7 uncapped cost-of-living increases. Soon, 3 other postal unions will be negotiating. Innovate like Sweden (letting customers use mobile phones to create individualized postcards) and Germany and other foreign services? The USPS has resisted digital creativity.
And finally, have any public postal systems solved the same problems? Yes, Sweden, Finland, Germany, Switzerland.
The Economic Lesson
While we have had postal services since the 1600s, Ben Franklin transformed the system. Appointed Deputy Postmaster for the Colonies by the British, he established our first home mail delivery system, diminished to a single day the letter delivery time between New York and Philadelphia, and to 6 days between Philadelphia and Boston. When the British fired Franklin for his rebellious political activity, the postal system was making a profit.
An Economic Question: How might incentives for government agency leaders and private business CEOs differ?