of construction was apparent. 'Private capital was forthcoming for railway investment on the scale on which it was undertaken in Britain in the later 1830s and early 1840s only because the eventual lowness of the private rate of return on some projects was not anticipated.' 24 The speculative manias, with their unrealistic expectations of profits, did not lead to the misallocation of capital, so much as encourage investment which offered a high social rate of return.
The railways offered a respectable social rate of return, but they were not the major factor in the transformation of the economy (see Fig. 11.6 for successive waves of investment). Canals, turnpikes, and coastal shipping were important, and they might well have offered social savings which rivalled or even exceeded the railways. There were significant changes in the organization and efficiency of transport throughout the eighteenth and early nineteenth centuries, which the railways continued rather than initiated. Canals and turnpikes laid the basis for the mobilization of savings to fund the railways, which were beneficiaries as much as creators of an active capital market. Above all, investment in transport reduced transaction costs in the economy, and this was in many ways more striking than improvements in industrial or agricultural productivity over the eighteenth century.