The “Devon Rents” paper is pretty much done – the theory written up and the empirical section completed. Now on to completing the Railways paper.
Malcolm calculated kilometers of track and Amy worked on the rents for 25 estates over the period 1832-1870. We found that an increase in track increased the rents – why? Because the tenant farmer saved money by using the railways to take his cattle to market. However, he didn't get to keep the money. Those savings were “extracted” by the landowner as higher rent. This is exactly what economic theory would predict. So what’s new?
First, I plotted the coefficient of the length of track variable in the regression against time. I found that the coefficient decreased over time. You can see this from the graph above. This means that for every extra kilometre of track, the landowner extracted a smaller amount year by year. Why should this be? Suddenly being soft-hearted? I don’t think so! It’s more to do with competition among the railways. They dropped their rates and so there was less to be extracted. The graph shows it all.