Ed Ellingson's Blog

3. The Steam Engine Starts to Change Things

The steam engine was developed in England in the 1700’s, but didn’t have much impact in the new United States until a little into the 1800’s.  That impact was immense; it was the application of steam engines on rails of steel, a relatively low-energy way to transport things great distances.  Trains could transport goods and people virtually anywhere you cared to run the tracks, and starting at about 1830 as an arbitrary cutoff, that became almost every settled area of the country.  Add to this the steamboats, powered craft that could travel upstream as well as down, and now farmers could get their commodities to market, and manufactured products could come to them.

My Grandfather on a museum train, circa 1960

That might seem like a nice benefit to the farmers, but in fact this is something that’s huge; to understand it you need to know something about the economies of scale.  Suppose you’re building your own log cabin, and you want to buy some nice metal door hardware.  If you go to your local blacksmith and work out a design and ask him to make one set, it might take him a day to make that, and he would have the expense of the iron and supplies to make it.  The hinges and latches would be very solid, probably repairable, and have a certain rugged look.

If you could travel to a larger town and talk to the proprietor of a larger shop, you might find someone who makes up hardware sets of one particular design, and makes them up in quantities of 10 at a time.  He would have a small investment in some special tools (jigs and fixtures), and would make all 10 in the same manner.  Generally you’d expect that the 10 units could be made in 2 days, or 1/5 the labor of the single-unit case.

If you could travel to a larger manufacturing center, you might find a hardware manufacturer who has a few similar designs, and makes products almost continuously at the rate of 100 a day.  They have extensive tooling, basically making each operation as easy as possible and such that an unskilled laborer can do it with little training.  They utilize external power as much as possible, like a water wheel, to do the energy intensive jobs, so the power required of the workers is minimal.  They have developed the product design so that it doesn’t use any more material than is required for function, and they offer the external parts in a variety of materials.  The human labor that goes into each unit is small, perhaps ½ hour, but they do have a substantial investment in the factory that allows this operation, and they must also advertise and distribute their product in order to keep sales up to match their output capacity.  Even with this “overhead” expense, the cost per unit is still substantially less than that of the “hand-made” products, and are actually “better” in almost any way that you’d  care to evaluate them.

This effect isn’t limited to just the shop floor either, a “big” operation can buy the input materials more cheaply, basically because that supplier can offer lower prices for a larger production quantity.  The overhead costs, such as marketing and accounting, are proportionally less for a large operation over a small.  John Deere perfected his steel plow design in his blacksmith shop in South Detour, IL but then scaled up to produce in a factory in Moline, IL and proceeded to sell them all over the world.  Brewers in Milwaukee, WI could scale up to produce beer for sale across the country and have a better product at a lower price than the small, local brewers.  These things were made possible by steam engines.

The two charts below show the concept described here.

Efficiency of Mass Production

Steam engines also expanded in the industrial sector, basically in supplementing or replacing water wheels.  Where factories initially were located along rivers where there was a significant water power potential (flow and elevation), steam engines allowed factories to be located almost anywhere.  The vastly improved movement of people and good via steamboats and trains was certainly import in itself, but the more important factor in the improvement of lives was the expansion of the factory system, taking advantage of the economies of scale.

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