Oskar Morgenstern: Die Einordnung der Verkehrspolitik in die allgemeine Wirtschaftspolitik (February 1936)

Morgenstern’s journal article examines the conflict between railways and motor transport as a problem of general economic policy. Its central claim is that transport policy cannot be governed by the interests of competing carriers: it must be assessed against broader objectives and the economic consequences of technological change. Rejecting vague demands that transport should serve the economy “organically,” he identifies consistency as the scientific criterion for judging policy:

Zunächst kann jedoch festgestellt werden, daß eine Forderung für die Verkehrspolitik geltend gemacht werden muß, die auch als die einzige wissenschaftliche Forderung an die Wirtschaftspolitik als solche gerichtet werden kann, nämlich das Erfordernis der Widerspruchsfreiheit.

English translation: First, however, it can be established that a requirement must be applied to transport policy which can also be addressed to economic policy as such as its sole scientific requirement, namely the requirement of freedom from contradiction.

Consistency is difficult because economic objectives are often imprecise and short-lived, whereas transport investment commits resources over long periods. Morgenstern anchors his inquiry in Austria’s acknowledged commitments to currency stability and budgetary equilibrium, together with the price and cost relationships necessary to sustain exports. Following an examination of railway tariffs, he organizes the argument around three problems: technical progress, the preservation of invested capital, and industrial location in relation to international competition.

Published, uniformly applicable railway tariffs facilitate entrepreneurial calculation. Their predictability contrasts with the opaque rebates of competitive railway systems, while monopoly can avoid wasteful duplication of infrastructure. Yet prices that provide clarity in prosperous conditions become rigid during a depression, obstructing adjustment and prolonging crisis. Secret discounts then undermine equal treatment. Moreover, tariffs already perform public-policy functions, substituting for customs duties or subsidizing industries and regions. Railways consequently cannot defend their position through commercial arguments alone when their existing arrangements embody wider political purposes.

The first substantive section distinguishes improvements that railways can absorb internally, such as electrification, from innovations outside the enterprise that challenge its organization itself. Motor transport belongs to the latter category. Morgenstern recalls that railways once displaced older carriers, destroyed established asset values, and enlarged markets through cheaper transport. Railway resistance to automobiles thus repeats a historical conflict from the opposite side. Nevertheless, the new transition is especially unstable: a largely complete monopoly becomes an imperfect one while automobile costs decline through improvements in vehicles, fuel economy, and tyres. Railway charges, constrained partly by wages and pension obligations, do not decline correspondingly. Motor transport both diverts existing traffic and creates additional demand; its effects cannot be reduced to traffic “stolen” from railways.

The second section challenges protection justified by the amount of wealth previously invested in railway installations. Productive assets derive their economic value from the products and earnings they generate, not from their historical cost or continued physical existence:

Daß die Aufrechterhaltung einer physischen Produktionseinrichtung (als welche sich, wie schon gesagt, auch die Eisenbahnen darstellen) identisch sei mit einer Kapitalerhaltung, ist unzutreffend.

English translation: That maintaining a physical productive installation (which, as already stated, is also what railways constitute) should be identical with preserving capital is incorrect.

His thought experiment is a peaceful world in which specialized armaments factories become worthless: their former importance would not justify continuing to manufacture weapons. Similarly, protecting obsolete railway capacity may destroy capital by withdrawing scarce resources from better uses. This does not require indiscriminate liquidation. Temporary declines in demand warrant attention to future recovery, and even contraction can require investment; such expenditure must be judged by the return attributable to it.

Morgenstern also qualifies any straightforward endorsement of automobile competition. Private accounts do not capture all economic effects. Railway tax privileges and compulsory carriage obligations complicate comparisons with motorists’ taxes and freedom to choose traffic. Losses borne by banks, shareholders, or creditors can allow motor operators to offer prices that conceal part of their economic cost. Nor would transferring all traffic to roads necessarily remain cheap: rising costs could reverse the apparent advantage. Policy should restrain demonstrably unsustainable competition but accommodate strong, durable competition.

The third section makes industrial location central to tariff policy. Unlike some other production inputs, transport costs cannot readily be offset through substitution: factories cannot simply relocate whenever freight charges change. International comparisons therefore matter as much as domestic tariff movements:

Analoges gilt, wenn die Transporte in anderen Ländern billig werden, im eigenen aber unverändert bleiben. Dann liegt eine relative Verteuerung vor.

English translation: The same applies when transport becomes cheap in other countries but remains unchanged in one’s own. A relative increase in cost then occurs.

Excessive Austrian tariffs effectively move its factories farther from their markets, weaken exports, and pressure other production costs. Conversely, erratic or temporary reductions can disrupt location decisions. The depression intensifies these conflicts because traffic depends on production and trade. Restoring international commerce would benefit railways particularly through their advantage over long distances; unilateral suppression of motor transport risks damaging the wider economy.

The conclusion calls for coordinated accounting of transport measures within the state budget and independent investigation of sustainable railway operations. Its methodological boundary is explicit:

Die Wissenschaft ist neutral, sie stellt keine Ziele auf. Aber sie kann Klarheit schaffen.

English translation: Science is neutral; it sets no goals. But it can provide clarity.

Economic analysis cannot choose political ends, but it can expose contradictory instruments, invalid arguments, and deferred adjustment costs. The article’s enduring relevance lies in connecting infrastructure protection with technological displacement, incomplete cost accounting, and international competitiveness—without treating either railway preservation or unrestricted road competition as an end in itself.