Once upon a time, canals were the latest thing in infrastructure investment. During the early years of the Industrial Revolution, they made it possible to move heavy goods, like coal, from mines to factories, using a fraction of the energy required by road transport. Delicate goods, like pottery, could be shipped with little breakage. Enterprising engineers and industrialists built canals in all sorts of unlikely places. There is even a canal system that crosses from England into the Welsh mountains, complete with the towering Pontcysyllte Aqueduct, which allows canal boats to traverse the Dee valley.
I visited Pontycysyllte this summer. When I showed Nick Rowe my holiday pictures and told him about the canal, his first reaction was “this is an argument for discounting future returns”
Why? The Pontcysyllte Aqueduct opened in 1805. Within 40 years, it was becoming obsolete, as railways began to supersede canals. Pontcysyllte exemplifies the fact that investment is an uncertain business. Any kind of technological or other kind of shock can cause the returns to infrastructure investment to evaporate.