When Data Flows Became Fast: The Trans-Atlantic Telegraph

When the offset trans-Atlantic telegraph message was sent inward 1858, the tough inquiry was how to follow upwards on the famous terse occupation that Samuel Morse had sent inward 1844 over the telegraph betwixt Baltimore in addition to Washington: "What hath God wrought?"

On August 18, 1858, the "official" offset message to cross the Atlantic yesteryear telegraph was ""Glory to God inward the highest; on earth, peace in addition to proficient volition toward men." Actually, amongst the diverse essay messages that were sent dorsum in addition to forth, this was the 129th message to cross the Atlantic. It took almost 17 hours to send.  Then Queen Victoria in addition to U.S.A. President James Buchanan got involved. The Queen sent a 98-word message that took xvi hours to transmit. Buchanan responded amongst a 149-word message that took 10 hours to transmit. Part of the occupation was that the signals were weak, in addition to needed to survive confirmed in addition to repeated a number of times. One engineer idea that the solution was to boost the voltage, which blew out the insulation on the cable after only 400 messages had been sent.

It wasn't until 8 years afterwards inward July 1866 that functional trans-Atlantic telegraphic communication was firmly established. Helen Fessenden discusses the effects of this communication breakthrough on diverse markets inward "The Great Telegraph Breakthrough of 1866: The transatlantic telegraph cable amounted to the data revolution of the day, tying global markets together inward unprecedented ways" (Econ Focus, Federal Reserve Bank of Richmond, Second Quarter 2018, pp. 28-30).

At the time, cotton fiber was the major U.S.A. export, in addition to almost 70% of all U.S.A. cotton fiber was shipped to Great Britain--much of it yesteryear means of the port of New York City.  But how could the merchants of New York know how much to send, in addition to at what price? The trans-Atlantic cable provided the information. Fessenden writes:

"Most cotton fiber was sent to U.S.A. ports for export, amongst New York City every bit the most of import hub linking U.S.A. producers to importers inward England. In turn, British textile workers spun raw cotton fiber into finished cloth, which was sold for domestic consumption in addition to for export. Prior to the transatlantic cable, however, in that place was oftentimes a lag betwixt the cost of cotton fiber quoted inward Liverpool in addition to what was quoted inward New York, oftentimes yesteryear a calendar week or more, depending solely on ship travel. One mutual occupation was that the data on unusual demand that New York merchants got from United Kingdom of Great Britain in addition to Northern Ireland was outdated, in addition to therefore it was hard to brand accurate purchasing decisions. Moreover, unusual demand fluctuated considerably, peculiarly on the European continent. (Building upwards storage capacity could only partly address this issue, due to the burn downwards run a hazard posed yesteryear cotton fiber in addition to prohibitive structure costs.) In short, this was a classic illustration of data frictions causing inefficiencies inward trade. ...

In several recent papers, Massachusetts Institute of Technology economist Claudia Steinwender has studied the effects of the transatlantic telegraph breakthrough of July 1866, every bit a critical positive stupor to cotton fiber markets. ... Whereas the average divergence betwixt New York in addition to Liverpool prices was 2.56 pence per pound of cotton fiber prior to the cable, it vicious to 1.65 pence per pound — a driblet of to a greater extent than than a 3rd — correct after. Furthermore, the transatlantic cost differences were much less plain of written report to major swings.

In turn, thank you lot to to a greater extent than timely in addition to accurate information, New York traders were improve able to accommodate export volumes to encounter fluctuations inward unusual demand. Rather than pass coin on costly storage, which required leaving around of their production idle, exporters could calibrate their shipments to a greater extent than efficiently. In Steinwender's calculations, this boosted average daily cotton fiber exports yesteryear 37 percent. The variance inward daily book increased fifty-fifty more, yesteryear 114 per centum — reflecting the fact that exporters were able to brand these adjustments quickly. Overall, she concluded, the cotton fiber merchandise experienced an 8 per centum efficiency arrive at inward annual export value, to a greater extent than oftentimes than non from the reduced variations inward cost differences due to the cable. Put around other way, this efficiency arrive at was equivalent to a twenty per centum driblet inward storage costs, or the elimination of a seven per centum advertizement valorum tariff."

There were a number of other efficiency gains from the trans-Atlantic telegraph. In general, trans-Atlantic merchandise rose because of improved data almost render in addition to demand. New regions could survive developed for U.S.A. cotton fiber production. Stock in addition to bond prices on either side of the Atlantic converged. Fassenden notes efficiency gains inside the U.S.A. economy, too. For example,
inward the yesteryear it had been necessary to convey ii prepare tracks betwixt locations--one outbound in addition to i inbound. But when it became possible to convey data on the place of other trains, it was possible to convey only i rails that, amongst shared information, could survive used for trains using the rails at dissimilar times to become both directions.

Our modern world of extremely rapid flows of data in addition to communication is a lot to a greater extent than than a convenience. It's also a driver of economical efficiency from local markets to global render chains.