¹ Discussion of this point appears, inter alia, in: Sturmey, Stanley G., British Shipping and World Competition (London: University of London, Athlone Press, 1962), pp. 82–85Google Scholar; Jones, Leslie, Shipbuilding in Britain (Cardiff: University of Wales Press, 1957), pp. 83–84Google Scholar; Burley, Kevin H., British Shipping and Australia, 1920–39 (Cambridge: Cambridge University Press, 1968), pp. 94–100, 264–268Google Scholar.

² One way of classifying the costs incurred by a shipowner is to distinguish those that are determined by flag of registration (“national” costs) from those that are international, in the sense that they are the same for all shipowners operating on a given route irrespective of flag of registration (“international” costs). Thus, we could include under the heading “national” costs: crew costs, maintenance (carried out on board), capital charges, management expenses. “International” costs normally include: port charges, cargo handling, stores, repairs (carried out in dock), insurance and depreciation. The distinction is not hard and fast. A government insisting that its flag vessels be built at home, for example, would raise the costs of its shipowners by the difference between the “national” and “international” price of a vessel less any subsidy given to the shipowner.

³ The distance between Aden and Colombo is approximately 2,100 nautical miles, between Colombo and Fremantle 3,150 nautical miles. Distances along the Australian coast are also considerable: Fremantle-Adelaide is 1,378 nautical miles.

⁴ See Trace, Keith, “Australian Overseas Shipping, 1900–60,” Unpublished Ph.D. Thesis, University of Melbourne, 1965Google Scholar.

⁵ Brown, T. W. F., “A Marine Engineering Review—Past, Present and Future,” Transactions of the Royal Institution of Naval Architects, 102 (April 1960), 408, 410Google Scholar; Smith, Edgar C., A Short History of Naval and Marine Engineering (Cambridge: Cambridge University Press, 1937), pp. 302–306Google Scholar. It is also interesting to note that while the Royal Navy was using water-tube boilers at the end of the nineteenth century, the owners of the mercantile marine were reluctant to do so and widespread adoption did not take place until the mid 1920's.

⁶ Brassey's Naval and Shipping Annual (afterwards Brassey) (1930), p. 192; Smith, A Short History of Naval and Marine Engineering, pp. 316–317. There were several other systems of exhaust turbines. The Metropolitan-Vickers Electric Co. Ltd. introduced a model in which the turbine drove an electrical generator which supplied current to a motor on the propeller shaft. A Swedish firm, Aktiebolaget Gotaverken, used the turbine to drive a compressor which took steam from the exhaust of the high pressure cylinder, raised its pressure and temperature and then returned it to the immediate-pressure receiver. In another Swedish system, that of the Aktiebolaget Lindholmen Motala, the exhaust turbine drove a generator and the power was used to heat steam on its way from the high-pressure to the immediate-pressure cylinder. The Danish Elsinore shipyard introduced another type in which the turbine was coupled to the propeller shaft by combined single-reduction gear and chain drive. There were others in addition to these. The Bauer-Wach system was the one most widely installed during the inter-war period.

⁷ Smith, A Short History of Naval and Marine Engineering, pp. 318–19, 322; J. M. Murray, “Merchant Ships, 1860–1960,” Unpublished paper read before the Royal Institution of Naval Architects, 17 May 1960, 30–31. Concurrent with these changes, a small though growing number of ships installed electric transmission between turbine and propeller. This increased overall efficiency and enabled higher speeds in heavy wearier; it allowed flexibility in the location of machinery ana reduced vibration and noise; safety was improved by the better subdivision which could be made in the hold; and it now became possible to avoid reversing the turbines.

⁸ Murray, “Merchant Ships, 1860–1960,” 32; Johnson, J., “Fuel for Merchant Ships,” Transactions of the Royal Institution of Naval Architects, LXXIX (1932), 59, 71Google Scholar.

⁹ (No author), Two Centuries of Shipbuilding by the Scotts at Greenock (London: Privately published, 1920)Google Scholar; Brassey (1921–22), pp. 223–224; Brassey (1930), p. 158; Brown, “A Marine Engineering Review,” 410–411.

¹⁰ Smith, A Short History of Naval and Marine Engineering, pp. 324–26; Brown, “A Marine Engineering Review,” 413–416; Murray, “Merchant Ships,” 31.

¹¹ (No author), Seventy Adventurous Years: The Story of the Bank Line, 1885–1955 (Liverpool: Journal of Commerce and Shipping Telegraph, 1956)Google Scholar; Murray, Marischal, Union Castle Chronicle; 1853–1953 (London: Longmans, Green, 1953), p. 184Google Scholar. The British record in this period was unimpressive, although the Bank Line ordered 22 vessels in 1922 and Union-Castle ordered vessels in 1924.

¹² Brassey (1921–22), pp. 224–226, 229–230; Brassey (1930), p. 191; Smith, A Short History of Naval and Marine Engineering, pp. 333–334. Another experiment which aroused a good deal of interest was the Scott-Still engine. The joint efforts of the Scott engineering company and the Still Engine Co. Ltd. began before the First World War and they commenced testing the first engine in 1919. This new engine was a combination of both oil and steam engines. The design aimed to reduce heat losses to a minimum so as to improve thermal conditions for the cylinders and maximize gains from the fuel burnt in them. The engine had oil-fired steam boilers for starting the main engines. The oil burners were men shut off and the boilers became steam and water reserves. These boilers were in circuit with the combustion-cylinder jackets and the jackets of the exhaust pipes and regenerators. The top side piston operated in the usual way by the combustion of oil, but the bottom side one operated by steam generated in the combustion-cylinder jacket assisted by exhaust gases. The reduction of the two cycles—oil and steam—upon each other resulted in the increased thermal efficiency of both. The Scott-Still engine was relatively more economical than the best heavy oil engine and achieved the lowest fuel consumption of any marine engine, viz. 0.375 lb. per B.H.P. Moreover, the space it occupied was considerably less than that for other oil engine installations. There were almost no rods, valves or cams associated with the engine and hence maintenance costs were expected to be far less than for normal diesel engines. Other features included the engine's good performance at low speeds and its quiet running and absence of vibration. Many shipowners hesitated before going to diesel engines and this experiment looked to be a promising compromise which might not involve the large prime cost of a new diesel yet achieved very significant economies. See Two Centuries of Shipbuilding, pp. 144–146, and Brassey (1921–22), p. 232.

¹³ Brown, “A Marine Engineering Review,” 416; Jones, Shipbuilding in Britain, p. 40.

¹⁴ Brassey (1921–22), p. 232; Brassey (1930), pp. 190–191; Brown, “A Marine Engineering Review,” 417; Murray, “Merchant Ships,” 31.

¹⁵ The consumption figure of 0.35 lb. per S.H.P. per hour was obtained by the Aagtekerk built for United Netherlands Navigation in 1934. This rate was guaranteed by the builder and confirmed by sea performance.

¹⁶ Brassey (1920–21), pp. 182–193; Brassey (1926), pp. 226–227; Sydney Morning Herald, 13 May 1924, p. 9.

¹⁷ Brassey (1926), p. 226; Sydney Morning Herald, 13 May 1924, p. 9.

¹⁸ We have benefited substantially from the discussion of the application of discounted cash flow techniques to shipping in Richard O. Goss, “Economic Criteria for Optimal Ship Designs,” Transactions of the Royal Institution of Naval Architects, (October 1965). See also Alfred, Arnold M. & Evans, J. B., Appraisal of Investment Projects by Discounted Cash Flow (2nd ed.; London: Chapman & Hall, 1967)Google Scholar. A similar type of cost-benefit calculation may be found in Lindert, Peter & Trace, Keith, “Yardsticks for Victorian Enterpreneurs,” in McCloskey, Donald N., ed., Essays on a Mature Economy: Britain after 1840 (London: Methuen, 1971), pp. 239–283Google Scholar.

¹⁹ Underlying our calculations is the assumption that the conferences were sufficiently powerful to ensure that the increase in tonnage kept in step with the increase in the cargo offering so that the cargo tonnage carried per voyage did not diminish appreciably as more vessels were added to the U.K./Continent-Australia cargo liner fleet. Empirical verification of the ability of the conference to control entry and ensure high load factors may be found in Brigden, J. B., “Australian Overseas Shipping,” Economic Record, VI, Supplement on the Economics of Australian Transport (August 1930)Google Scholar. See especially diagram, p. 186.

²⁰ The revenue figures are adjusted to allow for loss of income during survey periods.

²¹ The formula for finding the present value of a stream of further income is:

Where PV = present value; R₁, R₂, etc. = expected income streams in absolute amounts; r = the annual rate of interest. The column in our tables headed discounted cash flow thus represents the net cash flow for each year discounted by the appropriate discount factor.

²² Bank rate fell from a peak of 7 percent in 1920/21 to 4 percent in 1923, varying between 4 and 6 percent for the remainder of the twenties. The rate fell to 2 percent between 1932 and 1939. During the inter-war years both divided yield and earnings yield of ordinary industrial shares were substantially lower than the rates achieved after World War II.

²³ The trends we note in costs, earnings, and profitability closely resemble those published as part of the report of a conference between shipowners, importers, and exporters held in Australia in 1929. See Commonwealth of Australia Parliamentary Paper, 1929, No. 65, “Report of the Overseas Shipping Conference.”

²⁴ This point is not valid under all circumstances. If, for example, a new vessel provided a superior service—more frequent or faster sailings or less cargo damage—it might be worthwhile introducing it even though its total costs exceeded the variable costs of the older vessel. In such a case the difference might be recouped by selective pricing. We are indebted to Professor D. H. Aldcroft for drawing our attention to this point. It should be noted that conference freight rates in the Europe-Australia trade did not vary according to the quality of the service.

²⁵ Mansfield, Edwin, “Technical Change and the Rate of Imitation,” Econometrica, XXIX (October 1961)Google Scholar. Cited as reprinted in Rosenberg, Nathan, ed., The Economics of Technological Change (Harmondsworth: Penguin Books, 1971), 286–87Google Scholar.

²⁶ Mansfield defines a successful commercial application as one in which the equipment “was used commercially for years, not installed and quickly withdrawn.” He further notes that in only three cases—pallet loading machinery, tin containers and continuous mining machinery—did it take ten years or less for all major firms to install the innovation. See Mansfield, “Technical Change and the Rate of Imitation,” in Rosenberg, p. 287. Similarly, Griliches found that the diffusion of hybrid corn followed an S-shaped curve. Diffusion began slowly, accelerated to a peak rate at the mid-point of development, then slowed down again as farmers approached the optimal acreage of hybrid corn. See Zvi Griliches, “Hybrid Corn and the Economics of Innovation,” Science (29 July 1960). Cited as reprinted in Rosenberg, The Economics of Technological Change.

²⁷ Note that one might argue that the first successful commercial adoption of the motorship dates back to 1912/13. The East Asiatic Company's Selandia (4,950 g.r.t), built in 1912, was the first large vessel equipped with diesel engines. The Selandia was still running in the twenties.

²⁸ See the interesting article by Tage Madsen of the Transatlantic Steamship Co. of Gothenberg in Shipbuilding and Shipping Record (27 April and 4 May 1922). Madsen, impressed by the Doxford experimental opposed-piston high-pressure fuel injection engine, persuaded Rederi A/B's Board of Directors to contract with Doxford's for the Yngaren and the Eknaren. In the article, entitled “Actual Running Costs of Motor-ships,” Madsen quotes performance figures for Yngaren's maiden voyage to Australia and compares. its performance with that of the Company's Bullaren type vessels.

²⁹ The Blue Star Line, started by the Vestey Group in 1920 as a result of the Royal Mail Line's refusal to carry meat from Argentina to Britain at “reasonable” rates, entered the Australian trade in the thirties.

³⁰ Includes vessels belonging to the P. & O. Branch Service, and the British India Line.

³¹ Mansfield argues that competitive pressures mount as the proportion of firms that have installed the innovation increases, thus creating a “band-wagon” effect. The effect is especially important in cases in which profitability is difficult to measure; the fact that competitors have innovated may prompt a firm to consider an innovation more favorably. Mansfield also suggests that the proportion of “hold-outs” will be high if the innovation replaced equipment which is very durable. See Mansfield, “Technical Change and the Rate of Imitation,” in Rosenberg, 287–294.

³² Mansfield tests both a deterministic and a stochastic version of his model. The deterministic version of the model leads to two predictions: (a) that the number of firms introducing an innovation should, if plotted against time, approximate a logistic function, and (b) that the rate of imitation in a particular industry should be higher for more profitable innovations and for those requiring relatively small investments. The stochastic version rests on the hypothesis that the probability that a firm will introduce a new technique is an increasing function of the profitability of doing so and of the proportion of firms already using it but a decreasing function of the size of investment required.

³³ Brassey (1921–22), pp. 224–225, 233–234; Brassey, (1926), pp. 225–226; Johnson, “Fuel for Merchant Ships,” 94; Brown, “A Marine Engineering Review,” 417–418.

³⁴ Brassey (1930), p. 158.

³⁵ The Cunard Line adopted the policy of converting all existing vessels to oil fuel as well as deciding that all vessels ordered in its post-war shipbuilding program should be oil fuel burners. See Brassey (1930), p. 158.

³⁶ Brassey (1930), p. 158.

³⁷ Brassey (1926), p. 233.

³⁸ Quoted in Brassey (1926), p. 223.

³⁹ Brassey (1921–22), pp. 224–225, 233–234; Brassey (1926), pp. 225–226; Johnson, “Fuel for Merchant Ships,” 94–95.

⁴⁰ Rosenberg, Nathan, “Factors Affecting the Diffusion of Technology,” Explorations in Economic History, X (Fall 1972), 7Google Scholar.

⁴¹ Ibid., 26.

⁴² Professor D. H. Aldcroft has suggested that there may be a parallel between entrepreneurial behavior in snipping and railways. During the inter-war years British railways, other than the Southern, were slow to adopt diesel and electric traction. Whereas the rate of return on main line electrification may in fact have been too low to make such investment an attractive proposition, Aldcroft has suggested that diesel propulsion was an economic alternative to steam in the 1930's.

However, few diesel locomotives were in use in Britain prior to 1939. Aldcroft's tentative explanation is that the lag was the result of inadequate information regarding the benefits of diesel traction, the “cheapness and abundance of coal in Britain,” and the scepticism of a generation of railwaymen brought up on steam. See Aldcroft, D. H., British Railways in Transition (London: Macmillan, 1968), espec. pp. 68–77CrossRefGoogle Scholar.