It is generally believed that in the period when railroads first began to be built in this country, there was a great deal of useless “over-building”, a great many lines which were started and then abandoned after being proved worthless and ruining those involved. The statists often use this period as an example of “the unplanned chaos” of free enterprise. The truth is that most (and perhaps all) of the useless railroads were built, not by men who intended to build a railroad for profit, but by speculators with political pull, who started these ventures for the sole purpose of obtaining money from the government.
There were many forms of government help for these projects, such as federal land grants, subsidies, state bonds, municipal bonds, etc. A great many speculators started railroad projects as a quick means to get some government cash, with no concern for the future or the commercial possibilities of their railroads. They went through the motions of laying so many miles of shoddy rail, anywhere at all, without inquiring whether the locations they selected had any need for a railroad or any economic future. Some of these men collected the cash and vanished, never starting any railroad at all. This is the source of the popular impression that the origin of American railroads was a period of wild, unscrupulous speculation. But the railroads of this period which were planned and built by businessmen for a proper, private, commercial purpose were the ones that survived, prospered and proved unusual foresight in the choice of their locations.
Notes on the History of American Free Enterprise – Ayn Rand (1959)