for profit, to be successful, must be beneficial to both parties, the rates must be such as the customer can afford to pay, and the carrier to accept.

A proposition to fix by law the rate of freight on each commodity transported, is a proposal to determine the proportion in which the difference in terminal values shall be divided between the producer and the carrier, and to value the share allotted to the latter in advance. But difference of terminal values is so utterly different in the case of the innumerable variety of different commodities carried; so varies, even in the case of the same commodity, with season, place, and circumstance; is so dependent, in many instances, on the course of market values abroad, which fluctuate even from day to day, that it is simply impossible to frame a tariff based on such division which will not prove either ineffectual on the one hand or unjust on

the other.

The problem presented for solution may be illustrated by what may at any time occur in an ordinary railroad depot. There may be a half-dozen packages of the same weight and bulk, with exterior marks of difference, to be shipped in the same car, and for the same distance. What, if any, are the reasons justifying a discrimination of charges? And what the elements controlling the amount of charge in each case?

A consideration of the elements influencing and governing railroad tariffs, will show that the charges are not and cannot be regulated on the principle of a fixed percentage of profit on the cost of the service, or on the capital invested, and that a just discrimination of charges, according to the value of the service rendered, and the ability or will of the public to pay, is a necessary and ruling feature of all transportation for profit, and is founded on the common law rights and mutual interests of both the carrier and the public.

By the common law, the carrier is entitled to a reasonable compensation, not for the cost of the services, but for the services rendered, and to the use of all legitimate means necessary for the attainment of such compensation, and the public to transportation for persons and property, at reasonable rates, and without unjust discrimination.

As transportation for profit cannot be conducted at a loss to either party, the carrier cannot be forced to carry at less than cost, but so long as he can realize any profit, however small, from the service, he has not the right to deprive the public of transportation by prohibitory rates. If the charges are greater than the goods can bear, or the passengers can pay, the carrier deprives himself of the profits which he seeks, and the public of the transportation to which it is entitled, and it is, therefore, necessary to the interests of both parties, that the charges should be based rather on the ability of the public to pay than on the cost of the service.

LIMITATION OF DIVIDENDS.

As much has been written upon the subject of reducing fares and rates by a limitation of dividends on the capital stock, we cite the following opinions taken from the report of our predecessors touching that subject, as well as the testimony taken by the United States Senate Committee on Transportation to the Seaboard:

CAPITAL DOES NOT INFLUENCE CHARGES.

The capital invested in railroad enterprises does not, and should not, influence the charges for transportation. The investments in farms and property along the line of a road are as necessary to the success and continuance of the transportation business as the construction of the road itself, and one investment is as much entitled to a profit as the other. All companies realize the maximum profit which is attainable, having due regard to their ultimate interests, whether the capital be large or small. If the dividends should be limited by law, it would be impossible for a company to regulate its tariffs so as to produce the exact amount of dividends prescribed; and rather than risk falling below that amount, they would charge as before, and dispose of the surplus as the law might provide.

THE COST OF CARRIAGE EXERCISES BUT A LIMITED INFLUENCE ON CHARGES.

The cost of carriage is not taken into consideration in devising a tariff of charges, except as indicating the minimum charge which the company can make. The cost, in this case, is not the average per ton or passenger mile, derived from the accounts of the company, but the additional cost to which the company is subjected by the performance of the service, and may be best determined by the minimum charge made on the same road in like circumstances. It is a matter of experience and judgment, and not of calculation.

It is to the interest both of carriers and producers that charges should be based on the value of the service, or on what property can bear, and therefore what may be a reasonable rate of charge for one class of goods may be extortionate in another, even when the cost of carriage and other circumstances are the same. Thus a charge of three cents per ton per mile may be reasonable in one case, and one cent per ton per mile extortionate in another.

THE CAPITAL INVESTED NOT AN ELEMENT INFLUENCING TARIFFS.

The capital invested, and the interest and dividends on stock and debts, exercise no influence whatever on the charges of any railroad company. All companies, as organizations for profit, realize always the maximum profit attainable, and do not and cannot regulate their charges with a view of obtaining a certain fixed profit. To calculate the effect of any given tariff of charges on the aggregate profit for any given period in advance, there must be known what, during that period, will be the volume of each class of freight and passengers, the market values of the freight at home and foreign markets, and the earnings and operating expenses of the road. It would be as impossible to compel any company to arrange their charges so as to produce a fixed profit, as to make the number of customers of a hackman depend on the cost of his equipage. If, however, it should be provided that the surplus, above a certain percentage of profit on the capital, should accrue to the public, or be disposed of as may be provided by law, no company would risk falling below the profit allowed, and would therefore continue to charge all they could obtain.

In this connection may be cited the testimony before the United States Senate Committee on Transportation to the Seaboard, of Mr. Worcester, Secretary to the New York Central and Hudson River Railroad Company, and Acting Treasurer of the Lake Shore and Michigan Southern Railway. The testimony is as follows:

"It is sometimes supposed that the rates are made with reference to the revenue to be paid in on the capital, or on the investment in the enterprise, or on watered stock, as the present term is, and that if a railroad can make 'terminal charges,' or 'transfer charges,' or can invent anything of that kind, that is made an excuse for higher rates. Nothing of the kind ever obtains; rates never have the slightest reference to what the capital of the company is, or how large the investment they may desire to pay on.

The only question is what the property will bear, keeping in view always the future development of business, and the elements of prosperity involved in such development. What can be got upon this basis has to work out its own results, as regards any or all returns to stock or capital.

The amount of capital has nothing whatever to do with charges-the amount taken is one thing, a thing by itself, and is what the business will bear. There never was such a thing heard of as a company that increased its capital stock as an excuse or occasion for putting up rates. If the capital were doubled, and an attempt should be made to double the rates so as to pay on the doubled capital the same percentage of dividend that was previously paid, the diminution of the business would probably make the result a less aggregate compensation than before. "The ultimate element of prosperity in any kind of business is this: The maximum volume at the maximum price, and this principle is of absolutely universal application."

On the whole, therefore, while we think the public complaint as to existing railroad charges well founded as to some of the roads, we are forced to conclude that a general law classifying merchandise and prescribing rates of freight thereon, is not, at present, a practicable remedy for the evil. It is also to be considered that such a law could not do more than to prescribe a maximum rate on each class of freight. Embracing, as it must, an almost unlimited variety of commodities, it is not within the range of probabilitiy that it should fail to operate harshly upon some of the roads or parties affected, unless the maximum were left so high as to be ineffectual as a restraint upon charges; hence, if enacted, there could be no hope of its permanence. At every succeeding session, the Legislature would be wearied with applications to change the classification of this or that commodity, or to establish new classes of unenumerated ones, or to alter rates. Amendments to the Freight and Fare Act would occur annually in the statute book with the regularity of amendments to the Practice Act.

The general objection to laws which fix an arbitrary price at which one man shall sell his merchandise or his services to another, is also of the gravest kind. Such enactments are generally in violation of sound principles of government, as recognized by all enlightened publicists, are retrograde by several centuries in their character, essentially tyrannical in their nature, and only justifiable under the pressure of some public emergency, such as war, fire, famine, or pestilence, when all private rights have to give way to public necessity.

We are of opinion that the reduction of railroad charges to the lowest point consistent with a fair remuneration for the capital and labor employed, can be gradually accomplished by other means, less sudden and violent, but probably more permanent in character.

These opinions on the subjects to which they relate are so well expressed we insert them all here, reserving our own deduction for a subsequent part of our report.

ANTAGONISM BETWEEN PRODUCTION AND TRANSPORTATION.

The alleged antagonism at the present time in this State between. production and transportation is not real. In fact, it bears no semblance of reality. Production and transportation are as dependent on each other as the products of the land are dependent upon rain

and sunshine. Each is dependent upon the other for profit. Without production there could be no transportation, and without transportation there could be no way of disposing of the surplus products of the State. Self-interest will dictate to both the producer and carrier that mutual relations, which alone can promote the general welfare and general prosperity, must be established between them. By a judicious classification of freightable commodities, ad valorem, so as to realize a general average sufficient to maintain and operate the roads and meet the obligations of transportation agencies, while at the same time enabling the producer of cheap and bulky commodities to market them at rates far below the average, cannot but promote and conserve the greatest good to the whole people. If the transportation problem is so little understood as to warrant the insinuation of such antagonism, the flourishing condition of all our productive industries at the present time, should cause thinking men to reflect before inaugurating a conflict between interests so mutually dependent upon each other. In view of these and many other reasons which might be cited, we here assert that the principle upon which fares and rates should be adjusted is, that the rate "should bear a reasonable relation to the value of the service rendered."

Farther on we will devote more space to the principle of classification, inflexible tariff, "public use" of private property, and the extent thereof; discrimination, special rates, etc., exemplifying these subjects by illustrations and facts.

At this point a brief review of the action of other States and countries may serve to prove that railroad history is no exception to the general aphorism "that history repeats itself."

The railroad system of England, being the first to assume positive character, was the first to attract governmental attention. At first it was, by many, looked upon as a "public highway," but the active forces of its development soon concentrated the most powerful focus of English thought upon it, and the partisans of the "King's highway" theory, as it was termed, soon found their adherents rapidly diminishing. This did not occur, however, until numberless parliamentary attempts had been made at regulation. Each subsequent attempt to treat the railroads as "public highways," but disclosed the radical difference between a road over which every person could run his own conveyance and carry passengers and freight for hire, and one over which none but the owners who had built and equipped it for the purpose of carrying other persons and property than their own for hire. There would have been some analogy to the "King's highway" if the King owned the roadway and had furnished the vehicles, and had done all the carrying upon it. The railroad was owned by a private corporation, whose object was to furnish a cheaper and more rapid transportation for both persons and property, for hire, over their own road. The experiment, although at first there were few who were sanguine of success, rapidly gained favor with the producing and traveling public; yet at the same time it was creating a feeling of distrust of its growing power over industries near or remotely dependent upon the system for their successful prosecution. This distrust naturally gave rise to parliamentary legislation, and, as Mr. Adams says: "After more than forty years of blundering it was there at last realized in 1872 that the railroad was a thing sui generis; a vast and formative influence, as well as a material formative power, the growth of which was to be curiously watched in the expectation that in due

time it would develop some phase which again would call forth a corresponding development in the machinery of government through which its political and economical relations with the community would be finally established on some rational and permanent basis. This basis was only reached in England when her statesmen had learned the difference between a "highway" owned by the public and a railway owned by private individuals.

In asserting private ownership of railways, we shall not claim that there is not a use" in them in which the public have an interest. What we desire is to assert, and emphasize the assertion, that the property of railroad companies is as much the private property of the stockholders as bank or insurance stocks. The assertion from the rostrum and in publications that railroads are "public highways," in the same sense as when applied to ordinary roads, has had quite as much to do in misleading the people as to the ownership of railroads as any other cause, and the sooner the public mind is disabused upon this question, the better it will be for both the producer and the carrier. "The old analogy suggested by the Duke of Wellington, 'as mischievous as it is false,' still maintains a strong hold upon the legislative mind and belittles a great question." It took, according to Mr. Adams, conservative old England as long to emerge from the wilderness of doubt and uncertainty as to what the natural forces put in operation by her railroad system would develop, as it did the children of Israel to grope their way out of the wilderness into which they were led for their murmuring and unbelief. At last daylight dawned upon the sturdy Englishman, whose native force has girdled the globe with its glorious civilization; and if the later reports of the Royal Commission are any guide, there is little or no friction between production and transportation in that country. At every step in the solution of the problem it has been the remote and not the near difficulties that seemed most formidable. When reached a remedy was always found. Its railroad system partakes in a measure of the character of the government under which it has developed. Freedom of individual action in matters economic, characterize England more than that of any of the hereditary governments of Europe, and it is this that makes her the most powerful nation on earth.

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We might detail the railroad systems of Belgium, France, and Germany, but we should get farther away from the "problem it presents itself in our own country, as those countries differ in their character and internal administration from ours. We may say, in passing, that in Belgium, although the Government owns and operates over sixty per cent of its railroads, it is generally conceded that the management of the private roads is equal if not superior to those owned by the Government, in economy and efficiency. This, too, when the Government had the selection of the territory through which to lay out its roads. * *

*

We may also say that in establishing fares and rates, the Belgian Government adopts the same system that private roads adopt, and when competition is sharp with private roads it adopts commercial principles, by making special rates, to meet competition either by rail or water, or divides the traffic with its competitors. While its system is a part of the Government, in the details of working its traffic it is governed by the inexorable logic of commercial law.

The French railroad system, according to Mr. C. F. Adams, in its

design and management is opposite that of England and the United States. Under the Empire a plan to divide up the country into six grand divisions and apportion it among as many railroad companies, neither of which was to interfere or compete with the other, was consummated. The interest of the Government in the roads was the inspiring motive, together with that of the ultimate object of their acquisition. At the end of ninety-nine years the "concession" expires, and prior to that time it is optional with the Government to take them at the average profits of the lines during seven years previous to the taking. In working the traffic the companies establish the rates, and when questions arise they are settled by a Board of Arbitration, with the right of appeal to the Central Railroad Commission. Competition is virtually prohibited, thus suppressing all ambition to excellence in the management. But the French people are not so wedded to ancient custom as not to be susceptible to the natural forces at work in other nations, and with its political revolutions will be revolutionized the economic features in her railroad system. In fact few persons understand the economic principles of managing railroads better than M. de la Gournerie, Inspector General of the French Corps of Bridges and Highways, whose reputation is not confined to France. But we only allude to the French system here to show what has been the extent of government interference with the details of working the traffic in other countries than

our own.

In Germany, where the government is everything and the subject a mere convenience, steps have been taken for the acquisition of all the railroads by the Government. The philosophic German mind, if untrammeled, would no doubt work out a system of railway management which might be emulated by more liberal nations, but repression of individual freedom is traditional with the rules of that military cursed country, and while it remains so, we need not expect to draw inspiration from such a source. That nation is what its rules make it. Our own is what the people make it, and to it we return from our diversion, and will try and give an impartial sketch of the agitation of the question of regulating the railroads in the various States of the Union which have attempted it. From their experiences, as we have learned them from public reports, judicial decisions, and newspaper discussions, we have endeavored to deduce a line of policy to recommend for adoption in this, the last of the States in which the "agitation" of the question seems to have been renewed.

We are not unmindful of the fact that considerable discussion has been going on in New York, during the past year, growing out of the Western traffic terminating on the Atlantic seaboard, which has resulted, in the State of New York, in creating a Commission. The action of the Chamber of Commerce of New York City has brought about a great deal of discussion through the newspapers, magazines, essays, and reviews, by some of the most profound economic minds in the country. These essays and reviews have been the means of throwing much light upon the question of transportation. Without further reference to them here, we will proceed with our references. to the action of different States in their dealings with the railroad transportation problem.

In New York a Board of Railroad Commissioners was appointed as early as 1855. This Board made a report at a time when the man