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ECONOMIC LAWS GOVERNING RATES.

[NOTE. This epitome of the economic laws governing railway operations is a partial summary of the accompanying volume, and to those who have not time to study the subject in detail it will afford a glimpse of the conditions that govern the traffic of railways.]

The office of a railroad is to facilitate travel, and to bring producer and consumer together. This is accomplished by the use of such mechanical appliances as the arts of man have placed at his disposal, supplemented by rates that come within the means of the consumer and yet afford a margin of profit to producer and carrier.

The appliances of railroads everyone may study. They are such as traffic requires. But the principles upon which rates are based are not so well understood. A correct and general understanding of them is, however, necessary to the prevention of grave misunderstandings between the public and the carrier. Prosperity, ability of consumers to buy, inducement to producers to create, are all dependent upon a proper application of the rate principle by railroads. No other subject connected with trade is of greater importance. The principles governing it are very simple. Rates must be uniform wherever conditions are alike, and they must be just and reasonable. But

in determining what is reasonable, collateral questions must be considered. Thus the carrier's ability to perform a particular act embraces all his acts, as he can handle designated articles only so long as he handles other articles. Rates cannot, therefore, be considered apart. They are founded on economic laws, on what the article will bear. It is apparent that they are not equally productive, yet unjust discrimination is not exercised by the carrier. He does not conserve particular interests at the expense of others.

While rates must be such as to stimulate trade, they must also be remunerative to the carrier. It results from the application of this condition that traffic which is not productive dies.

Competition is a potent factor in determining rates, and is general in the case of railroads. Thus, the facility and cheapness with which wheat may be moved from India to Liverpool affect the rate on wheat in every quarter of the globe. They also affect the rates on substitutes therefor, such as rye, barley, and so on. In so far as this is so, it is apparent that competition is only partially dependent upon the presence of neighboring lines or other local influences. Local competition, while valuable, is not enough to enforce equitable conditions. It must be supplemented by the competitive markets of the world, including the diversified carriage of mankind by land and water. Richness of soil, facilities of production, the price of labor and rates of local

general consumption, influence the charges of other carriers in every quarter of the globe. It is no exaggeration to say that sources of competition among carriers are as numerous as the divergent interests of trade. Because of this they are self-regulative. Their errors of judgment and sins of omission and commission are self-corrective.

Competition is not the "life" of trade, but its balance wheel or regulator. Trade cannot be vigorous or healthy where it does not exist. Supply and demand are the "life" of trade. Love of gain and the necessities of mankind will keep trade alive where there is no competition. But competition sweeps away or reduces to their proper level enterprises that labor under disadvantages. It is in no part the duty of carriers, any more than private individuals, to keep alive unproductive industries or those requiring constant succor; to do so would be to make one portion of the community bear, permanently, the burdens of another. Wherever competition prevails, the fittest survive. It stimulates men to great effort; develops their inventive genius, enforces economical methods, keeps alive interest, leads men to personal sacrifices. Competition is not an unmixed good. Its advantages, however, outweigh its disadvantages. Its hardships are mollified by the devices of men. Thus, those of railroads are mitigated.

Local competition enforces special conditions,

railroads labor under. Wise discrimination is a necessary adjunct of the duties of carriers. When denied, both carrier and community suffer.

Railways in the United States have suffered greatly from local competition. While encouraged to compete with each other, it has been sought to deny them the right to mollify their strife. Wherever railway construction is free, owners should be permitted to regulate competitive effort, and laws prohibiting it are destructive. One of the devices of railways for preventing undue competition is pooling. Where it is prohibited, consolidation of rival interests follows when the adoption of other effective devices is impossible.*

Competition between local carriers is beneficial in many ways aside from its effect on rates. It

* The device of pooling has been vehemently opposed in the United States under the belief that, if countenanced, managers of railroads would take advantage of the public or cease to try to operate except under this makeshift. This is a mistake. It should not be forgotten that they have never adopted a pool, in any country, except with reluctance and only under the most trying circumstances. No railway owner or manager will willingly circumscribe his action. This was the experience in the United States during the short period in which pools were permitted. They were never entered into except with reluctance, and only when their presence became necessary to protect the interests of the community and the carrier. While the practice of pooling is advocated by economists as a panacea for many of the evils that affect railroads subjected to indiscriminate competition, it operates generally to the disadvantage of properties highly managed and equipped, and in favor of those more potential as disturbing influences than as

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