and their construction, which are discussed later, it must be conceded that it is a general principle recognized in all of those cases that it is permissible to make the competitive rate low enough to get business and to hold it. But this principle permitting the carrier to make in particular instances low rates to meet competition has its limitations; it will not justify the making of rates which will not be remunerative, as that must result in throwing undue burdens upon others. 1

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§ 1224. Necessary limitation upon these principles.

That the law of increasing returns cannot be permitted to go too far in rate making has been pointed out many times by those who deal with this question from the legal standpoint. While few economists would go to the logical extreme of justifying any whimsical distribution of the total burden upon particular kinds of business any more than they would defend personal discrimination, many would still defend charging against particular classes of business that can bear the burden of the larger proportion of the cost, and still more they would justify the making of lower rates for classes of business which could not stand the higher rates in order to gain the advantages of increased volume of business resulting in decreasing costs. To a lawyer, however, who believes that discrimination in public service is the abhorrent thing such relative discrimination can no more be defended by business motives than personal discrimination can be. All that can be said of the advantages of getting the higher price for all the business you can, and then making concessions to get more business still, can be said in defense of personal discrimination as well as relative discrimination. But it will not do to come to a conclusion here without full examina

See also the language in Interstate Commerce Commission V.

Alabama Midland Ry. Co., 69 Fed. 227 (1895).

tion of the merits of the controversy, for policy may materially modify logical rules. And if there be real policy in permitting charging what the traffic will bear against particular traffic or in permitting reductions to increase business and thereby reduce cost, it will have its influence in making the law.

§ 1225. Equalization of commercial advantage.

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A theory of fixing rates which appeals to many economists, which is in fact a modification or special application of the policy for charging what the traffic will bear, is the theory that rates should be so fixed as to equalize the advantage of shippers and thus establish conditions of business for the good of the whole country. It is in substance a sort of legal protection to beneficiaries thought to be meritorious. Thus if wheat cannot be raised in Wyoming as cheaply as in Iowa, the rates from Wyoming to the seaboard should be correspondingly reduced; unless indeed it does not seem to the rate fixers to be for the country's good that wheat should be raised in Wyoming. A practical objection to this doctrine will at once appear. It calls on the private individuals who happen to have power over rates to act in such a way as to subserve the public good, rather than their own advantage; and thus without election as legislators and without the responsibility of office, to perform one of the most difficult of legislative functions. It must be admitted that certain judges in certain opinions have given some countenance to this doctrine, but only to the extent of saying that if a rate making body has acted upon these theories its course will not be held to be irrational. While the equalization of advantage cannot be a chief factor in

1 See for example:

Georgia. Southern Ry. Co. v. Atlanta Stove Works, 128 Ga. 207, 57 S. E. 429 (1907).

Minnesota.-State v. Minneapolis

& St. L. Ry. Co., 80 Minn. 191, 83 N. W. 60 (1900).

rate fixing, it may legitimately be considered as one of the subordinate factors tending to lower the particular rate, and may be taken into account with the other factors enumerated in this chapter. It is notable, however, that the courts have never required the making of rates to proceed upon this basis; they have at most, and only to a very slight degree, given some justification to companies which have had such policies in mind.1

§ 1226. Argument against preferential rates.

It is often urged that a carrier should so arrange its rates as to bring about some desirable commercial result, either by equalizing commercial advantages between two localities or between two commodities. This theory is dangerous. The carrier's rates may seldom be fixed with such an object in view. There should be no attempt to deprive a community of its natural advantage or supply the lack of these advantages to another community. A carrier has no right to concern itself with the advantages of one point on its line as against another, or to adjust its tariff so as to equalize the natural advantages between the two places.2 Localities should not be deprived, through a carrier's adjustment of relative rates, of advantages supplied from a common market for the finished product nor of the other advantages which the enterprise of its citizens has secured, and upon the strength of which business conditions have grown up. Certainly such consideration cannot prevail in place of a statute prohibiting

1 United States.-Interstate Commerce Commission v. Chicago Gt. Western Ry. Co., 209 U. S. 108, 52 L. ed. 705, 28 Sup. Ct. 493 (1908).

Illinois. Peoples Gaslight Co. v. Hale, 94 Ill. App. 406 (1900).

2 See for example: Chicago, R. I. & P. Ry. Co. v. Interstate Com

merce Commission, 171 Fed. 680 (1909). This opinion is much modified in favor of allowing the public welfare to be considered by a regulating commission in Interstate Commerce Commission v. Chicago, R. I. & P. Ry. Co., 218 U. S. 88, 54 L. ed. 000, 30 Sup. Ct. 651 (1910).

the charging of more for a short haul than for a long haul which includes it.1

§ 1227. Conclusion as to proportionate rate.

As a result of these considerations, the hypothesis may be drawn that a rate should be established for each article of traffic. This rate will be fixed according to the share of the entire burden of charge which ought reasonably to be borne by that particular article. In determining the reasonable share of the burden to be borne by an article, various considerations must be weighed, and the rate when finally established will be determined as a result of all such considerations. It must be clear, therefore, that the establishment of the particular rate is not, like the establishment of the general schedule of charges, a matter which can be settled altogether by a mathematical formula. There are too many economic factors operating in bringing about a particular rate for that to be possible really. The division of rates among the particular commodities involves judgment and experience; it is not an exact division, but only the closest possible approximation to fairness.

§ 1228. Conflicting theories still persist.

Charging what the traffic will bear will always prove the easiest way to get the proper amount of money, if no legal limitations are put upon this distribution of the burden. To leave the distribution of the burden without law, when the total charge is restricted by law, seems almost stultification. For a disproportionate rate to a particular customer may be more oppressive than a system which, although somewhat too large in its total returns, was one

1 See for example: Behlmer v. Louisville & N. Ry. Co., 83 Fed. 398 (1900), holding that economic equalization cannot justify charg

ing more for short hauls than for long hauls in the face of an explicit statute.

in which he contributed only a proportionate share. Of course, on actual application neither of these theories would to-day be pushed to its logical extreme, the economists would profess to deplore actual extortion in an individual charge; the lawyer would not demand exact distribution of the burden. Legal restriction to some degree is admitted by the economist; economic modification is recognized to some extent by the lawyer. For practical purposes the various theories may be thus reduced to modifications in various degrees of these two persisting theories.

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