New-York tribune., 1910-08-31
THE RAILROAD RATE HEARING

The opening Of the railroad rate hear
Elgs at Chicago indicates that the rail
roads are going to take a moderate and
sensible position before the commission.
Nothing viii be heard, according to the
information III Chicago, of the verge of
bankruptcy" arguments, which were
popular in certain quarters some time
ago, but instead the roads will rest their
case for the proposed increases on the
grounds of "eXpedency and business
necessity" 1t will be urged on the part
of the roads, we suppose, not that they
will soon stop paying dividends if the
present freight rates are maintained. but
that larger earnings are necessary to I'M
prove the roads and to attract capital
70 their support. As TO the fairness of
the proposed rates it will be urged that
Trey are not excessive when the value
Of the service is taken into cOnsidera-
ton
Here will be one point Of difference
between the railroads and the shippers.
The former, it is understood. will main
tain that capita lization should not en-
ter into the question as 10 what are
proper rates, but that they should be
determined by the value of the service
performed: that is 10 say. they should
he what the traffic will bear" The
shippers, on the other hand. will bring
forward the usual argument that pres
ent rates are yielding large and ample
returns upon capital actually invested
Ii railroads, and Will seek to have the
commission settle the question on the
basis Of the physical value of the
property.
These two theories of rate making will
have, because Of the magnitude of the
interests concerned, more thorough
discussion than ever before but it is
improbable that the commission will be
drawn into laying down the principle
by which in its opinion rates should be
made. The question is Il difficult one, and
there is probably some difference of
opinion among the members of the com
mission as 10 what the guiding princi-
pie should be. Following the courts, the
commission has appeared to lay good
deal of stress upon the value of the
property involved as an element in the
problem. and this has inclined it to re
gard with favor the idea of causing
q physical valuation of the railroads Of
the country 10 be made. The theory
that rates should be fixed so as to WELD
a reasonable return upon the value of
the property involved sounds so simple
that it has proved extremely attractive
But its simplicity is deluSive. value
being. as the Supreme Court itself has
said, largely a matter of opinion.
Nevertheless. how difficult it is to keep
the value Of the property involved out of
consideration was illustrated in the tes-
tim0ny before the commission of PreSi-
dent Ripley of the AtchiSon. Topeka &
Santa Fe Railroad. How much consid-
''eration should be given to such capitali-
''Zation in the making of rates. he was
asked. None at all he replied: the
value of the service rendered should
govern the making of rates" But little
later when explaining how his railroad
needed money" he said that in the fif-
teen years during which he had been at
its head his road had earned only 43t
per cent on its entire capitaliZati0 ton
This capitalization" he added, sis less
than the reproduction value of the
property That is to say, his argument
seems to be that the rates must be raised
because the road needs money, and the
road needs money because its earnings
OH the physical value of its property
are low. If railroad presidents cannot
maintain a perfectly consistent position
en- this question, it is perhaps too much
to expect the commission to reach per-
fectly clear and satisfactory rule for
determining the propriety of rates But
we hope that this large consideration Of
the problem which it is now undertake
ing will lead it away from rather than
toward the morass Of a physical valua-
ton.