The sun. [volume] (New York [N.Y.]) 1833-1916, 1910-12-03

CLEMENTS If the Interstate Commerce
Commission said that that body be-
lieves that n physical valuation Of the
railway properties Of the United states
i rh, first step toward ad.qIat" regila-
ton OF Frailwayl rates. In" scheme
nf phv-i,a Naluaiiu ion a. a basis for rat"
making l. fatty rejected a. utterly
uuwurhablr by practically all the abl,r't
railway authorities uf the country. The
advocates ut the general plan ara IN
wide Disagreement regarding th" prope-
basis for such a valuation Will. railway
experts are in litth' short Of full agree
nlrnt thai the relations between physical
value of property and "harg" for rams
purtatInn are so vague that equitable
/ adjustment Of rate. ou valuation basis
I would h" impossible
To the argument that III" valuation
of railroad should represent its cos
of present reproduction. nesS. The
answer Is made that tn. sum of the
cost of reproducing "A watch. its case,
springs. Jewels. &c - the value OF a
watch rs Junk but not l's value "a a
watch It, value as watch depends
mainly on how II will run similarly
IN" cost of reproducing the locomo-
tivcs. cuvrrt-. fish plates, &c. Of a
railroad - not It's value as railroad
It's valu" as "a railroad depends on
whether il = 50 located and 30 organized
and operated a. 20 h. of great or little
utility TO the prbhc, of great or Fiji"
profit - It's owners Rate regulation
based on physical valuation alone would
put premium on extravagant con-
-trlIcrion and operation and discount
gu skIlfiIl management
This is a simple statement Of an els>-
mrntArv business principle long cs'ah-
liSh"d and universally recognized. In
IN" 49, -! TN" G. &. G. and ~ l.. Rail
WAY ~. BACkrS I5i l. ;. AS. the
supreme Court of the United States
held thar the vahir Of property results
from ia" us. to which il ia put and varies
with The prohrablensss Of that Use.
present and prospective, actual and
anticipated There is no pecrIniary
vahI. oursid" of that which results from
such Is" SuppOs" there are two bridges
over the OHIO the cost Of the constrlIc-
ton of zach b"ing tn" same. one bet tween
Cincinnati and Newport and the other
twenty ml"s below. where there il moth
ing but vlllag" on either shore The
vahl. of the one will rnanifestlv b~
greater than that Of IN" other. and that
excess of vallic will spring solely from
the larger Use OF IN" on. than of tho
Other. ON what basis would the pro-
poncnts Of physical valuation ia the
determining factor in rate making adj
uIs' toll charge on these respective
bridges,
expert VII" has discussed the sub
l'oi rnf''r- - IN" Denver and Rio Grande
road. "NIth it, difficult mountainous
slrnIug- ~ H. competition with such
a road a. th" Union facifi" with it,
relatively easy construction and its
larg.' gross and net earning He asks
whether tn" rat" regulating authorities
would hN th. rates 30 that the road Of
r"~ "Ssarlv expensive construction and
comparatively limited business could
earn a far return and 10 NOR" fav"rably
situated Competitor earn a perhaps I'M
duk high return. ar fix the rate. 50 that
the strong road would earn no mors
than - fair return. with Ri. possible or
probable result nf forcing it@ weaker
competitor into bankruptcy. an event
that would be n calamity IN the territory
,"'ially served by m. bankr'Iptad line.
There are several line, over which rner-
ohandise may ba shipped from this oitv
=" Buffalo. for ln-tanc" Tn" inevitable
r,.srIlt If rates fixed on q basis If the
phvsrral value or the reproduction cost
~ 'hu-.. lines would ba variation in per
mi'r..i charg"S and a spectral price ad
vantag" =" IN" of the several roads
The popular idea. continues the
writer already quoted seems to be that
rate. are. - adjusted a. to "arn re-
turn on III" capitalization Of IN" railway.
that many railways ara over,apitalized
and charge excessive rates IN order to
earn return on their excessive rapitali-
s!flnn and that valuation should be
substituted for capitalization as the
basis II rat" making The grea. trouble
wlth this th"nrv j. that II IL absolutely
fall" Their" ar. roads that ar. over
capitalized. but they ar" relatively few
III number. and IN" evidence IN tho
matter at least indicates tha, over
. capitalization tends to r"drIc" rather
than - increase rate charges Such
road ar" frequently abb" 80 TAX. BUSH
mesa from other lines by rate cutting.
" hill" rat" increase Unless y il made ON
all lines would only drive business To- |
their competitors Moreover. neither
Capitalization nor physical valuation
ar nrI- any Iuo v hat"vnr 10 tho rrasnn-
hbI"r"-- 81 W" rat" to b" charged on /
any gwen commodity IN" unit cos, ~ !
transporting -everal thousand diTnr.n, |
',umvhitT- for different distances |
under widely different conditions is /
Almost II not absolutely impossible NJ
determination. Without tho necessary |
data, on what basis can selection hs |