Arizona republican., 1919-05-26
Wages, Prices and Railway Valuation

It is being urged in some quarters-by Senator Cummns the chairman of the senate commit tee on interstate commerce among others-that legislation for the future regulation Of the railways private operation should provide for general reorganization Of the railways on the basis of valua ton.
 The Railway Age in an editorial in it's current attention the that apparently the valuation being made by the interstate com. commission is to be based almost entirely upon cost of physically reproducing the railways and that because of the great of wages and prices the valuation of the railways on this basis probably would be B 100000 greater than it would have been five years ago.
 "The Division of Valuation expects to complete it's inventory of the railroads time late in 1920" the Railway Age, and judging by the prelmin- ary reports few of the smaller roads which the division has made public it's final report to the Inter- state Commerce Commission will consist essentially of figures regarding the of reproduction new less depreciatons for each of the properties results presented thus far have been based unit prices purported be representative of conditions on June 30, 1914, and obtained in the main an average Of unit of work done during the five years 1s10-14 inclusive Presumably these 1914 prices were selected because they afforded the latest information available at the inception of the valuation Just what significance is to be placed in 1920 of repro ducton based unit costs applicable 1914 has not been made clear If valuation is to serve any rse- full purpose it be based on evidence admissible at the time that the valuation is to be used. Any estimate of the cost of reproducing property on q gwen date must be obtained by applying to tho i'm Fentory qualities unit prices that typical at the date the valuation is used Unit prices in 1914 will have no more real relationship to tlc cost of repro ducton in 1920 than the prices of 1904, or 1894 or any earlier year that might be arbitrarily selected
 Had there been radical change in price levels Tn the years subsequent to 1914 this question would De Of no particular importance, but four years of te european war have produced such imitation of cur fecy and other changes that the wages labor and prlces ot many commodities probably average close 10 loo per cent higher than in 1894 and economists hold out scant hope for any appreciable reduction rom the present levels. In the words of Professor Irving Fisher of Yale University TO talk reverentlv of l9l3-4 prices is to speak deal language
 Notwithstanding these considerations there are current references to valuation of railway propen.as in the neghborhood of ST 900 900 O0O-a figure oh Flously based on past costswhereas the use of nres elt unit costs or labor and materials probably would prouuce valuation of 50 per cent higher than would tnose or lSl4 valuation based on present unit costs certainly would amount to less than s22 ono am ooo While the book cost of road and equipment of tho carriers IS only about S1S000 900 GOO and their not capitalization about 100000 00O If the public in ssts on passing rates valuation and on passing vaI aon mainly on the cost of reproduction the railway owners will hardly object Spokesmen of the rsiIvas are modestly suggesting that the book cost of osa and equipment be used as the basis of reeu1a+ina future rates and earnings The public probablv ,vo,d better accept this basis than go on with it's valuation TOT II the valuation is not the money spent in
 making IL VIII De wasted swhile if, as apparently is intended the valuation is be based chiefly m cos4 of reproduction and if as apparently n,ne+ b ao up-todate unit costs must be used the valuation will pc so enormous that it's as basis for reg,latin rates ana earnings will cost the public far more Shan any other basis that could be employed"