Arizona republican., 1922-05-04
Ry Frederie j. Haskin

Throughout the winter the inter-
state commerce commission has been
engaged upon an intensive study OF
fixing railroad freight rates to pro-
vide transportation for American
business at reasonable charges and
at the same time TO enable the rail-
road corporations to earn a fair re-
turn on their investment. This is a
tremendous undertaking. The COM
mission has heard thousands of pages
of testimony from experts represent
ing railroads, shippers, investors and
the general public. One of the most
difficult problems involved is how
much the commission should be
guided in fixing rates by the need of
the railroad companies for revenue
adequate to pay dividends to their
stockholders
There are two diametrically OPP
posed schools of thought on the
question of rate making in relation
to return, The railroads maintain
that the commission should consider
the amount of money invested in rail-
road property, equipment and cost OF
operation and then fix a rate which
will yield a. fair return-say s per
cent--on this capital sum. They say
that they are regulated and not in the
free market of competition and there
fore should have rates fixed on
basis which will guarantee earnings.
In opposition, the shippers present
some such argument as follows: a
man owns two houses Both cost him
$4,000, including land and building.
But one is better situated or better
designed than the other. He can
get rent of $50 a month for one
house but only $40 a month for the
other. After holding them for some
time he desires to sell. Prospective
purchasers investigating to learn
what these properties were actually
worth would find out what rent they
yielded the owner. Upon discovering
that one house paid a return of $40
and the other $50 they would offer
higher price for the $50 house than
the other.
In other words, the value of a
property must be determined by Its
earning power. The rule sought by
the railroads Is the reverse, that is,
the earning rate must be fixed arbi-
trarily by the cost of the property.
Commission Must Judge
This gives something of an idea of
the difficult problems which arise in
connection with rate regulation. Both
sides have their champions. The
commission must decide between
them. To obtain the best available
information. the commission gathers
elaborate data. Such a study recent
ly mas been made by DR.. Jean Paul
Muller, an attorney, accountant and
economist of Washington. lie has
made a critical survey of the relative
value and earning power of group
of railroads and a group of industrial
corporations. The figures produced
XII nv
the relative positions of these two
important business groups.
The man in the street who works
for salary sometimes has difficulty
in thinking Of money as financiers,
industrialists and economists think OF
it. The fact is that money in the
large business sense is a comodity
Just as potatoes, shoes, wheat or steel
are commodities. It's price and avail
ability are determined by the laws OF
supply and demand just as in the
case of other goods. Money has
price as much as cigars. The price or
money is expressed as interest. In
reality. il is rent. A given amount of
rent is paid for the use Of money Tor
a. year. The rent is high or low in
accordance with the abundance or
scarcity of idle money and also in
accordance with the relative risk in
volved of losing it or getting it back
at the end of the lease. If man is
sure he will get his money back he
will rent it for q lower figure. Many
men arc willing to run a slight risk
in order to earn the higher rent for
the use of their money which risky
investment pays. No one is willing
to run very much of a risk. Capital,
that is money, is the most timid COM
modify in the world.
Now DR.. Muller has studied a
group of railroads and group OF
industrial companies for the ten-year
period from 1911 to 1920 inclusive,
to ascertain which group pays the
best yield.
One thing which governs the safe
ty of an investment is the amount OF
money already advanced on the Sc
curity offered
Much Money in Roads
DR. Muller's figures show that for
this ten-year period more money al
ready had been invested in the rail-
roads than in the industrials. BY
industrials is meant manufacturing
enterprises and the like. The fig
ures show that for the ten years ap-
proximately half OF the value of the
railroads was mortgaged. The fig
ures for the mortgaged portion range
from 53.05 per cent in 1911 to 4foe
ner cent in 1920. The surplus, that is
profits, for this group range from
7.8S per cent in 1911 to 176S per cent
in 1920. This shows that the rail-