Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-03-14
MEN, AND MONEY
BY VI. S. Rukeyser.
Copyright. 1877

emeritus of Yale University, has re-
minded the newspaper reading public
that Old Eli stands for more than
foot ball skill.
DR.. Hadley has stirred the interest
of the financial community with his
challenge Of the whole tendency OF
government to subject the railroads
and other public utilities to more reg
ulation than ordinary business.
The Yale savant gets attention
when he speaks on the transporta-
ton problem, concerning which he
has long been considered a specialist.
During former President Taft's admin
istration DIR. Hadley served as chair
man of a commission which studied
the railroad problem in 1911. Dr.
Hadley, who discusses the question
of the thwarted freedom of railroad
managers in the current Yale Review,
is director of the Atchison, Topeka
& Santa Fe and the New York, New
Haven & Hartford.
The kernel of the Yale sage's ar
gument, which is contrary to the
whole trend in railroad regulation
since the establishment of the Inter
state Commerce Commission in 1887,
as carried in the Bulletin of the Ma
tlonal Tax Association, follows:
Restricting Fronts Harmful.
Efforts to restrict the profits of
prosperous and well-managed corpo-
rations, whether directly or indirectly,
through the use of physical value as
a rate base, have done harm rather
than good to the public, because they
have discouraged the investment of
capital and the development of traffic.
What the public needs Is abundant
service, progressive methods and low
rates. If we can get these results
by a policy of dividends and compen-
sations, which allow the manager of
a public service corporation the same
sort of freedom to use This intelli-
gence-the same sort of incentive to
use his intelligence which is accorded
the manager of a factory or any other
privately managed industry. and to
reap the rewards of his skill and in
telligence in increased dividends to
his stockholders-if we get these re-
suits by this method we get them
cheaply. If we adopt the opposite
policy we run the risk of losing them
altogether. To try to withhold the
reward of skill and foresight under
such circumstances is not economy,
but parsimony-scanty facilities, un-
progressive methods and high charges
in proportion to the service rem
dered"
Here Is a bold and unequivocal plea
for restoration Of complete freedom
of management, an affirmation of the
old-fashioned belief that competition
and good business sense will protect
the public from abuses. This message
receives a more cordial hearing now
than 1t would have a decade or two
ago. The older excresences of unmiti
gated competition. such as rebating,
on the one hand, and excessive
charges, on the other, are in the more
distant past and are beginning to
fade out of public memory. Accord
ingly, the old mania to punish the
railroads has diminished.
An Admission" by Congress.
The transportation act of 1920 was
an admission by Congress that the
pendulum had already swung too far
in the other direction; that the main
force of regulation had been destruc-
tive to railroad credit.
With ownership of railroad and
public utility securities more widely
scattered among the general public
than at any time in the past, a pro-
posal favorable to railroad capital
gets a better hearing. With the pre-
vailing conservatism there will be in
creasing attempts to break down re-
strictive business legislation.
The public-and the legislators
will be called upon to make difficult
decisions.
The need for punitive regulation has
definitely passed. but constructive leg
islation can, in my opinion, make def
mite contributions. 1t can assure out
side investors that accounts will be
kept properly and that earnings will
be reported clearly and promptly. It
can prevent expenditures for reckless
and undesirable purposes. 1t can sur
round a regulated enterprise with pub.
lie faith and confidence, and thus at.
tract capital which might otherwise
be skeptical.
But, unless regulation can persist
emily demonstrate that 1t Is doing use
full things, the idea of permitting a
dollar invested in railroads to earn
only limited amount, whereas a dol
lar invested in automobiles may earn
an unlimited amount, Is bound to
meet increasing opposition.
The unique status of the railroads
for many years resulted in a strike of
capital against the railroads.
Constructive Legislation Aids.
The more constructive character of
recent Federal legislation and regu-
lation have recently caused a return
flow of capital railroad securities
have shown a tendency to regain
their investment prestige.
The restrictions are to some extent
offset by other factors, such as the
permanency of the service sold by
the railroads, their quasi-monopolistic
character and the limited supply of
railroad facilities in growing
country
Whether Dr. Hadley's views are
accepted or not, his throwing of the
gauntlet to railroad baiters will help
to clear the atmosphere and remind
the public that it's first concern is
assurance of good service.
Among the railroad operators the
man who never accepted the philos
ophy of regulation is l., F. Loree.
president Of the Delaware and Hud-
son, a man of keen intellect and