Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-08-17
Continued From First Page.)

Continued From First Page.)
in connection with confirming the ap-
pointment of Chief Justice Hughes.)
Now let us see what has happened to
the valuation of public utilities, as de-
termined by what it would cost to re-
produce them.
In any large daily newspaper any
one may find thing called, in the
somewhat mystic LANGUAGE of finance
and currency, 1.-The commodity index
The commodity index represents speak
ing roughly. the average price of good:
compared with previous years.
According to this index, a thing
which was worth 81 in 1926, four years
ago, is today worth 83 cents. Things,
commodities" includes public utility
properties. A public utility property
which was worth 100000 in 1926 is
today worth $83,000,000
The statement is subject to qualiflca-
ton. The commodity index is based on
the average of large number of COM
in some degree counter to the average
Also, while the valuation of a public
utility may be reduced by the change
in the value of the dollar, it may be
increased by some local condition, such
as increased value of land, due to local
changes in population. What is said
here applies to averages. AS to any one
utility there may be conditions which
make its valuation higher in spite of
the effect of the changing value OF the
dollar
But, speaking broadly and subject to
these qualifications, an electric plant or
gas plant which in 1926 was worth
500, 100000 is today worth $83, 100000
If in 1926 it would have cost 100000
900 to reproduce it, the cost of repro
duction today would be $50 100000
Consequently. if in 1925 the public
utility could charge rates high enough
to yield per cent on 100000, coo, or
$7,000,000, it can charge today only
enough to yield per cent on $83,000,-
999, or $5,810,000.
Settlement Comes Without Politics.
Because that reduction amounting
to something like II per cent? has
taken place in the value of public util-
tiles on their own theory that they
should be valued at what it would cost
to reproduce them-because of that re-
duction in valuation, it must follow that
there will be the (roughly) correspond
reduction in rates charged the pub
lic This reduction in rates will settle,
or certainly should settle, the public
utility question in most o. the forms
in which it is up in the various States.
The settlement, If it comes about, will
occur not through the agency of poll
ticians, but almost, one might say, in
spite of them.
One feels tempted to say, in a mo-
ment perhaps of hot-weather cynicism,
that politics has never been helpful in
the settlement of any economic ques-
ton, that politics has never done any,
thing but bedevil such questions.
During the very time. during some
10 years past. when the Supreme Court
of the United States was handing down
decisions saying that the valuation of
a public utility should be, speaking
roughly, what it would cost to repro
duee it--during that very time the
politicians were crying to heaven, criti-
eizng the Supreme Court violently, pro-
claiming that this was the wrong basis
of valuation. The demand of the critics,
the radicals and the politicians was
that the Supreme Court should value
public utilities on the basis (mainly) of
the actual number of dollars invested In
them.
This latter basis of valuation. the ac-
tual number of dollars invested, has
much merit. If it did not have merit
it would not have been supported by
men so able as the Supreme Court mi
nority, consisting of JuStic.s BrandeiS,
Holmes and Stone.
1t may be that we would be better
off in the long run-many thoughtful
persons think We would--f we would
adopt permanently the principle that
public utilities taS we'll as railrCadS)
should be valued on the basis of the
actual number of dollars invested. To
adopt shat principle would give US at