in devising these means the chief difficulty | ous from the place of shipment to the place of was encountered. Agreements upon rates were voluntary arrangements which could be departed from at pleasure, and if they had behind them no sanction, they were not likely to stand in the way of a war of rates when the provocation to one seemed sufficient. Accordingly, the scheme of pooling freights or the earnings from traffic was devised and put in force through the agency of these associations, as a means whereby steadiness in rates might be maintained. The scheme was one which was made use of in other countries and had been found of service to the roads.

The pooling system was looked upon with distrust by the public, mainly because it seemed to be a scheme whereby competition between the roads could be obviated, and rates for railroad service put up or kept up to unreasonable figures. But if railroad managers supposed that by this scheme they were to stop competition among themselves, the result has not answered their expectations. The portant possibilities as a restraint upon reckcompetition has still gone on; each road less rate wars. The reductions when such striving to obtain as large a share of the busi-wars are in progress have generally been made ness as possible, and no agreement among them could altogether prevent a yielding to the pressure of shippers for lower rates.

parties; and the number of parties whose minds are to be brought into accord being commonly very considerable, an association of officers or agents is made the means of bringing about the desired unity of action, and is also made a common arbiter, to prevent frequent and serious disturbances.

Among the reasons most frequently operating to cause complaints of rates may be mentioned:

The want of steadiness in rates;

The disproportion between the charges for long and those for short distances;

The great disparity between the charges made for transportation by roads differently circumstanced as to advantages;

of less value. With this method of arranging tariffs little fault is found, and perhaps none at all by persons who consider the subject from the standpoint of public interest. Indeed, in the complaints thus far made to the Commission little fault has been found with the principles on which tariffs for the transClassification, also, as has been said, is not portation of freight are professedly arranged, by the Act taken out of the hands of the car-while applications of those principles in parriers, though a certain power of supervision is ticular cases have been complained of frevested in the Commission; and classification is quently and very earnestly. not only best made by joint action, but if it were not so made and the methods of the roads thereby brought into harmony, it would prob ably become indispensable, however undesirable it might otherwise be, for the Law to undertake to provide for it. Moreover, when classification is made and put into effect it becomes necessary to make provision for inspection or some sort of supervision of its application, in order to prevent its being employed as a device for giving preferences as between shippers. A fraudulent classification, through connivance of the agent in making out deceptive shipping bills, has often been resorted to for this purpese; and as the fraud affects the competing carriers as well as the shippers who are discriminated against by means of the cheat, the carriers and the public alike are interested in such a supervision of the work of all the roads as will be likely to detect the fraud. Self interest on the part of the carriers will impel to this supervision, and it is most generally done through some common agency. If it shall be fairly done as between the carriers themselves, it will tend to the protection of the public; and the benefits will be on the same line with those the Act undertakes to establish or provide for.

XI. REASONABLE CHARGES.

Of the duties devolved upon the Commission by the Act to Regulate Commerce, none is more perplexing and difficult than that of passing upon complaints made of rates as being unreasonable. The question of the reasonableness of rates involves so many considerations and is affected by so many circumstances and conditions which may at first blush seem foreign, that it is quite impossible to deal with it on purely mathematical principles, or on any principles whatever, without a consciousness that no conclusion which may be reached can by demonstration be shown to be absolutely correct. Some of the difficulties in the way have been indicated in what has been said on classification; and it has been shown that to take each class of freight by itself and measure the reasonableness of charges by reference to the cost of transporting that particular class, though it might seem abstractly just, would neither be practicable for the carriers nor consistent with the public interest.

The public interest is best served when the rates are so apportioned as to encourage the largest practicable exchange of products between different sections of our country and with foreign countries; and this can only be done by making value an important consideration, and by placing upon the higher classes of freight some share of the burden that on a relatively equal apportionment, if service alone were considered, would fall upon those

The extremely low rates which are compelled by competition in some cases, and which may make rates which are not unreasonable seem, on comparison, extremely high.

Some others will be mentioned further on. The want of steadiness in rates is commonly the fault of railroad managers, and may come from want of care in arranging their schedules, or from want of business foresight. But more often perhaps it grows out of disagreements between competing companies which when they become serious may result in wars of rates between them. Wars of rates, when mutual injury is the chief purpose in view, as is sometimes the case, are not only mischievous in their immediate effects upon the parties to them, and upon the business community whose calculations and plans must for a time be disturbed, but they have a permanently injurious influence upon the railroad service because of their effect upon the public mind. When railroad companies determine for themselves what their rates shall be, it is not unnatural for the public to infer that the lowest rates charged at any time are not below what can be afforded at all times, and that when these are advanced, the company is reaching out for extortionate profits.

Now, there are few important lines in the country that have not at some time in their history been carrying freight at prices that if long continued would cause bankruptcy. But to a large proportion of the public the fact that the rates were accepted was proof that they were reasonable; and when advanced rates are complained of, the complainants, to demonstrate their unreasonableness, go back to the war prices, and cite them as conclusive proof of what the companies then charging them can afford to accept. Many popular complaints have their origin in the ideas regarding rates which these wars have engendered or fed, and the evils of the controversies do not end when the controversies are over, but may continue to disturb the relations of railroad companies with their patrons for many years afterwards.

It may be truly said, also, that while railroad competition is to be protected, wars in railroad rates unrestrained by competitive principles are disturbers in every direction; if the community reaps a temporary advantage, it is

found carrying the article at the same price for 100 miles as for 20. The low rate for the long distance has extended the area of production and benefited the city; and it is possible to conceive of cases in which the opposite course, of taking distance into the account in

one whose benefits are unequally distributed, | tion in the city, have gradually extended the and these are likely to be more than counter-area from which they would receive and transbalanced by the incidental unsettling of prices port it at the lowest rates, until they may be and interference with safe business calculations. The public authorities at the same time find that the task of regulation has been made more troublesome and difficult through the effect of war rates upon the public mind. These are consequences which result so inevitably from this species of warfare that it would nat-all rate making, would have kept production urally be expected they would be kept constantly in mind by railroad managers. It is inevitable that the probability that any prescribed rates will be accepted by the public as just shall to some extent be affected by the fact that at some previous time they have been lower; perhaps considerably lower.

The disproportion between the rate charged and the distance the property is carried is also important in its effect upon the minds of those who have not the time or perhaps the oppor tunity to study the subject and understand the reasons. There are grounds on which short haul traffic may be charged more in proportion to the distance of transportation than long haul traffic, some of which anyone would readily understand and appreciate. Thus, it is seen that a considerable proportion of the carrier's service is the same whether the transportation is for the short or for the long distance: there must be the same loading and unloading, the same number of papers and entries on books, and so on. It is also seen that short haul traffic is more often taken up and laid down in small quantities, and that for this reason the proportionate train service is much greater.

But when all these considerations are taken into account it will still appear that the long haul traffic is given an advantage in rates which must be accounted for on grounds which are not so readily apparent. When the reasons are seen it may perhaps appear that there is in fact no wrong either to the shippers who are apparently discriminated against, or to the general public.

so far restricted in territory that producers near the city could never have been given as low rates as they receive now, when they are charged the same as their more distant competitors. Where such a case appears, the failure to measure the charges from regard to distance could not dogmatically be pronounced unjust, if it appeared that the railroad on the one side and the public on the other was benefited by the course actually adopted. But to increase the rates to the nearer producers, or even to keep them at a point which, though fair in the first place, has in the course of events become unreasonably high, in order to be able to put those at a distance on an equal footing in the market with such nearer producers, would be manifestly unjust. Not even on grounds of general public advantage do we understand that this would be justified; for public benefits, when they are to be had at the cost of individual citizens, cannot rightfully, nor we suppose lawfully, be assessed on one class of the people exclusively.

The great disparity in the charges of different roads for the transportation of the same kind of property is a prolific cause of complaint, sometimes justly founded and sometimes not. It is apparent sometimes, in the complaints which are made to the Commission, that the parties complaining hold the opinion, or at least have an impression, that the cost of transporting a particular species of property is substantially the same on all roads, and that consequently the charges made by one road may prove with tolerable certainty that the higher charges made by another road are unIt is not uncommon that in railroad freight just. If the circumstances and conditions unservice the rates for the transportation of a par-der which the traffic is carried by the two roads ticular kind of property, instead of being reg- are substantially the same, the comparison ularly progressive, shall be found arranged on would be legitimate and the argument from it a system of grouping, whereby the charges to of very great force. But when any such comall points within a defined territory shall be the parison is made, there are some circumstances same, though the distances will vary. Thus, having an important bearing upon rates which at the present time the rates which are made cannot be left out of view. Among these may from New York to Chicago are also made be specified: from New York to all points within a territory about Chicago, which includes some important towns in western Indiana and western Michigan. A question might be made by such towns whether grouping them with Chicago and making them pay the same rates is just; but the grouping system in general departs so little from the distance proportions that it is seldom the ground of complaint.

There are cases, however, in which the distance proportions are purposely disregarded; and the doing so is justified by the managers on the negative ground that no one is wronged by it, and on the affirmative ground that the public is benefited. Cases of the sort may perhaps be found about all our large cities in which the railroads, as to some particular agricultural production needed for daily consump

The length of haul.-A thousand tons of wheat can be loaded, transported a thousand miles, and delivered, much more cheaply in proportion to distance than the same quantity can be loaded, transported one hundred miles and delivered.

The quantity hauled.-A train load of coal can be transported more cheaply in proportion to quantity than a single car load, and a car load more cheaply than a hundred pounds. So if the business is large, though it be the transportation of many kinds of property, it can be done relatively more cheaply than if it were small.

Return freights.-If lumber or other property in quantity is to be delivered at points where there will be return loads for the same cars, the delivery can be made much more cheaply

than at points where return freights could not|cago. Any arrangement by consolidation or be expected.

Cost of moving trains.-This is very much less on some roads than on others by reason of lighter grades, cheaper fuel, less liability to obstruction from storms, and other causes which may disturb the track or delay trains.

These are among the causes which have an important bearing on relative rates. Beyond these the relative cost of roads must be allowed force also, if the owners are to be permitted to charge such rates as will make their investments remunerative. A complaint that rates are unreasonable may, therefore, require for its proper adjudication a careful inquiry not only into the circumstances and conditions of the road which makes them and of the traffic upon it, but also into those of other roads whose lower rates are supposed by comparison to show the injustice of the rates complained of. But there are reasons which make it necessary, in adjudicating a case of alleged excessive rates, to consider rates on other lines or at other points, even when the complaining party makes no argument or draws no conclusion from them. Questions of rates on one line or at one point cannot be considered by themselves exclusively; a change in them may affect the rates in a considerable part of the! country. Rates from the interior to New York necessarily have close relation to rates from the same points to Philadelphia, Boston, and Baltimore; rates from the seaboard to Toledo must have a similar relation to those from the seaboard to Detroit and other towns whose business men compete with those of Toledo in a common territory. Just rates are always relative; the Act itself provides for its being so when it forbids unjust discrimination as between localities. This prohibition may some times give to competition an effect upon rates beyond what it would have if the competitive forces alone were considered.

otherwise that should undertake to eliminate this influence would, if made on a large scale, be futile, because it would antagonize laws of trade and communication which would be too powerful for it; and on a small scale, affecting particular towns or small districts, it might be illegal from its manifest inequality or injustice.

Competition.—A study of the Act to Regulate Commerce has satisfied the members of the Commission that it was intended in its passage to preserve for the people the benefits of competition as between the several transportation lines of the country. If that shall be done, the towns which have great natural advantages, or advantages acquired by large expenditures of money in establishing new thoroughfares of commerce, will have cheaper rates than can ordinarily be obtained by towns less favorably situated. New York with its noble harbor, its central location, the Hudson River, and the Erie Canal for interior water ways, can not be deprived of the benefits which spring from these great natural and acquired advantages without altogether eliminating competition as a force in transportation charges, and by an exercise of sovereign legislative power establishing arbitrary rates over the whole country.

It might possibly be within the competency of legislative power to prescribe for the several interstate railroads equal milage rates for the whole country; but this, if enforced, would put an end to competition as a factor in making rates, and to a very large extent deprive the great business centers of the country of their several natural advantages, and also of the benefit of expenditures made by them in creating for themselves new channels of trade. It would, in fact, work a revolution in the business of the country, which, though it might be greatly beneficial in some directions, would be fearfully destructive in others. Congress has not by the existing legislation underThe Commission has had occasion, where a taken to inaugurate such a revolution; nothing railroad company operated lines which run in the Act to Regulate Commerce looks in that parallel to each other, to hold that if the com-direction, unless it be the prohibition to charge pany yielded to competitive forces so far as to give the towns on one line very low rates, the effect of such low rates upon the business of rival towns on the other line could not be ignored when their rates came under consideration. The natural influence of just competitive forces ought to be allowed as it would be as between two lines owned by different companies; and if the rates on one line were made very low because of competition, keeping the others high because the absence of competition enabled it to be done might amount, within the meaning of the Law, to unjust discrimina tion. Consolidation of rival lines, or the bringing them under the same management, cannot justify ignoring on one line the effect of com petitive forces on the other; those forces always, when not unnaturally restrained, have an influence which reaches beyond the points whose business is controlled by it, and by secondary effect modifies prices to more distant points. This is well understood in the transportation business; the modifying effect of The competition by water is the most imrates by lake and canal is perceived in the portent factor in forcing rates to a low level at charges on all lines from the Mississippi to the the points where the lines of land and water seaboard; the rates to and from Duluth affect transportation intersect. Where there are good all charges in the Northwest to and from Chi-channels of water transportation, the cost of

more for a shorter than for a longer haul on the same line in the same direction, the shorter being included in the longer distance. But that prohibition is not absolute; and if it were, a strict enforcement would necessarily be at the expense of the competitive centers which have heretofore had the exceptionally low rates. The rates have made them centers for a valuable wholesale trade which they cannot expect to retain permanently in its entirety if they are deprived even in part of the advantages which they have hitherto had from the competition of rival carriers. The benefit which non-competitive points receive must be largely at the expense of the competitive. This is one of the inevitable consequences of perfecting the reform in the direction of basing rates upon distance more than has been the case hitherto. It is an incidental disadvantage to some which is supposed to be more than made up by the more equal apportionment of transportation benefits.

moving traffic upon it is so very greatly below | the States, it has operated directly to increase the cost of rail transportation that the railroads railroad earnings, especially in the cutting off would scarcely be able to compete at all if ra- of free passes on interstate passenger traffic, pidity of transit were not in most cases a mat- and in putting an end to rebates, drawbacks, ter of such importance that it enables the rail- and special rates upon freight business. The roads to demand and obtain higher rates than results of the Law in these respects are also are made by boat. But even when compensat-eminently satisfactory to the general public, ed for the extra speed, the rates which the certainly to all who had not been wont to roads can obtain in competition with the natu- profit by special or personal advantages. In ral water ways must be extremely low and in connection with the abolition of the pass syssome cases leave little if any margin for profit. tem, there has been some reduction in passenThe experience of the country has demonstrat ger fares, especially in the charge made for ed that the artificial water ways cannot be milage tickets in the Northwest, the section of successful competitors with the railroads on the country where they are perhaps most em. equal terms. If the effort is to make the busi- ployed. ness upon them pay the cost of their maintenance and a fair return upon the capital invested in them, its futility must soon appear. The railroads long since deprived the great canals of Ohio, Indiana and Illinois of nearly all their importance, and the Erie Canal is only maintained as a great channel of trade by the liberality of the State of New York in making its use free; in this way taking upon itself a large share of the cost of transportation which would be assessed upon the property carried if the canal were owned and held for the profit of operation as the railroads are.

Freight traffic for the year has been exceptionally large in volume, and is believed to have been in no small degree stimulated by a growing confidence that the days of rebates and special rates were ended, and that open rates on an equal basis were now offered to all comers. The reflex action of this development of confidence among business men has been highly favorable to the roads.

In some localities the passage of the Act was made the occasion on the part of dissatisfied and short sighted railroad managers for new exactions, through a direct raising of rates, by In their competitive struggles with each change in classification and otherwise. The other towns can not ignore the effect which manifestation of the spirit which induced such the existence of natural water ways must have action is now but seldom observed, and the upon railroad tariffs; the railroad companies wrongs resulting from it have in general been cannot ignore it, nor can the Commission ig- corrected. The effect of the operation of the nore it if competition is still to exist and be al- fourth section has been specially described lowed its force according to natural laws. above, and the Commission repeats in this Neither can the great free Erie Canal be ig-place its opinion that, however serious may nored; it influences the rates to New York have been the results in some cases, the genmore than any other one cause, and indirectly, eral effect has been beneficial. The changes through its influence upon the rates to New in classification made since the Act took effect York, it influences those to all other seaboard have been in the direction of greater uniformcities, and indeed to all that section of the ity, and have also in general, it is believed, country. been concessions to business interests.

not well be maintained. No destructive rate wars have occurred, but increased stability in rates has tended in the direction of stability in general business. There is still, however, great mischief resulting from frequent changes in freight rates on the part of some companies; changes that in some cases it is difficult to suggest excuse for.

Other considerations bearing upon the rea- The tendency of rates has been downward, sonableness of rates might be mentioned, but and they have seldom been permanently adenough has been said to show the difficulty of vanced except when excessive competition had the task which the Law has cast upon the Com-reduced them to points at which they could mission, and the impossibility that that task shall be so performed as to give satisfaction to all complaints. The question of rates, as has already been shown, is often quite as much a question between rival interests and localities as between the railroads and any one or more of such localities or interests; but while each strives to secure such rates as will most benefit itself, the Commission must look beyond the parties complaining and complained of, and make its decisions on a survey of the whole field that, either directly or indirectly, will be affected by them.

XII. GENERAL OBSERVATIONS. The Act to Regulate Commerce has now been in operation nearly eight months. One immediate effect was to cause inconvenience in many quarters, and even yet the business of some parts of the country is not fully adjusted to it. Some carriers also are not as yet in their operations conforming in all respects to its spirit and purpose. Nevertheless the Commis sion feels justified in saying that the operation of the Act has in general been beneficial. In some particulars, as we understand has also been the case with similar statutes in some of

The general results of the Law have been in important ways favorable to both the roads and the public; while the comparatively few complaints that have been heard of its results are either made with imperfect knowledge of the facts, or spring from the remembrance of practices which the Law was deliberately framed to put an end to.

XIII. AMENDMENTS OF THE LAW. The Commission has not seen occasion for recommending any very considerable changes in the Act under which its work is performed. It has seemed to its members that the Law for the regulation of interstate commerce should be permitted to have a growth, and that it would most surely as well as most safely attain a high degree of efficiency and usefulness in that way. The general features of the Act