DISCRIMINATION IN RAILWAY RATES. 497 



permanently be so low that the income is less than the expenditure. 

 The value of the service to the shipper fixes the opposite limit to the 

 reduction of charges. Here the rule applies to each shipment and at 

 once. The shipper knows with considerable exactness the elements 

 which enter into the cost of the commodity and the price it will bring 

 in the market. He can at once determine then whether or not its 

 transportation will afford him a profit. If it will, it is sent. If not, it 

 remains where it is. With the railroad, on the other hand, the cost of 

 no single shipment can be determined. It is carried on a freight- 

 train, which also carries many other shipments consigned to many 

 places. The same train often carries emigrant passengers, and is run 

 over a track which is also used by passenger-trains. Besides these 

 elements, there are large expenses incurred by the company of which 

 an indefinite amount is chargeable to the various classes of traffic per- 

 formed. It is thus a matter of impossibility to say what will be the 

 cost of any particular shipment, and it is even a matter of extreme un- 

 certainty to state the cost of the various classes of traflSc each by itself 

 — as passengers, freight, express, or mails. The only course then left 

 to the railroad is to take the freight at whatever rate the shipper can 

 send it with profit to himself and hope the whole of its traffic will 

 amount to a greater sum than the cost of the service. The railroad 

 may thus for years continue carrying freight at rates which do not 

 cover the cost of the service, while the shipper will immediately stop 

 his freight as soon as its transportation ceases to be remunerative to 

 him. The rates can in no case be more than the value of the service, 

 but they may be less than its cost. Between these two limits, the 

 former of which ultimately determines the point below which no rates 

 will be held, and the latter of which immediately determines the point 

 above which no freight will be sent, there is in practical operation a 

 varying scale of rates determined by competition both of parallel lines 

 and various commercial forces. 



These different kinds of competition I have elsewhere dwelt upon ; * 

 it will answer the present purpose to name them. They are : compe- 

 tition of capital, of parallel railroads and water-routes, of markets, and 

 the efforts of the railroad to increase its net income by increasing its 

 traffic with lower rates. Wherever there is a fair discrimination exer- 

 cised in fixing rates, it will be found to be based on one or more of 

 these forms of competition. This proposition, it is intended to illus- 

 trate in the following pages ; and, if true, it is of the first importance, 

 for, as competition is generally conceded to be a more potent regulator 

 of prices than all other forces, if discriminations result from it, to pro- 

 hibit them must also interfere with competition. All forms of dis- 

 crimination in the rates of transportation which are fairly exercised 

 may be classed under three heads — namely, those which favor persons, 

 places, or things. 



* " North American Review," May, 1884. 

 VOL. XXVIII. — 32 



