The Willamette River Case: Gains 251 



not support the scale of aluminum reduction operations assumed 

 in our example immediately above,. We can assume, however, that 

 this amount of power (22.34 per cent of the total 80,000 kilowatts) 

 is allocated, along with power from other federally developed 

 sources, to the production of aluminum. Given the difference in 

 annual power costs between a federal Northwest and a private Ohio 

 Valley plant of $900,000, we reduce the amount to only 22.34 per 

 cent, or $201,100. This is the amount of the gains with which we 

 are concerned. 



This gain of $201,100 next is divided between the aluminum 

 industry and the railroads providing complementary services, and 

 further broken down in Table 54. First, we treat the regional 

 locus of gains associated with the share going originally to the 

 aluminum industry. 



The increase in the before-tax share of the aluminum industry's 

 gains would amount to about $30,800 (22.34 per cent of $138,000). 

 Again, assume that the industry retains 55 per cent of the total out 

 of which to reward the owners of capital services and distributes 12 

 per cent to labor and 33 per cent to consumers. This would leave 

 the industry with a before-tax gain of $16,900, shared equally with 

 the Internal Revenue Service on our assumption of a 50 per cent 

 marginal corporate profit tax rate. We further assume that only 

 10 per cent of the shareholders in the industry reside in the Pacific 

 Coast region, with the remainder of the shares owned by residents 

 of other regions. Gains to labor are taken to be regionally oriented, 

 whereas the distribution of gains to consumers, in the light of the 

 national market served by the aluminum industry, are restricted 

 to only 10 per cent in the Pacific Coast region. 



We now take up the regional locus of gains associated with the 

 share going to the railways. We have assumed that approximately 

 85 per cent of the gains to the aluminum industry from lower cost 

 power would be disbursed for increased transport services. This 

 would amount to approximately $170,300 of the total. If we assume 

 that 75 per cent of the increased receipts of the railways must be 

 deducted to cover marginal costs,^^ about $42,600 would remain 



^^ Railway Freight Service Costs in the Various Rate Territories of the United 

 States, Senate Document No. 63, 78th Congress, 1st Session, 1943, pp. 41-44, 

 63-70; and G. H. Borts, "Increasing Returns in the Railway Industry," Journal 

 of Political Economy, August 1954, p. 323. 



