THE FARMER AXD THE RAILROADS. 1G3 



and paid for by a private company, upon which no transporta- 

 tion is permitted except in conveyances owned and operated 

 by the company, bears very little resemblance to a public 

 thoroughfare, built and controlled by the public, and upon 

 which any one is free to travel. The old precedents — even 

 those relating to toll roads— were practically valueless. A 

 new system of law was built up, and in the absence of legisla- 

 tive action was built up by the railroads themselves. As any 

 private interest which has power will abuse it, tliis power was 

 abused, and then came a conflict, which was finally settled by 

 the Supreme Court of the United States, by the decision that 

 tlie public had the right to regulate the administration of rail- 

 road affairs, including the power to regulate fares and freights, 

 subject only to the limitation imposed by the common law 

 upon the railroads themselves, that the tariffs so fixed must 

 be "reasonable" — a court of proper jurisdiction being, in the 

 last resort, the judge of what is "reasonable." Practically^ the 

 term "reasonable" has come to mean such rates as, in the 

 aggregate, should provide a revenue sufficient to yield a 

 proper rate of interest eitlier upon actual investment, the cost 

 of reproduction, or the present value as affected by existing 

 conditions, including competition, or by such a combination 

 of all three methods of computation as may seem just to all 

 parties in any particular case. 



This brings us to the consideration of a vexed question 

 which is fundamental. Upon what sum shall a railroad be 

 permitted to earn dividends? In popular discussion the advo- 

 cate of the railroads points to the enormous aggregate of out- 

 standing stock and bonds, and asks to be allowed to earn 

 interest upon that. At this, however, the public laughs, as 

 well it may, and indeed that contention is now seldom made, 

 even in popular discussion. It is never attempted before any 

 competent tribunal. The aggregate of paper indebtedness is 

 recognized as of no value, e.Kcept to maintain the balance, 

 which the exigencies of bookkeeping requires. 



Some say that interest should be earned on actual invest- 

 ment. But there have been so many " reorganizations" and 

 "consolidations," and such a disappearance of old books of 



