136 SECTIONAL ADDRESSES 
interest to encourage further diversion of heavy-goods traffic from the 
railways to the roads. ‘ Such further diversions would add greatly to the: 
expenditure on highways and tend to make the railways unremunerative, 
without conferring any commensurate advantage.’ 
The Salter Committee endorsed this view, and recommended that the 
Minister of Transport should be given power to prohibit by regulation 
(after consulting the Advisory Committee which they recommended 
should be set up) certain classes of traffic which are unsuitable for road 
haulage from being transferred in the future to the road. They added 
that there is room for a scientific inquiry as to the most economic form 
of transport for each class of goods, having regard to distance and other 
considerations. 
The ideal distribution of traffic could only be brought about if it were 
possible to secure that each piece of transport service, by whatever mode 
of transport it was effected, was charged for at a rate sufficient to cover 
its true cost of production. But the difficulties of determining such 
true costs are very great indeed, and especially so in the case of both rail 
and road transport. On the railways it is impossible unless one makes 
large and arbitrary assumptions in the division of costs between different 
categories of traffic, yet requiring the same permanent way, much 
common equipment, and many common services. It is equally difficult 
in the case of road transport—as the Royal Commission on ‘Transport 
and the Salter Conference realised—if one is to take into account a proper 
share, according to user, of the cost of construction and maintenance of 
roads, the cost of signalling road junctions, the cost of street widenings 
in cities, and the construction and maintenance of terminal and junction 
stations. It would appear that in both cases we can only approach the 
problem by empirical methods. The real cost of production eludes us. 
_ "To what extent is it possible for the railways to find some solution of 
their problem by an alteration of their present (statutory) system of 
charging ? Sucha step is advocated by many railway critics at the present 
time. ‘The proposals range from a general lowering of rates and fares— 
based on the assumption that the elasticity of demand for rail transport 
is such that a higher aggregate net revenue would thereby be obtained— 
to schemes involving a revolutionary change in the general structure of 
railways charges. 
Prof. Pigou, in his Economics of Welfare, makes a careful analytical 
examination of the contrasted methods of charging according to value of 
service and cost of service, and comes to the conclusion that the latter mode 
of charging would bring about a better distribution of national resources 
and thereby increase national welfare. But his argument is by no means 
clear, nor does he indicate how the system could be carried out in practice. 
He admits that to apply the system would involve a number of delicate 
adjustments, since rates would have to vary with the incidental costs 
attaching to each service, and with the time at which it is provided in 
relation to the peak of the load. To provide for these adjustments 
would often be, as he again admits, a very difficult matter, involving 
costly technique and account- -keeping. Eventually, he compromises by 
stating that it is a matter of how near to the ideal of cost of service it is 
