Apkil 20, 1906.] 



SCIENCE. 



609 



passed through the 'wrecking' period, 

 and in many instances new companies 

 formed to take over the property of the 

 wrecked company. The total of stock and 

 bonds outstanding June 30, 1893, the year 

 the stock and bond law went into effect, 

 was $392,726,113, on 9,198 miles of road, 

 an average of $40,250 per mile. The com- 

 mission's estimate of what it would cost 

 to reproduce all the railroads in Texas on 

 June 30, 1904, was $16,244 per mile. The 

 estimate was made on what it would cost 

 to reproduce the roads— the old roads— in 

 their condition at the time they were 

 valued, the materials, cost of labor, right 

 of way, etc., being figured at average prices 

 prevailing at time of valuation. On the 

 average estimated cost of reproduction, 

 the 9,198 miles of operated railroad in 

 1893 were worth $149,422,312, showing 

 $243,303,801 of the outstanding bonds and 

 stocks to have been 'fictitious.' 



Management, under apparently like con- 

 ditions, has much to do with state railway 

 regulation. They had equal privileges 

 conferred. Of three examples cited, the 

 first is laid in a populous, rich section, 

 running from north to south, and the 

 earnings and accumulations have been 

 great. Tears of operation make a good 

 showing of surplus which is in the hands 

 of its owner in New York. 



The second, running from south to 

 north, in a rich and populous section of 

 the state, had a large income from opera- 

 tion, but either spent it in 'riotous living' 

 or so merged it with that of its dominant 

 owner as to show a condition of bank- 

 ruptcy on its ovm books. 



The third is in a sparsely settled part of 

 the state, unassisted by domination, and 

 aided alone by its own energy and pru- 

 dence, and with the same rates prescribed 

 by the state for the others, has prospered, 

 and distributed its surplus earnings to the 

 numerous holders of its shares of stock. 



Which of these three do you say has em- 

 ployed its privileges to the best advantage 

 and to the greatest credit of the state 1 



This brings us to a discussion of freight 

 rates. What is the proper basis for rate- 

 making? Shall they be fixed with refer- 

 ence to the capital invested? Should they 

 be made with reference to the value of the 

 commerce transported? Should they be 

 fixed upon the theory that they should be 

 'all that the traffic will bear'? Or must 

 they be fixed and adjusted so as to pay all 

 fixed charges, operating expenses, better- 

 ments, etc., and leave something for the 

 stockholders ? 



If the latter basis should be adopted 

 how would you adjust the rates to meet the 

 showings made by the three roads I have 

 taken for illustration? The management 

 of one road might, on the same rate, with 

 the same tonnage, same capital and in- 

 vestment make money, and another lose. 

 You can never fix rates that will be rea- 

 sonable to the shipper on that basis unless 

 you have control of the finances and oper- 

 ate the line independently. One Texas 

 line paid out $30 per 100 train miles for 

 maintenance of equipment, while another 

 paid only $15 last year. 



If you base rates on the theory that they 

 shall be ' all the trafiic will bear, ' the move- 

 ment of freight on such rates will be re- 

 stricted to the actual, economical require- 

 ments of all freight-paying commodities. 

 Such a rule will not stimulate the move- 

 ment of commodities of small value. 



From what I have already said it is also 

 conclusively shown that you can not use 

 the bond and stock issues of the roads as 

 the proper basis for rate-making. 



Proposed Solutions of the Eailway Rate 

 Problem: H. T. Newcomb, Washington, 

 D. C. 



This paper applies especially to com- 

 mercial rates as related to the work of the 



