156 BULLETIlSr 102, VOL. 1, UISTITED STATES NATIONAL MUSEUM. 



But this recognition lias been a matter of growth, not at all a sudden 

 appreciation of the case. Looking merely at the main steps in the 

 evolution of the public utility conception, we see that the distinctive- 

 ness of the field first met formal recognition upon the insertion of 

 certain clauses into municipal franchises, imposing in advance the 

 restrictions deemed necessary in return for the privileges extended. 

 This course of action clearly established a field of operations that 

 differed from the setting accorded industrial activities in general; 

 public participation in industrial affairs thus had its inception. But, 

 inside the restrictions agreed upon in advance, the operating company 

 had the utmost freedom in regard to procedure, profits, and the like ; 

 under these conditions a public service organization still had incentive 

 for advancing its practice and otherwise increasing its efiiciency. 

 This method of administration, however, while lucrative to private 

 enterprise, proved a failure from a public-service viewpoint, due, in 

 the main, to the corruptibility of municipal authorities. This 

 regime covers a dark page in American municipal government. 



Following the failure of franchise control of public utilities, another 

 step in the direction of furthered public oversight was added in the 

 form of public utilities commissions; this method of control has 

 come extensively into vogue and its sphere of influence is spreading. 

 The public utihties commission carries public oversight from its 

 initiation in the franchise over into the actual operations of the 

 activity concerned. This method of administration, for which 

 American municipalities have held high hopes, has likewise failed. 

 It has succeeded in removing the incentive for progress, which was 

 still present under the franchise regime, without supplying any 

 activating influence in its stead. It insures in favor of the public 

 for the full gain of any increased efiiciency that may come into 

 play, but in so doing it removes the industrial motive that makes for 

 increased efficiency. While protecting the public from the appear- 

 ance of gross extortion, at the same time it shields the public from 

 gaining the advantages of technological advance. It puts a premium 

 on stagnation; it defeats the purpose for which it was created.^ In 

 the course of American industrial evolution, just in proportion as 

 successive activities have come under our present type of public 

 utility control, to the same extent have efficiency and progressive- 

 ness fallen into abeyance. This is illustrated on the one hand by 

 the gas works, one of the earliest public utilities to come under the 

 present type of control and hence notorious for its inadequate practice; 

 and, on the other, by the telephone service, scarcely yet affected by 

 public oversight and in consequence still highly efficient. Adequacy 



1 This is aside from the matter of integrity and ■wisdom on the part of the personnel of the commission. 

 No public utility organization can count on gaining anythdng worth while by lowering its operating costs, 

 because of a proportionate reduction in rates which will be demanded. 



