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accurately calculated. Where such changeable conditions exist, it must be almost a hopeless task to estimate the value of the service and the relation it ought to bear to the total expenses.

Again, the cost of service in transporting a train load of merchandise to any point will vary according to whether the cars return to the starting point loaded or empty. Cars returning loaded would partly compensate for the first transportation; cars returning empty would be a loss to the road.

Moreover, it costs more to move a thousand dollars' worth of coal than a thousand dollars' worth of silk goods, yet it would be impossible to charge the coal at the rate of the cost of service. If the charge of the silk goods were determined by the cost of service and the charge for the coal were fixed proportionately to the charge of the silk goods, the charge would be so great that it would prohibit the transportation of coal. In like manner, the charge for transporting New Jersey wheat to New York might be determined by the cost of service, but if the New Jersey rate were charged for carrying Dakota wheat to New York, the charge would be so high that it would not pay to transport Dakota wheat.

Rates, then, are not determined by the cost of service.

The railroad is a monopoly. It can fix monopoly prices for its service. It is influenced in fixing its rates by self-interest. This self-interest leads it to increase its traffic as much as possible, and consequently it charges "what the traffic will bear."

To illustrate, let us take the case of Dakota wheat shipped to New York:

Cost of production to the Dakota farmer

Price of wheat in the New York market

Railroad charges — Dakota to New York.

Cost of production and transportation to farmer

Profit to farmer

$.10 a bushel

.60 a bushel

.20 a bushel

.30 a bushel

.30 a bushel

The railroad might charge 30 cents or 40 cents for transporta

tion, but it is prevented :

1. Because of the competition of other lines. This competition, however, is often avoided by pooling and combinations.

2. Because the railroad desires to increase its traffic in wheat. The lower the rate, the more wheat will be shipped, and the more profit the road will make.

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The amount that shall be charged by the railroad is thus described: The amount of the charge for any particular service is the product of a definite rate applicable between the points of origin and destination, or for the distance traversed, and to the commodity or class of passengers carried, multiplied by the number of persons or the weight of the freight." (Encyc. Amer.)

Rates are lower in Europe for passengers than in the United States, but this is due to the fact that there are several classes, first, second, and third, in the passenger service, and as a rule the service is much less satisfactory.

It has hitherto been generally conceded that the rates in this country have not been excessive, and during the twenty-five years prior to 1910 there had been a gradual decrease in freight rates, because of the introduction of better methods and a more economic administration of transportation.

The passenger rates have been but little changed in the same period as compared to freight rates.

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Many concessions have been made by the railroads. Mileage books are issued. Suburban passengers are treated to wholesale terms. Wholesale rates are given to conventions.

Rating introduces two important elements into railroad business, classification and discrimination.

Classification. Classification is the apportionment of commodities into different classes determined by various conditions of traffic accommodation, the nature of the commodity, the quantity of the commodity in different sections of the country, and the naming of a fixed price or rate for each class in transportation.

Classification may have reference to passengers, who are carried way or express, ordinary or Pullman, but it generally has reference to freight.

Classification is determined (1) by the nature of the commodity local or through; carload or not so; cheap goods or dear goods.

(2) By conditions of accommodation: special cars (refrigerators, oil tanks, coal cars); the need of facilitating new traffic; the manner of packing (live stock, crockery, powder).

(3) By the quantity of the commodity in different sections of the country shoes in New England, wheat in the West.

Classification is necessary, as may be seen from the variety of the commodities carried by the railroads :

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9.7 per cent of traffic 2.3 per cent of traffic 53.7 per cent of traffic 10.9 per cent of traffic

15.6 per cent of traffic

3.6 per cent of traffic

4.2 per cent of traffic

These seven heads embrace between 9000 and 10,000 kinds of commodities. It would be impossible to have rates for each commodity. Hence, general classes are made out.

There are three main classifications:

1. Official east of the Mississippi and north of the Ohio

and the Potomac. It has 8 classes.

2. Southern-east of the Mississippi and south of the Ohio and the Potomac. It has 15 classes.

3. Western

west of the Mississippi. It has 10 classes. There is also the transcontinental classification, used for freight between the Atlantic and the Pacific. Again, a special classification embrace commodities destined for export trade.

There are also the "special commodities rates, issued by railroads to help some special new commodity. There are over 1000 such special tariffs.

Several states have special classifications, made by state legislatures or state commissions, as Illinois, North Carolina, Florida, Iowa, Georgia.

A single uniform classification would be better for trade, because the transportation costs could be computed by the shippers and discriminations could be more easily detected. But it does not seem practicable.

Discrimination. -Discrimination is the granting of special favors in regard to rates or accommodation to certain individuals or localities. It is of two kinds: personal and local.

Personal discrimination may be practiced by the granting of free passes to passengers, or by charging different rates and according different accommodations to different persons.

The causes that lead to personal discrimination may be

(1) a desire to build up a new business which may need specially low rates in order to exist or as an inducement to put its product on the market;

(2) the competition which exists between railroads, each of which strives to secure the transportation trade of wealthy producers;

(3) the attempt to gain the good will and assistance of large shippers, whose influence in railroad legislation and railroad grants may be of moment;

(4) the desire to build up a business in which the railroad officials are interested.

Local discrimination exists when railroads favor one locality, town, city, or section of country more than another, in the matter of rates or in the granting of accommodations, fast trains, exact schedules, or suitable cars. Through such discrimination, local rates are high, through rates low; domestic trade is made to pay a high tax, while foreign trade is allowed cheap rates; one seaboard city may have to submit to exorbitant charges, while another is specially favored in the charges.

It is not easy to find all the various causes that lead to local discrimination. Some of the causes, however, are:

(1) Water competition, as when boat lines and barges and steamers, coastwise and on lakes and rivers, compete with railroads and lead them to reduce charges between points that enjoy such waterway advantages.

(2) Better terminal facilities in one city than in another, affording the means of shipping goods abroad.

(3) The competition of other lines of railroads.

(4) The influence of powerful corporations and favoritism shown by the railroads.

(5) Trade competition and rivalry between communities, leading them to grant special favors to the roads in the assured hope of receiving special favors from the roads in return.

The effect of any kind of discrimination is to cause uncertainty, fear, and danger in business. In all businesses, transportation cost enters as an important item and must be calculated in estimating the amount of capital required, the outlay for wages and salaries, the amount and cost of product; and when the transportation charges may be changed at the will of the railroad officials and made excessive for personal or local reasons, no certainty of one's financial standing can exist, and no assurance of ability to fulfill contracts.

Discrimination may build up one man's business at the expense of another; it may build up or it may destroy fortunes, cities, towns, and even whole districts of the country.

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