service cannot be sold at a good price it must be sold at some price, for it is more expensive to lie idle than to do something. When the service is in demand the prices go up.

Q. But if the crop is larger, charging the same rate, would you not make a greater profit by the increase of the transportation?

A. That would depend upon the degree of regularity with which it would be served.

Q. The element of regularity did not enter into my question or your auswer a moment ago. I say if the crop is larger, by carrying a greater amount of freight, do not you make a greater profit?

A. Other things being the same, yes, sir.

Q. Why do you raise your rates of freight, then, when you have an increased trade?

A. Because the element of regularity comes in in this way. There has been no season that I know of when the demand for transportation has been equal to the supply' throughout the whole year. There have been certain seasons when it has fallen off, simply because there was no demand East. It fell on the regular water-routes as well as on the Jail-routes, and during that time it has to be sold at less than cost. When the demand becomes vigorous, as it will in the case of a large crop, there must be an additional charge made in order to make a fair average rate throughout the year. If I understand your question, that is about the answer I wish to make.

Q. Then you put your answer on the ground of the irregularity of transportation when the crop is larger?

A. I am not sure that I get your idea exactly.

Q. My question was simply this: Why is it, when the grain-crop is larger, that your rates of transportation are increased, when, by reason of the increased crop, your profit must be greater at the same rate than when there is a small crop, all other things being equal. Now, I understand your answer to be that, because of the irregularity of transportation, when there is a large crop, you have to charge a higher rate of freight.

A. No, that is not exactly the idea I meant to convey. What I meant was, that at no time in any year within my knowledge, whether the crop was large or small, was there a regular demand for transportation up to the amount that the various lines could supply. Even when the crop was large cars lay idle at certain seasons, and because many laid idle the service was performed at a loss. If there is to be a fair average annual result to the transporter, then, when the demand again picks up, there must be a sufficient increase of charges to make a good average price. The average price for the whole year for the last five years would not be an unfair price.

Q. Is it not true, in any ordinary business, that the larger amount of goods a man sells the smaller profit he can afford to charge?

A. Yes, sir.

Q. Then, if you have your roads and your rolling-stock on your hands, and your employés, the question I want you to answer is, why is it that when you have got more freight to transport you increase your rates? A. If you will allow me I will make an illustration. If a manufacturer was to lie idle for two months in the year, and then have a large demaud for his goods-up to the full capacity of his manufactory-he could not supply the amount that he furnished during the time of the year that he run so cheaply as he could have supplied them if he had a steady demand throughout the entire year. There would be part of the year when he would be fully taxed, but there was part of the year when

he would be idle, and if he intends to have a fair revenue upon the capital invested in his factory he must get larger prices for the goods he makes during the time that he runs than he would need if he had a demand sufficient to enable him to run steadily the whole year round.

Q. Taking your illustration, it seems to me that where the crop would be small, then you would charge a higher price.

A. But, unfortunately, nobody wants to transport when the crop is small. The demand for transportation is much short of the supply.

Q. Would not you want a higher price, in order to make your interest on the capital invested.

A. If we could get it; but it is out of the question to get it.

Q. But the grain is there; it has to be transported.

A. Then it would hardly be called a short crop, so far as the transporter is concerned.

Q. I do not mean a crop where there is no grain exported; there is wheat exported from the West. I mean new grain. Suppose it falls off 20 per cent. this year from what it was last year. Now, I understand you that this year you will reduce your rates because the crop is less. If next year it is 20 per cent. over what it was last year you will increase your rates because there is more grain to be carried.

By Mr. CONKLING:

Q. There being in both years, you mean, the same fluctuation of glut and scant?

A. If I understand you to mean that the demand for transportation is the same in each year, there would be no change in the rates.

By Mr. NORWOOD:

Q. Well, the demand, of course, cannot be the same each year, because my supposition is, that there is not the same amount of grain to be carried each year; but you have the same capital invested, &c., and have the same employés, and are to no more expense whether the crop is short or large. Now, why is it if it is 20 per cent. greater one year than another, you charge an increased rate of freight? The irregularity, now, that you speak of, is assumed to be the same in either year.

A. But still, in the one year the demand is not sufficient to employ the transportation facilities offered, and in the other year it is more than sufficient. Do I understand you correctly?

Q. I did not understand your answer.

A. In the short crop year, if I understand you, the demand for trans. portation is not equal to the amount of transportation facilities offered, and in the next year the demand for transportation is in excess of the transportation facilities offered.

Q. Oh, no, sir; that is not my supposition, because you have stated, and so has Mr. Hayes, already that you have got more transportation now than would carry double the products of the West to the Atlantic coast.

A. I did not understand you to ask me to affirm that part of Mr. Hayes's statement. I thought you referred to the general statistics as to the tonnage moved. Mr. Hayes has gone into that more thoroughly than I have, and I could not say whether the amount of transportation facilities which he there names is or is not correct. There are times, however, as at the present time, when the amount of transportation offering by rail and by lake and rail, is greater than the facilities offered by rail and by lake and rail. But, in the very same year, there are other times when the amount of transportation offering is very much

less than the facilities existing. For instance, in July and August we had quantities of idle cars; now we have a demand for more cars than we have. What it may be a month hence nobody knows. It depends very much on the foreign demand. I think that, taking the average movement, there is now sufficient transportation facilities to move the stuff that is to come East. There is always a large excess of unused facilities going West.

Q. You think, then, that the transportation is equal to the product' coming East?

A. Equal to the amount that wants to come East? Yes, sir; I think it has been so during this year.

Q. Now, then, if this year was a short year, short of your capacity to transport, why would you charge less for it?

A. Simply because we would not have customers for the service we offer, and we have to tempt them by offering at less than cost.

Q. Then, when they tempt you, you charge them a higher rate? A. When they want more than we can furnish we do. We do just as anybody else who manufactures anything.

By Mr. CONKLING:

Q. Is not the short truth of the whole matter that the yard-stick by which you measure is not the cost of production, but how much the commodity will bring?

A. Substantially so, sir; but, practically, the cost of production does regulate the price, and the best illustration of that is, that there has been a constantly diminishing average charge since the war closed. Now it is scarcely half what it was then.

Q. That is true, you mean, generally and constructively and eventu ally, but, in point of fact, on any given occasion you regulate, do you not, your tariff of freight by the compensation which, under the circumstances, you can get?

A. Well, that is measurably true, yet there are sometimes modifying circumstances which any sagacious transporter would always have reference to. For instance, if he undertakes to tax a party manufacturing on the line of his road unduly, because there happens to be a sudden demand, he will dampen the business ardor of the party, and there probably will be no increase in his manufacturing establishment. If he pursues a careful, considerate course, and has in view the doctrine of "live and let live" all the time, he will have a rapid and continuous growth on the line of his road, and that, I think, is the point at which most roads have arrived.

Q. Then, if I understand you, this would be a fair inference, that the law of supply and demand governs you, except that true economy and conservatism leads you to avoid anything which you deem extortion. A. Yes, sir.

Q. That is your proposition, is it not?

A. This is the general idea stated a little more broadly, that the transporter wants to get a fair price, and he deems that a fair price which his customer can afford, and the amount his customer can afford is that sum which will not repress production. If the transporter charges so much that the party cannot work profitably, production will be repressed. He must have reference to the profit of his customers. If he does not he will soon have no trade of any account, or, at least his trade will not grow.

Q. So that not meaning to reap advantage oppressively on the misfortunes of the time and the producer, you do mean to avail yourselves

of all that the law of supply and demand will give you in return for the transportation?

A. That is precisely the idea, sir.

By Mr. SHERMAN:

Q. Does not another element enter into it-the question of competition-whether you do not charge a much higher price for shorter distances frequently because you have no competition from those points?

A. That is done; that has been done to a greater extent than it is now. I think where roads are managed by men who have been trained to the business, and who have broad commercial ideas, they regulate their rates as much by the competition of their customers' markets as by the competition of rival transporting lines. For example, on the Pennsylvania Road, at Johnstown, is, perhaps, the largest rail manufactory in Pennsylvania, and perhaps in the United States. It has grown from a very small beginning. It cannot get a pound of raw material in there (except that which is produced around its place) except over the Pennsylvania Road. It cannot get a pound of its manufac tured product to market except by the Pennsylvania Road. So far as power is concerned, that road can charge it any sum it pleases, but it has encouraged its growth from a very trifling institution to a very large one, by having constant reference to the competition of the markets this party had to meet, as well as to the profits of the road itself, in the transportation. And it is so with, I suppose, four hundred or five hundred different enterprises along the same road-lumber enterprises, coal enterprises, and a variety of iron enterprises-until that traffic on the line of the Pennsylvania Road that is entirely beyond competition, except competition of markets, is vastly greater than that which is known as competitive traffic.

Q. Still, is it not true that railroads very often, almost as a rule, charge more for nearer points, because there is no competition?

A. I think it is more frequently the case on new roads managed by parties inexperienced in the business. It has been so, to a large extent, on the new roads in Illinois, there is no doubt of that.

Q. It is a great point of complaint that they make discrimination against localities that have no competing lines.

A. Yes; and it is an injudicious policy, and does harm to the road. Q. Is not that, so far as your observation extends, one of the great leading causes of complaint by the farmers themselves?

A. I think that is the principal one.

Q. They complain that the price of freight to them to their nearest market, a short distance, is greatly in excess of the long distances.

A. Yes, sir; I think it is their chief complaint, and a very sound one.

By Mr. NORWOOD:

Q. Do they not further complain that it takes about three bushels of wheat to get one to market by rail?

A. They have made a statement of that kind, which is rather attractive to the general mind, but if wheat is shipped from California to New York, it would take many more bushels.

Q. I am not speaking of California; I mean out here in Illinois.

A. Yes, I understand that, sir. I think it is hardly a proper illustration. How many bushels it takes to get one to market depends on the distance the producer is from the market. If the producer wants a certain service performed, he must pay somebody a fair price therefor, or do it himself. I have no doubt the statement is correct.

By Mr. DAVIS:

Mr.

Q. We are anxious to know the capacity of a double-track road. Hayes, I think it was, gave us an idea that every half hour with a train was its full capacity. Do you agree with that statement?

A. No, sir. I have been in the habit of running freight trains five minutes apart.

By Mr. CONKLING :

Q. Is that on a road running passenger trains, as well as freight? A. Yes, sir; running five minutes apart, in the manner stated by Mr. Davis, in convoy. I think I could run convoys on a freight road, so far as the mere movement is concerned, in sections five minutes apart, if no passenger trains interfered; but an exclusively freight road I should think entirely impracticable, that is, a purely freight road I do not think could be sustained at all.

Q. Why?

A. The public along the line would have no other means of rail travel, and they would certainly insist on being accommodated.

Q. You assume for your purpose that the theater of your freight road that we are talking about is not occupied by any other road?

A. Yes, sir.

Q. But if you had a freight road parallel?

A. With a passenger road parallel it could be. But in the question of capacity you must take into account the time required for repairs of your track. There would have to be a certain time of each twenty-four hours devoted to track repairs, when you could run no train over it. As roads are now managed the trains are so regulated that there is a considerable interval after a convoy runs, perhaps three or four hours. Q. In other words, you group your trains in certain portions of the twenty-four hours to leave certain intervals?

A. Yes, sir; for track repairs and passenger trains.

Q. In the case of a road in proper condition, properly ballasted and in good condition, running freight trains over it at the rate of twelve miles an hour, what portion of the twenty-four hours averaging the year would be necessary to maintain that track and road-bed, floods or extraordinary accidents excepted?

A. That would be a mere matter of judgment. I should think at least one third of the time would be requisite.

Q. Throughout the year?

A. Yes, sir; I should think so. Without going carefully into an examination it would be hard to form an accurate conclusion.

Q. That would include renewal of ties when they rotted or split, and everything which concerned the road-bed, as well as the service?

A. Yes, sir; perfecting the drainage, ditching, and all that sort of thing.

The committee here took a recess of fifteen minutes.

Mr. POTTS (resuming) to Senator SHERMAN. You were speaking of high local charges. They are made chiefly on roads that are not known as through lines. They are made from a non-competitive point to what is known as a competitive point; for instance, from some local station to Chicago, or to Peoria, or some local station to Bloomington, some point where they strike a through line; but if you had a main line of through road, and did not have the branches necessary to tap all these points, your main line of road would not interfere with this sort of charges.