and are not valid objections to the principle or practice of combination as such. Given a sound and conservative administration, in which the rights of various elements composing the combined undertaking are adequately and intelligently represented, the dangers feared become shadowy in the extreme. If the holders of the stock of a section were properly represented on the central board, to pet one section and starve another would simply be out of the question. No unjust discrimination in investing funds provided in the interest of the general undertaking would for a moment be tolerated. Speculative investment-(e. g.) in coal lands, real estate, unfinished leased lines, or other "fads"-would be resolutely opposed and at once killed by inside and responsible opposition.

It cannot be doubted that the substitution of a central board for two or three sectional boards makes a substantial saving in the cost of administration. If the services of competent men are secured for sectional boards, they must be paid for at market price; and a very cheap article will scarcely answer the purpose. Again, a combined enterprise has the advantage of undivided judgment and unrestricted freedom in laying out its programme of through business. The several sections are under one control, and can be worked with organic unity and precision. The elasticity of existing resources is multiplied. The rolling stock, equipment, staff and general appurtenances can be shifted and transferred with facility. Pressure in one part of the system can be relieved by the superfluous resources of another part. The economy towards which combination tends is not a matter of a day. It operates during the whole three hundred and sixty-five days of the year.

Then again, wasteful or unnecessary forms of competition can, in many instances, be suppressed or dispensed with. While it is quite true that, in the main, competition protects the public against unfair charges, it is possible (in vernacular language) to run this principle "into the ground." The public needs a certain amount of transportation. The best service will be rendered by that system which supplies exactly what is wanted, no more and no less. When two competing companies send rival trains approximately from and to the same terminal points, and each is loaded far below the point of paying business, that is not really beneficial to the public. Neither of the two companies dares to withdraw its train, lest its rival steal a march. The result is a service inferior from the point of view of the public, because unremunerative from the point of view of the transporting companies. An appreciable amount of power is wasted in unnecessary friction. Combination would enable the rival companies to put on one superior train, instead of two or three inferior ones, adequate to all the requirements of the public at a slightly reduced price, and to make a living profit for their stockholders besides. The encouragement would grow and multiply as development proceeded under the guidance of sound management. It would come to be understood that the interests of the public and of the transporting companies, though not strictly co-extensive, largely overlap one another, and that the best result, from both sides of the question, is that a genuine and satisfactory service be consistently and uninterruptedly rendered at a fair market price. The recurring disturbance of existing contracts and relations produced by the strain of excessive competition, and the uncertainty and disappointment incident thereto, are highly

injurious to prosperous trade and public convenience on the one hand, and to successful railroad administration on the other. It is, in the writer's opinion, a grave mistake to suppose that the inferences derivable from experience really point to the conclusion that railroads judiciously combined or consolidated are less efficiently managed than those which are operated by fractions. As Mr. C. F. Adams Jr. has well pointed out,* the enlargement of power, judgment and resources is apt to beget an enlarged sense of responsibility. Suppose many years ago the English Government had permitted the co:nbuation of the southern lines leading out of London, and had, in consideration thereof, asked one or two minor concessions for the protection and convenience of the public. Does any practical railroad administrator doubt that a better and cheaper service would to-day be at the command of the public, and that the stockholder would be the richer by untold thousands of pounds? No doubt such a combination, in order to be thoroughly satisfactory, would have needed at the outset very skilful adjustment of subsisting interests, and very adequate and balanced representation of those interests for all time. But that would not have formed an insuperable difficulty, if the immense advantages of enlightened combination had been thoroughly understood and frankly accepted.

If the foregoing view be substantially true,-our enquirer will not be at all frightened at the mere fact of combination as such. On the contrary, he will be wise to bear in mind that the unmistakable tendency of compensation to transporting companies is towards a lower, not a higher, level; and that, as a corollary, the investor must expect, as the years go on, to get a lower rather

* "Railroads: Their Origin and Problems," C. F. Adams Jr., 1880.

than a higher rate of interest for the money which he locks up in railroads. In selecting his investments he desires, as a matter of course, to evade the consequences of this systematic reduction of interest as far as practicable. The economies which are rendered possible by judicious combination will probably go far towards effecting this object. He will of course have a preference towards those examples of combination which are least liable to speculative control, or to legislative or official interference with competent private management, and which exhibit, in the most effective form, an adequate and permanent representation of legitimate subsisting interests.

CHAPTER V.

POOLS.

Our observer will certainly be struck by the importance attaching to the "Pool" in connection with various aspects of investment. Concerning its moral status and its relative necessity or expediency, he will find abundant information in current text-books. The question in which he is directly interested is rather whether the creation of a pool is calculated permanently to solve apparently insuperable difficulties arising between competing railroads of which he holds, or is disposed to acquire, the securities; or whether the mere existence of a pool contains for him adequate reason for alarm or distrust. As in practical business the word is used in a variety of senses, it will be proper to note that the following observations relate not to any speculative or "blind" pool. The objections to which this form of the thing is liable are of that general kind which apply to all forms of speculative control. The pool referred to is simply the expression of a serious necessity which attends the development of railroad enterprise, and may be regarded as a sort of convenient half-way house between internecine competition on the one hand, and wholesale combination on the other. Perhaps the most striking illustrations connected with the subject may be found in the well-known "Granger" cases, and the experience of the railroads affected by them.

A period occurred in the history of America when the