Railroads: Rates and RegulationsRipley, William Zebina
History
Railroads: Rates and Regulations
Ripley, William Zebina
Railroads -- Freight -- Rates -- United States; Railroads and state -- United States
This proposition is clear beyond dispute. The actual cost of service,
which fixes an irreducible minimum rate between Y and Philadelphia, is
less on the short line than by the roundabout one. For either road to
accept less than the portion of the cost traceable to this particular
traffic, that is to say, the extra cost incident to its acceptance,
is economically inconceivable. From this it follows, other conditions
being equal, that the shortest line between Y and Philadelphia
rules the rate in the last instance. This is normally the case. The
roundabout route thereafter merely accepts the rate thus compelled.
To permit the roundabout line to rule the minimum rate would not only
violate a fundamental principle of operation: it would inevitably
lead to chaos. The analogy with cut-throat competition in business is
obvious. It is equally plain that the mere acceptance of a short line
rate by a roundabout road, so long as this rate is adequate to yield
some profit over the extra cost, while of advantage to some, may not
work positive injury to any one. This condition normally corresponds
to the state of affairs represented by diagram A. The nearer point, X,
as Hadley avers, has no just grievance against Y because the latter
has the good fortune to have a direct service to Philadelphia at a
low rate. For Y to withdraw shipments from the line via X might even
destroy the only chance of X for a market. It would also deprive Y
of whatever benefit it might have derived from competition either of
routes or of facilities. Of course, we have expressly omitted market
competition as a factor, reserving it for separate treatment. Yet
one objection arises. Normally, the direct line ought to maintain
a tariff conforming in some degree to the distance principle. The
roundabout line can compete at Y only by a violation of it, unless,
indeed, its local tariffs be graded much more gradually. In other
words, its progression towards the maximum must be distributed over
a much longer line. Even this would, on Hadley's statement of fact,
eliminate X from the Philadelphia market. Such reduction of local
rates upon the roundabout route would in turn discriminate against
places like Z on the direct line, equally distant with X from
Philadelphia. For the latter places would necessarily be assessed at
a higher rate per ton-mile.[203] This would constitute another form
of local discrimination, which will be discussed in due time. There
is, therefore, at best, only a choice of adjustments, either of which
leads to some form of inequality. But, upon the whole, balancing the
evil with the good, the first variant of our oyster case appears to be
best solved by according all shippers at Y a somewhat lower rate than X
enjoys.
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