toward assuming such responsibilities has given place to careful consideration of the business relations of the new corporation to corporations with which they are already connected, and to procurement of legal advice. Though involving hardship at times, a change which brings home more clearly to directors in American corporations their responsibilities can only be a change for the better. So far as the formal condemnation of industrial combinations and monopolies is concerned, the new legislation leaves us where we were before. There are indications, however, that among the first tasks of the Trade Commission will be a study of situations in which this condemnation is looked upon by business men as a serious handicap to our national industry. One of these relates to American competition in foreign markets. In such markets American manufacturers find themselves confronted by the monopolistic cartels of Germany and other countries. To meet this competition, they feel the need of similar combinations among American manufacturers. As was pointed out in a recent report of the Merchants' Association of New York, to push effectively American products in a foreign market, a selling agent should represent all the American firms seeking to develop trade in the particular line in that market; otherwise American competition itself will tend to discredit American products, and American manufacturers will all be worsted by the organized competition of the manufacturers of other countries. Under its authority to investigate foreign trade relations, the Trade Commission has already held hearings in the leading seaboard cities, designed to make articulate the demand of American business men for the right to combine in the development of foreign trade. Though the Commission has expressed no opinion officially, it seems evident from the character of the questions asked at the hearings that it sympathizes with this demand. A recommendation from it to the next Congress of a relaxation of the prohibition on combination as regards our trade relations with other countries will surprise no one. Since such a recommendation is likely to encounter slight opposition in Congress, legislation along this line may almost be predicted. Should this anticipation be realized, we shall be in the interesting situation of approving combination as a means of advancing our business interests abroad, while condemning it in connection with business at home. It would not seem a long step from such approval to relaxation of the Sherman Act all along the line. Such relaxation is particularly to be desired in connection with the common carriers, where we have in the Interstate Commerce Commission fully-developed machinery for regulation as a substitute for competition. A relaxation in the case of the common carriers would afford grounds for a demand for a similar modification of national policy with reference to industrial combinations. A few more reports like that posthumously issued by the Bureau of Corporations on the tobacco industry,' indicating that dissolution of the Tobacco Trust has simply served to increase the expense of carrying on the business without lowering prices to the consumer, will cause the public to lend a sympathetic ear to such a demand. Another aspect that will receive the attention of the Trade Commission is the fixing of resale prices by the manufacturers of specialties, which has been held to be in violation of the Anti-Trust Acts. Among business men the opinion is widespread that the cutting of the prices of such products by retailers is a peculiarly obnoxious form of unfair competition. It will be interesting if the Trade Commission comes to take the same view, and prohibits as unfair the cutting of prices, the fixing of which by manufacturers has been condemned by the courts as a violation of the Anti-Trust Acts. The very fact that we have in the Trade Commission a body competent to study these questions and to advise Congress with reference to them is the greatest merit of the new legislation. Whatever view be taken of the ultimate solution of the trust problem, all must agree that the new legislation should help us to study it rationally. Heretofore the bugaboo of monopoly has confused the public mind. Responsive to every demagogic arraignment of the octopus, public opinion has coerced our lawmakers into an attitude with reference to trust legislation which 'Part iii of the Report on the Tobacco Industry, March 15, 1915. has been emotional rather than rational. If the Trade Commission will serve to introduce the “rule of reason" into legislative halls as it has been introduced, somewhat arbitrarily perhaps, into judicial decisions, we shall at least be on the road to a solution of the trust problem. That that solution must combine, with the condemnation of the abuses of monopoly, regulation that will enable us to enjoy the benefits of coöperation and combination, is an opinion well nigh unanimous among business men, and more and more widely held in governmental circles. HENRY R. SEAGER. COLUMBIA UNIVERSITY. GOING VALUE IN CONNECTION WITH A PHYSICAL APPRAISAL IN A RATE CASE THE NEW YORK RULE OING value, as the term is used in connection with public GOIN utilities, means, in general, the cost of building up the business, in addition to the necessary cash outlay for physical property and organization. It has been allowed by most of the commissions and courts of the country as an element to be included in the valuation of a property for the purpose of rate control, although for the most part it has not been clearly and precisely defined. It has been set forth perhaps most definitely in the state of New York, by the court of appeals in the Kings County Lighting Case. The purpose of this paper is briefly to review "going value" under the New York rule, considering precisely what it is, how it should be calculated, and under what circumstances it should reasonably be allowed. For the purpose of this discussion, it may be well to distinguish first between the different bases of valuation that might be used more or less satisfactorily in a rate case. We must remember that our task is not to determine the economic or commercial value of a property but to fix a valuation for the purpose of rate control. This fact is pointed out clearly by Justice Miller in the Kings County Lighting Case. The fundamental consideration is that the valuation be fair or just to the company or the investors. Rates paid by the public for the service should be as low as possible, but they must be fair to the company. They must cover all operating expenses, including depreciation and taxes, and must bring a reasonable return on a fair valuation placed upon the investment. Since we have to do with valuation and not with economic value, we might use any one of the three following bases in determining the amount upon which a return should be allowed: 1210 N. Y. 479. (1) appraisal of the property at cost of reproduction, less accrued depreciation; (2) appraisal at actual cost less accrued depreciation; (3) sacrifice incurred by investors in behalf of the property, including their direct investment through the issue of securities and their indirect sacrifice due to reinvestment of earnings and deficiency in fair return on the direct investment or on the reinvestment of earnings. Various other bases might be used, but those just mentioned are perhaps the more reasonable and are the ones that receive the most consideration by the commissions and the courts. It should be emphasized that each of the above bases forms a distinct method of valuation by itself and might be used consistently as a valuation policy without reference to any other. The method that has been used most commonly in valuation is the first-physical appraisal at cost of reproduction, less accrued depreciation, which was followed and approved also in the Kings County Lighting Case. It has received the sanction of the Supreme Court of the United States and for the most part seems to form the valuation policy of the country. In its application to particular cases it has been variously modified with reference to other bases of valuation, as dictates of justice have seemed to demand. It is, nevertheless, an independent method and has no necessary logical connection with any other. haps it should justly be modified under special circumstances, but as a method it is complete in itself. Per Going value, as defined by the New York court of appeals, is a category or element that belongs fundamentally not to basis number one, cost of reproduction less accrued depreciation, but to number three, actual cost or sacrifice incurred by investors. It is not a necessary cost to be included in a physical appraisal. If it is allowed, its inclusion must be justified on the grounds of justice and not on general principle followed in the valuation. In general, the court looks to the appraisal as the legal basis of valuation, and seems to approve the cost-of-reproduction method, but insists nevertheless that for the sake of justice allowance must be made for going value. The court defines going value in any case as |