promise which he has reason to believe will be acceptable to both parties. In the early stages of the conference the parties on one side of the table generally attempt to convince those on the other side of the justice of their demands. Failing in this, the arguments, towards the end of a conference, as has just been said, are usually directed toward securing a favorable vote from the chairman and are therefore directed to him. Some chairmen pride themselves on their ability to secure an agreement among the parties without the necessity of casting a deciding vote. Rev. A. R. Edgar, for many years chairman of the clothing board, as well as other boards, has told me that he has never yet been obliged to cast the deciding vote. At times, where an agreement has seemed impossible he has adjourned the board meetings until the parties have informed him that they were able to report an agreement. While such results are not infrequent, it commonly happens that the chairman must practically make his position known, - that is, he must indicate how far he is willing to go in the matter of an increase in wages, - before the two parties can be made to come to an agreement on this vital issue. The most experienced chairman of the wages boards in Victoria has told me that he is seldom obliged to give a deciding vote, but I have noticed in board meetings over which he presided that after a lengthy discussion, when apparently all the arguments on either side had been presented, he would announce that he was willing to agree to a certain wage or other arrangement. Generally this was a compromise between the proposals made by the two parties, and it was then left for one side or the other rather reluctantly to make the motion that such an arrangement as the chairman had suggested be made, whereupon the other side would accept the proposal.

The wages boards in Victoria and Tasmania and until recently at least those in South Australia and Queensland are therefore true examples of collective bargaining, since the agreements are reached as a result of full presentation of the claims of employers in a trade collectively represented and those of the employees in the same trade also collectively represented. The chairman, altho possessing considerable power, is bound to exercise it with discretion if he is at all inclined to bring about a determination which will satisfy in a measure both parties and which will permit the industry to continue without interruption. The boards in New South Wales, on the other hand, do not convey to the visitor the impression of being conferences wherein employers and employees make their own bargains. The taking of evidence, the inquiries made by the board members, the extended arguments presented by representatives of the two sides with a view to influencing the board's decision, all give the appearance of a judicial tribunal. This impression is heightened by the knowledge that in most cases the parties may make an appeal direct to the arbitration court. As a matter of fact, the conciliation councils in New Zealand, while not pretending to the name of wages boards, far more resemble the wages boards in Victoria than do the New South Wales boards. Indeed, in many respects, the conciliation councils are better examples of collective bargaining than even the Victorian boards; for the chairman in such councils has no deciding vote and when an agreement is obtained it must be reached by the two parties alone. One must not be misled by this fact into reaching a conclusion that a chairman might be dispensed with under the wages boards plan. The wages boards' experience under the 1902 amendment to the Victorian law, which took away from the chairman the

right to vote, clearly showed the impracticability of such a plan. The real reason why the conciliation councils in New Zealand are able to reach an agreement in the majority of cases is the fact that both parties realize that if an agreement were not reached the case would automatically go to the arbitration court for final adjustment and, generally speaking, employers and employees prefer to settle their own differences.

M. B. HAMMOND.

OHIO STATE UNIVERSITY.

DEPRECIATION AND RATE CONTROL

A CRITICISM

In a recent article in this Journal 1 Professor Allyn A. Young takes to task the United States Supreme Court and public service commissions generally for erroneous thinking and improper action in regard to depreciation in connection with valuations made for purposes of rate regulation. Confining his attention to the physical property element in the valuation, he argues that the property taken as evidence of the investment can and should be valued for that purpose as tho it were new, without allowing for age, wear and tear, and obsolescence, in the case of large and varied properties, except for depreciation allocated to a period in which depreciation accruals were legally charged to operating expenses. In this opinion Professor Young ranges himself with Mr. James E. Allison, public service expert, and till recently chief engineer and influential member of the St. Louis Public Service Commission, which alone has adopted the policy for which argument is made. As frankly he sets himself against the accepted opinion of the day.

Much in Professor Young's article is above criticism. To the notion of a "state of normal average depreciation" attention deserves to be called, and the figures cited easily emphasize the importance of the issue here raised. The summary of certain developments in the accounting regulations of the Interstate Commerce Commission is valuable, tho intentionally not comprehensive. The statement and illustrations regarding the

1 Depreciation and Rate Control, vol. xxviii, pp. 630–663, August, 1914.

And in

depreciation of particular assets are helpful. particular I should cordially assent to the first of his three summarized conclusions in the form in which it is stated. Furthermore, he would be bold who would undertake to defend public service commissions, or even the United States Supreme Court, against charges of looseness, inconsistency, and inaccuracy of statement, or to support all their rulings. Members of these bodies cannot be experts in all fields or infallible in any, and and their reasoning and conclusions frequently merit criticism.

Nevertheless, on the fundamental issue which Professor Young raises I am convinced that the current view is correct, and that the attack upon it deserves no support from economists.

The issue may be resolved into three separate questions, all relating to deductions, in valuations for purposes of rate control, for depreciation of physical plants operated by public service companies, during periods when such allowances for depreciation were not prescribed by law.

1. Is such deduction necessary in order correctly to state the present investment in the plant?

2. Is such deduction, retroactive in its effect, just to public service companies?

3. Is such deduction, involving (as it ordinarily does) the carrying of a permanent reserve for accrued depreciation, expedient?

The first of these is purely a scientific question, in the realm of economics and accounting. The second is an ethical question, involving the propriety of a sort of ex post facto legislation, but also, be it noted, the problem of equality of treatment of different companies. The third is purely a question of public policy, not wholly dependent upon the answers to the first two.