depend upon the elements that go to make up cost, it cannot depend upon cost. It must therefore depend on something other than cost. That is to say that it must depend upon the value of the service, if not in one or more of the specific senses which have been suggested for that phrase, then in the broad sense of all the circumstances other than cost (and discrimination) which strike the court as affecting the question what rate is proper.

Since the primary requirement is that rates shall equal cost, the value of the service can take effect only so far as cost is in doubt. But cost is always in doubt. Even the cost of a company's whole product is by no means free from doubt. The mere amount of the property employed is certain, and the cost of maintenance and operation is tolerably certain; but the value of the property and its rate of depreciation are matters of opinion, and the proper rate of return is eminently a matter of opinion. Ideas of public policy exert their chief influence in the determination of what constitutes a reasonable rate of return; but judges could not if they would, and there is no reason why they should, altogether exclude the influence of such ideas in deciding on the fair value of the property and its rate of depreciation. In the case of a particular service, the doubtful element in cost is far larger still. When, as in the case of a carrier, a company is performing a variety of services, it is clear and familiar that there is no means of determining neatly the share of the value of the whole property, or of depreciation, or of the costs of operation and maintenance, which ought to be attributed to each. The question exactly what a particular service costs is therefore "one of almost insuperable difficulty." 95

It is unquestioned that the profit which a utility may earn on its entire business is variable; and observations to that effect have frequently been coupled with references to the interest of consumers. The United States Supreme Court has said:

"If the answer had not alleged, in substance, that the tolls prescribed were wholly inadequate for keeping the road in proper repair and

390 (Idaho Pub. Util. Com.); Duluth St. Ry. Co. v. R. R. Com., 161 Wis. 245, 152 N. W., 887 (1915); P. U. R. 1915 D, 192, 206. There is little objection to putting the matter in this way, and considering that it involves varying the return (inversely) with the cost. But, if cost is defined as reasonable or normal cost, the return above cost is not made to fluctuate when the efficient company is allowed a greater profit than the inefficient one.

95 Central Yellow Pine Assn. v. Illinois Central R. R., 10 I. C. C. 505, 538 (1905).

for earning dividends, we could not say that the act was unconstitutional merely because the company (as was alleged and as the demurrer admitted) could not earn more than four per cent on its capital stock. It cannot be said that a corporation is entitled, as of right, and without reference to the interests of the public, to realize a given per cent upon its capital stock. When the question arises whether the legislature has exceeded its constitutional power in prescribing rates to be charged by a corporation controlling a public highway stockholders are not the only persons whose rights or interests are to be considered. The rights of the public are not to be ignored." " 96

But the statement of variability is most commonly made, as one would expect, with reference to the return on particular services. In Northern Pacific Railway v. North Dakota, the very case in which it was laid down that the value of a service could not be made an excuse for fixing rates below cost, the United States Supreme Court said:

"The legislature, undoubtedly, has a wide range of discretion in the exercise of the power to prescribe reasonable charges, and it is not bound to fix uniform rates for all commodities or to secure the same percentage of profit on every sort of business. There are many factors to be considered differences in the articles transported, the care required, the risk assumed, the value of the service, and it is obviously important that there should be reasonable adjustments and classifications. The court. . . is not called upon to concern itself with mere details of a schedule; or to review a particular tariff . . . which yields substantial compensation for the services it embraces, when the profitableness of the intrastate business as a whole is not involved." 97

And the actual effect of the value of the service on rates is, naturally, most evident in cases dealing with classification, or other

96 Covington Turnpike Co. v. Sandford, 164 U. S. 578, 596 (1896). Cf. Southern Indiana Ry. Co. v. R. R. Com., 172 Ind. 113, 128, 87 N. E. 966, 971 (1909). "What that profit shall be whether ten, six, two, or any other per cent must be determined from the facts of each particular case, taking into account, as against the cost and earning capacity of the railroad, the value of the service to the shipper, and the amount he can reasonably afford to pay. In short, as the charge approaches oppression to the shipper, it should in the same degree approach the point of minimum profit to the carrier."

97 236 U. S. 585, 598, 599 (1915). Similarly, in Norfolk & Western Railway v. West Virginia, 236 U. S. 605, 609 (1915), the court said: "The state is under no obligation to secure the same rate of return from each of the two principal departments of business, passenger and freight." Cf. Bogart v. Wis. Tel. Co., P. U. R. 1916 C, 1020, 1053, 1054 (Wis. R. R. Com.).

wise passing on particular rates. As the Interstate Commerce Commission said in 1912,

"In all classification consideration must be given to what may be termed public policy, the advantage to the community of having some kinds of freight carried at a less rate than other kinds." 98

For example, the Interstate Commerce Commission has treated the prosperity or depression of the business affected by a particular rate as bearing on the question what the rate should be, when there has been no question of going above or below the limits of cost. The complainant's prosperity was treated in Hitchman Coal & Coke Co. v. Baltimore & Ohio Railroad 99 as pointing more or less to the conclusion, which the commission reached, that the rates complained of were not too high; and in Cattle Raisers' Association of Texas v. M. K. and T. Railway 100 the depression of the complainants' business was treated as having some tendency, though a slight one, to justify the commission's action in lowering rates.10 But it can hardly be said to be established law that prosperity or the lack of it on the part of consumers is entitled to any weight at all.

On the other hand, it is entirely settled that the value of an article served counts in fixing the rate. In 1917, in dismissing a

98 In re Advances in Coal Rates, 22 I. C. C. 604, 623 (1912). The dictum in this case that the Norfolk & Western did not prove itself entitled to an advance by the mere showing that existing rates did not cover the cost of the service is overruled, if it was ever law which is very doubtful - by Northern Pacific Railway v. North Dakota, 236 U. S. 585 (1915).

In Coke Producers' Assn. v. B. & O. R. R., 27 I. C. C. 125, 132, 140 (1913), rates were lowered on the ground, among others, of public policy in favor of the dissemination of an article. The Public Service Commission of West Virginia took similar action in Greer v. B. & O. R. R. Co., P. U. R. 1916 D, 286, 301. Cf. R. R. Passenger Rate Case, P. U. R. 1915 B, 362, 386. (Mass. Pub. Serv. Com.), and Bogart v. Wis. Tel. Co., P. U. R. 1916 C, 1020, 1053, 1054, on propriety of favoring some classes of traffic.

99 16 I. C. C. 512 (1909).

100 II I. C. C. 296, 348 (1905).

101 In Central Yellow Pine Assn. v. Illinois Central R. R. Co., 10 I. C. C. 505 (1905); and Tift v. Southern Railway, 10 I. C. C. 548 (1905); the Interstate Commerce Commission, in holding that the prosperity of a business cannot excuse the imposition of a rate which exceeds cost, used language which, taken literally, would indicate that the prosperity of a business served has nothing at all to do with the propriety of a rate. But the Commission may be supposed to have had in mind only the question with which it was dealing, viz., the question of allowing a rate to exceed cost. The question of fixing a rate higher or lower within the range of cost is distinct.

complaint against a carrier's rate on raw silk, the Interstate Commerce Commission said:

"The increase in the hazard is not the only fact to be considered in prescribing rates for the transportation of highly valued commodities. The Supreme Court in N. P. Ry. v. North Dakota, 236 U. S. 585, 599, in giving some of the many factors which should be considered in making rates, names 'the risk assumed' and also 'the value of the service.' This Commission has throughout its history given consideration to the value of a commodity when determining what is a reasonable rate thereon. Illustrative of the value of service is the percentage that the rate paid bears to the value of the article. . . . Silk is one of the commodities of the highest value in proportion to the ratio which the charges bear to the value of the commodity."

102

Weight is constantly being given, in passing on rates, to comparisons with rates at other points where conditions are similar.103 In passing on the rate for a particular service, tribunals not infrequently refrain altogether from guessing what the cost of the service may be. The difficulty or impossibility of fixing exactly the cost of a particular service, and the special regard which is

...

102 Silk Assn. of America v. Penn. R. R., 44 I. C. C. 578, 580, 581 (1917). Similarly, in 1916, in a case involving advances on live stock, the commission adjudged that "rates for the transportation of any of the animals named . . . which are increased . . . by more than 2 per cent for each 50 per cent . . . of additional value are . . unreasonable." National Society of Record Assns. v. Aberdeen & Rockfish R. R. Co., 40 I. C. C. 347, 355 (1916). The same principle was applied in Iowa R. R. Commrs. v. A. T. & S. F. Ry. Co., 36 I. C. C. 79, 85 (1915). Cf. Coke Producers Assn. v. B. & 0. R. R., 27 I. C. C. 125 (1913); Ford Co. v. Michigan Central R. R., 19 I. C. C. 507, 509 (1910); Union Tanning Co. v. Southern Ry., 26 I. C. C. 159, 163 (1913).

State tribunals have recognized the same principle. Cf., e. g., Copeland Ore Co. v. M. T. Ry. Co., P. U. R. 1917 F, 182, 195 (Colo. Pub. Util. Com.).

103 E. g., Freight Bureau of Cincinnati v. Cincinnati, N. O. & T. P. Ry., 6 I. C. C. 195 (1894); Oregon & Washington Lumber Mfrs. Assn. v. S. P. Co., 21 I. C. C. 389, 392, 393 (1911); Boileau v. P. & L. E. R. R. Co., 22 I. C. C. 640 (1912); Marian Coal Co. v. D. L. & W. R. R., 24 I. C. C. 140, 142 (1912). Cf. Interstate Commerce Com. v. Louisville & Nashville Ry., 118 Fed. 613 (1902). Comparisons with other rates were used in support of increases in Re East St. Louis Light & Power Co., P. U. R. 1918 B, 320 (Ill. Pub. Util. Com.); Railroad Passenger Rate Case, P. U. R. 1915 B, 362, 392 (Mass. Pub. Serv. Com.); and in support of reductions or refusals to increase, in State ex rel. Watts Engineering Co. v. Pub. Serv. Com., 269 Mo. 525, 191 S. W. 412, P. U. R. 1917 C, 581, 591; Pub. Serv. Gas Co. v. Board of Pub. Util. Commrs., 84 N. J. L. 463, 474, 475, 87 Atl. 651 (1913); Hocking Valley R. R. Co. v. Pub. Util. Com. of Ohio, 92 Ohio St. 362, 110 N. E. 952 (1915), P. U. R. 1916 B, 406; Re Kans. City Elec. Lt. Co., P. U. R. 1917 C, 728, 790 (Mo. Pub. Serv. Com.); Re Kent Water & Light Co., P. U. R. 1917 D, 394, 397 (Ohio Pub. Util.Com.).

consequently shown for value in fixing the rates on particular services, have sometimes led to the assertion- notably by the Interstate Commerce Commission 104 that very different considerations must govern the fixing of particular rates from those that apply to an entire schedule; that the cost of a particular service, being unascertainable, can have little to do with the propriety of a particular rate, and that particular rates must therefore be governed largely by value of service. This assertion is true within limits, but there are two observations to be made upon it which greatly qualify its apparent meaning. In the first place, it implies that the value of a service is ascertainable, if not quite definitely, at least more definitely than its cost. But if one recalls the variety of elusive ideas which go under the name of value of the service it is evident that this is not so. On the contrary, as the Interstate Commerce Commission itself has pointed out, "the cost of the service is ascertainable with much more precision and capable of more tangible expression than the value of the service." 105 In the second place, the proposition more or less suggests that, in respect to particular rates, the criterion of value is deliberately preferred and preferable to the criterion of cost; in other words, it overrules cost. That is far from true. To allow value to influence rates within the range where cost is doubtful is not to prefer value to cost; it is simply to prefer value to nothing. The question which is to prevail can arise only when both are known; so far as either is unknown there is no conflict. And, as has been pointed out, when there is a conflict it is cost and not value that prevails. The Supreme Court has held that coal rates 106 and passenger rates 107 which are below cost must be raised, and that lumber rates which exceed cost must be lowered.108 From the fact that costs are less accurately determinable in the case of a particular service than in that of an entire business, it follows that the range of what may or might be found to be cost is a broader range in the case of the particular service; and this is the

104 Central Yellow Pine Assn. v. Ill. Central R. R. Co., 10 I. C. C. 505, 539, 540 (1905).

105 Boileau v. P. & L. E. R. R., 22 I. C. C. 640, 652 (1912).

106 Northern Pacific Railway v. North Dakota, 236 U. S. 585 (1915), (note 53, supra). 107 Norfolk & Western Ry. Co. v. Conley, 236 U. S. 605 (1915), (note 56, supra). 108 Southern Railway v. Tift, 206 U. S. 428 (1907); Illinois Central R. R. v. Interstate Commerce Com., 206 U. S. 441 (1907) discussed above.