Rate (transportation)

“ It is obvious that the growth of transportation in any country is bound to be more rapid than the increase either in population or in wealth. It appears, indeed, almost as if the volume of transportation in the United States increased more nearly as the square of population than in direct proportion. It has been estimated that we forward two and a half times as much freight per capita as some of the leading European countries like France. Our domestic population from 1890 to 1910 increased about fifty per cent. The railroad mileage grew at about the same rate. ”

“ We are aware of the difficulty which attends proof of the cost of transporting a single article, and, in order to determine the reasonableness of a rate prescribed, it may sometimes be necessary to accept as a basis the average rate of all transportation per ton per mile. ”

“ Indeed, in some respects light letters are more easily and more rapidly handled than postcards. From that standpoint, therefore, there is nothing to justify the difference of 100 per cent. in the rate of charge, and the lower rate is an arbitrary concession. The logical ground for its existence is rather to be looked for in the familiar and generally accepted principle applied to the determination of transportation rates by railway, by road, or by sea, viz. charging "what the traffic will bear," or the variation of the rates according to the intrinsic value of the goods transported. ”

“ Any rate which will contribute a surplus, small or large, above the mere cost of transportation,—that is to say, above the expenses incident to this particular carriage,—and which thereby lessens by the amount of that excess the burden of the fixed charges remaining upon other traffic, is justifiable. ”

“ Such an equalization of rates between points unequally distant from a given centre, not infrequently arises in connection with mere competition of transportation routes. Referring back to the diagrams on page 219, it may happen that a complainant at X, the nearer point, recognizing the inevitableness of a low rate at Y, may succeed in securing an agreement that, while its charges cannot be less than at Y, at least they shall not be more. ”

“ Hoists, cranes, tipping bodies, combination bodies, conveying belts and chains and many other devices facilitate rapid unloading and loading.
By sending goods from factory to retailer by motor railway terminal expense is cut out. Just how far it is profitable to send goods by truck is a question depending on the relative terminal charges, the hauling rate, and the collecting charges. ”

“ It is probable that with a reduction of freight per fast train to the uniform rate of 10s. per ton, a considerable proportion of existing goods train traffic would be transferred to fast trains, so that the same figure might be arrived at with much less increase in tonnage. ”

“ The average freight haul in the United States is 120 miles, or about five times as long as the average journey per passenger. How can such a difference be accounted for except by the dissimilarity in the principles which govern the computation of passenger and freight charges? The same rule should be adopted in fixing passenger rates that is recognized by railroad men in fixing freight rates: the rate per mile should decrease with the increase of the number of miles traveled. ”

“ Where all circumstances of value, cost, competition, and quantity are equal, a mileage rate is now applied by railroads, only reducing the rate per mile gradually as the length of haul increases, thus making the rate conform more nearly to the cost of service than if the same rate per mile were applied for all distances. ”

“ The maximum charges for the user of the road, the user of the truck, and the provision of the engine are capable of being fairly measured by reference to the distance travelled. They are, therefore, properly the subject of a mileage rate. But the providing of station accommodation, and work which the Railway Companies perform as carriers—as distinguished from mere conveyance—have no relation to mileage. ”

“ The through rates were applicable only on 'reasonably direct', not 'markedly circuitous,' routes, and outbound shipments from the transit point were usually limited to the rails of either the inbound carrier or a carrier participating with it in a joint rate via the transit point. ”

“ Grain, lumber, coal, iron, shoes, dry goods, groceries, drugs and chemicals, would all have to pay near about the same rate per 100 pounds per mile, and that rate would have to be something like an average of the present rates charged upon the different classes of freight. The higher classes of freight would be a good deal lowered, and the lower classes would be materially raised. ”

“ This principle of joint cost, so clearly set forth by Professor Taussig, [250] is fundamental and comprehensive. It pervades every detail of rate making. But it rests upon two basic assumptions which, while generally valid, are not universally so. In the first place each increment of traffic must be new business, not tonnage wrested from another carrier and offset by a loss of other business to that competitor. And secondly, each increment of traffic must be economically suitable to the particular carriage in contemplation. ”

“ The facts in regard to the average length of haul, the average rate per ton mile for different kinds of traffic, or the average charge per passenger mile, and general information as to the nature of commodities carried, speed of transit, and services rendered for the rates charged must be ascertained before any comparison is possible, and these facts are not ascertainable for English railways. ”

“ Both problems are very difficult, however, and the unintelligent adjustment of rates has frequently resulted in injustice both to the roads and their patrons.
A rate per ton-mile for each class of freight is out of question, because a large part of the cost to the company consists in loading, handling, and storing the goods. Once aboard the car, it costs but little more to carry a ton of freight one hundred miles than to move it one mile. The rates per mile, therefore, are necessarily greater for short distances than for long runs. ”

“ This railroad can get the natural difference between the cost of the goods at C and the cost of similar ones made at A and carried by water to B. If the railroad gets the traffic between A and B, and the water route is abandoned, the case becomes the same as that which we have already considered,—the transporting is done at a rate which prevents one of the lines from covering its merely variable costs and secures all the traffic for the other line. ”

“ There is probably no such low rates for railway transport in the world. But this low rate is due entirely to the competition of the lakes, rivers, and canals. It is very exceptional even in the United States. The average rate charged for transport in the United States in 1888 was ·45d. per ton per mile, [239] which is 164 per cent. more than the Chicago to New York rate already quoted. ”

“ Until such an analysis be made, it will suffice for our purpose, viz., the analysis of the principles of railroad rate making, that we adhere to our first general conclusion, namely—that of the total expenditures of a railroad at any given time about two-thirds of them are constant, while only one-third vary with the ups and downs of the volume of traffic. ”

“ Passenger Service.—Passenger traffic is more easily managed than the movement of freight. For the greater part the rates are fixed by law. On a few eastern roads local rates are two cents per mile; in the main, however, a three-cent rate prevails, except that in sparsely peopled regions the rates are four and five cents per mile. On many roads 1,000-mile books are sold at the rate of twenty dollars; on some the rate is twenty-five dollars per book. ”

“ You can lead a horse to water but you cannot make him drink. Which, being freely translated, means that you can raise railroad rates to a point where traffic begins to fade away, to find other pathways for itself, or to cease altogether. This is particularly true of passenger rates. A nation-wide rate of more than three and one-half cents a mile, with a heavy increase in the Pullman rates to keep pace, is not a particular inducement to travelers. ”

“ This study of the freight rate structure is so comprehensive and thorough as not only to be exceedingly valuable to anyone having to do with railroad freight traffic either as a railroad official or as a shipper, but it is also a most fascinating exposition for the general reader of a subject which has not hitherto received a popularly intelligible presentation. It offers to younger men the only means of knowing how the present freight rate system has been evolved. ”

“ The average rates proposed would, it is believed, admit of a uniform rate for any distance for minerals and other goods carried in bulk in open trucks, of no more than the lowest rate now in force, by charging higher rates for goods requiring closed trucks and more labour in handling, still higher rates for goods of abnormal size or weight, and higher rates still for single small parcels, on account of greater proportionate expense of handling. ”

“ In such cases the rail lines allow the water routes a differential or constructive mileage in recognition of their relatively cheaper per mile expenses of operation. The differential may sometimes exist, where, judging by the bulk of traffic the advantage, irrespective of the differential, lies with the line giving the lower rate. ”

“ Since the first application of air-brakes to freight trains in 1887, [Pg 89] a train crew sufficient to handle fifteen cars can care for thirty about as well in long haul wholesale business. Fuel cost, also, as has been shown, lags well behind the rate of increase of the load. Eaton in his Railroad Operations, concludes that from thirty to fifty per cent. of cost is independent of the trainload. The effect is that any increment in the paying load very materially decreases the cost of operation per ton. ”

“ If the freight on such a carload be $300 the rate per pound would be only one cent, and there is scarcely a commodity upon which a freight rate of one cent per pound makes any difference in the retail price. ”

“ The relative proportions and the distribution of local and through traffic upon two lines of differing length in competition with one another are primary factors in determining the ability of either one to "make the rate." This is, of course, especially true under the operation of any long and short haul law, under which any reduction of the competitive rates would necessitate a lowering of the charges at intermediate points. ”

“ A reduction of cost of operation per unit, attending a growth in volume, has already been fully described in connection with the theory of rates. And it is but natural that a reduction in the rate should follow any lessening of cost. Moreover, a large volume of business usually implies a relatively greater amount of low-grade tonnage. In order to bring out this relationship the second column in the table on page 415 has been added. This permits a correlation between freight density—that is to say, ton miles per mile of line and revenue per unit of service. ”

“ The longer the haul, the lower the ton-mile cost as a matter of necessity. As Chanute calculated on the New York Central a generation ago, [65] while the average cost per mile of hauling a ton ten miles was 4.062 cents, it descended progressively to less than one cent per mile for distances over five hundred miles. A common rule is that the rate rises as the square root of the distance, rather than in proportion to it. A hundred-mile haul represents a cost approximately only twice as great as one of twenty-five miles, instead of being four times as much. ”

“ The pressure brought upon the railroads by such competing producers, manufacturers and dealers has been a very important factor in the development of certain arrangements of freight rates, which we shall term the Regional Rate Structures, each of which has grown out of the various characteristics of a traffic region and has become adapted to those characteristics. ”

“ The economic parallel between rents in Europe and freight rates in America is very close and real. Rates are prices; they result from a conflict of interests; and the conflict is intricate because many interests enter into it. Freight rates are the rate of return on capital invested and work done by the railroad company and they enter into the cost of production of the shipper. They also affect the relative profits of big shippers and little shippers and the relative prosperity of towns and ports. Freight rates are, therefore, in our country, a means of distributing returns on industry. ”

“ Provided that no trader shall be entitled to object to an increase of an exceptional rate reduced by a railway company since the appointed day unless the effect of the increase is to make the rate applicable to his traffic higher than the rate applicable thereto immediately before the reduction. ”

“ The cost of service should invariably be an important factor of a rate. Railroads should not be compelled to carry any commodity for less than the actual cost of moving it, nor should rates be fixed greatly in excess of such cost of service. The carload should be the unit of wholesale shipments. Since it costs the railroad company as much to move ten carloads of freight which belong to one shipper as it costs to move ten carloads belonging to ten shippers, no advantage beyond the general carload rate should be given to the large shipper. ”

“ Big shippers may be given an undue advantage by excessive difference between the rates on carloads and less than carloads. [86] On June 29, 1898, the Western railroads 69advanced their less-than-carload rates to the Pacific Coast to a minimum difference of 50 cents a cwt. above the carload rate; and “on a great many commodities the difference is greater than the profit on the goods.” [87] The Interstate Commission regards a moderate reduction on carload shipments as fair, but will not sanction lower rates for cargo or train-load quantities than for carloads. ”