greatest value and have the largest interest in the overhead of the property" (pages 71-72). But do they? The most we can say about the value received is that those who buy the most expensive service (expensive to the customers) receive the greatest (money) value; and the most expensive to the customer would not necessarily be the most expensive to the company if the joint costs were apportioned on some basis other than that suggested by the author-the very question at issue. Thus we get no light on the question of policy involved in the apportionment of the joint costs of the utilities mentioned. Perhaps the total of such costs relative to the other three classes is too insignificant to make this question of much consequence.

Though the author refers to the cost principle as "fundamental", he does not by any means reject the principle of charging what the traffic will bear. But he would apply that principle to public utilities "only when it will serve to lower the average cost of service to the public, or will develop a legitimate, natural, and desirable business that cannot be developed without some concession in rates from the average of its class." On the other hand,

For a business so varied as railroad service in which the cost of a particular service cannot be determined, what the traffic will bear is the rational basis for a tentative rate design. If it is found to yield more than is judged to be a fair return a general scaling of rates may be ordered, or certain necessaries of all people may be selected for lower rates to reduce the earnings to the proper fair return [pages 79-80].

Here again we are led to the threshold of a series of questions of general public policy which could not be treated in a book of this size concerned primarily with questions of interest to the engineer.

In treating the problems which fall under the other main head-the problems, that is, concerning the total return to which the company shall be entitled-Professor Raymond's discussion is particularly helpful. The precise basis for regulation ought to be specified in the company's charter (page 26). When regulation

is first undertaken for an old property, the value acquired to the date of action should be allowed, and a method of regulation, automatic so far as possible in its action, should be adopted for the future. For a new company the same procedure should be had, but here the return base is the fair and reasonable sacrifice of the owner in creating the property [pages 162– 163].

The value which the author would allow for the old company is the

market value of the entire business, obtained by capitalizing the earnings. This value, he recognizes, may exceed what the courts have laid down as the minimum. Needless to say, its amount would not have to be measured; all that would be necessary in order to maintain it would be to avoid reducing the net earnings. In an expanding business, however, as the author points out, the net earnings can be maintained even when rates are reduced, for in such a business" earnings are normally increasing under present rates for service" (page 161).

Though the author would allow an old company not previously regulated to maintain its value, the "return base " for new companies is not to be confused with value; for that reason objection is quite properly made to the use of the term "fair value" by the courts (page 147). Upon this return base

there must be a minimum rate for lean years and a maximum rate for fat years, any return between the two being considered fair; any return below the minimum being too low and calling for a larger return later or an addition to capital, and any return above the maximum being unreasonably large and one that calls for some adjustment or crediting of the surplus to the public [page 167].

This suggestion for the systematic addition of deficits to the return base and for the systematic deduction of surpluses therefrom is of vital import for the successful working of automatic regulation.

66

Having determined the return base, the rate of return to be allowed on it is called by the author "the wage of the money". In addition to this return he would allow a 66 wage for service" (page 38). The latter may, "for lack of a better unit of measurement", be measured as a percentage of the invested capital. It would seem to be much better to measure the profit as a percentage of the business done, if some good way could be found to discourage the high cost of service ... and to put a premium on low cost of service" (pages 38-39). On page 117 he gives a formula which would result in "a profit rate for service that grows less as the business (cost) is larger, though the gross money profit grows with the growth of business." A value may result which exceeds the cost (or the "return base "); and it is to this excess of value over cost that the author seems to refer when he speaks of a remainder which " is called, by some people, water, and by others, speculative value, and by others, promotion cost, and by economists, surplus" (page 36). A suggestion is made for differentiating in the security issues between this surplus and the cost incurred (page 37). The reviewer would venture one criticism on the allowance of this

"wage for service". The object of the allowance is solely to furnish an incentive to the management to be on the alert to improve the service or to lower the costs to the public. The management is already being paid, presumably, for its routine work, in the form of salaries. On Professor Raymond's plan, it is true that unusual alertness would increase the return on the stock; but it is equally true that under some circumstances this extra " wage for service" might result even with routine or inefficient management; the monopoly power might well be so great that even the poorest management could earn more than the normal" wage of the money" if permitted by the regulating power to do so. To avoid compelling the public to pay a surplus for anything except unusual efficiency, it would seem better to determine the wage for service" not by a general formula applicable to all utilities, but by a separate consideration of each plant, subject to periodical revision. Some rough earmark of normal efficiency could be agreed upon, perhaps a given rate of charge for the service; and a surplus return could be allowed only when accompanied by previously determined improvements upon this "normal" efficiency. Such was roughly the plan agreed upon in the case of the gas company in Boston, where, by a sliding scale, dividend rates higher than "standard" are permitted only when the price of gas falls below the "standard" price.

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COLUMBIA UNIVERSITY.

ROBERT L. HALE.

American Problems of Reconstruction: A National Symposium. Edited by ELISHA M. FRIEDMAN. New York, E. P. Dutton and Company, 1918.-xxvi, 471 pp.

One reads a book like this with profound regret that the penny pamphlet is not in vogue in America. In England all of the more pretentious articles included in this symposium would have been available for popular distribution at a nominal charge, available as individual studies and not lumped into a bulky, expensive and, therefore, little-read tome. The regret is the greater, because in a nation of economic illiterates the kind of simple, painstaking exposition which we get in the articles by Senator Owen, Henry E. Cooper, Professor Fisher and Professor Seligman is invaluable. Their statements should be on editors' desks; they should be written about, explained and discussed. How else can we get from an electorate, blissfully ignorant of triangulation, fluctuations in the value of the pound and the urgent need for popularizing acceptances, any supporting judgment for a national fiscal policy which has the public interest at heart?

The papers on finance are by far the most scholarly, consistent and informative in this volume. This is attributable, no doubt, to the editor's special interest in the field. By the same token, the reviewer finds his own field-the labor problem-peculiarly slighted. Not that Mr. Wehle's contribution is slight. It is substantial and valuable. But to give less than twenty-five out of four hundred and fifty pages to the problem of industrial relations shows a serious lack of perspective concerning the issues of American reconstruction. Mr. Gilbreth's article might, I admit, be included in the "labor" category, but Mr. Gilbreth is threshing over old straw and his discussion adds little to the subject that his books had not said before reconstruction was thought of.

A more fundamental criticism is that, in common with most compilations, the book does not exhibit any inner unity. And while this is not expected, it is still an indispensable part of a real contribution to reconstruction literature. What we need most in popular discussion of economic theories and phenomena is to show plain people how it all hangs together in a way that reacts upon their lives. People are not going to be interested in economics until they see plainly how, for example, foreign trade affects the regularity of work in their industry; or that United States loans to foreign governments are not merely something to be read about on the financial page, but events of consequence to the demand for American goods in England and China. After all, amid all the bewildering complexity of the modern economic world, it is the duty of the economist to make plain the interrelations and their human consequences.

There is material in this book out of which the thoughtful reader can make his own tentative synthesis. But there is no one contributor who is trying to see the field covered by the book as a whole. Is it possible that for the task of such synthesis, undertaken from a definitely pluralistic and humanistic point of view, no one could be found?

Finally, I believe reconstruction discussion is in danger of becoming sounding brass and a tinkling cymbal unless it is premised by an explicit declaration of purpose. Why do we want reconstruction? What do we want reconstruction to do? These are the first questions. Why not answer them first? You cannot discuss method intelligently unless you discuss aims. There is no use building carriages if there are no roads, no road maps and no horses! Why reconstruction, if it is not to some clearly visualized purpose?

No purpose is stated in this volume, and one feels that the individual writers have distinctly different and sometimes even opposed purposes. This constitutes a major failure. For, unless I am much mistaken, the

first problem of reconstruction is to achieve a definition of aim and purpose for America and for the nations of the world which shall be generous and exalted, but which shall also be definite enough to give the expert technician the sense that a tangible criterion of social value is at hand.

NEW YORK CITY.

ORDWAY TEAD.

Railway Rates and the Canadian Railway Commission. By D. A. MACGIBBON. Boston, Houghton, Mifflin Company, 1917.xv, 264 pp.

The first part of this volume, the value of which is in no way diminished by the fact that it receives no recognition in the title, tells of the development of water and rail transportation in Canada, describes the present Canadian railway system and the freight rate structure and gives an account of the origin and growth of public regulation in the Dominion. The second part describes the rate problems with which the Canadian Railway Commission has been required to deal and analyzes the principles which the Commission has devised for its guidance in maintaining an equitable relationship between the railroads and the public.

The development of transportation in Canada, as Dr. MacGibbon points out, has been closely related to the development of transportation in the northern part of the United States. While Pennsylvania and Maryland were pushing the construction of the Main Line of Public Works and the Chesapeake and Ohio Canal, in response to New York's waterway between Albany and Buffalo, Canada was endeavoring to safeguard her commercial future by building the Welland Canal; and just as the Pennsylvania Railroad and the Baltimore and Ohio were Philadelphia's and Baltimore's challenges to the supremacy of the port of New York, so the Grand Trunk embodied the competitive spirit of Montreal. The construction of three Canadian transcontinental lines marked the westward extension of the competitive struggle of the seaports and industrial cities of eastern Canada with similar centers in the northeastern section of the United States. In both countries, railroads received large subventions from public treasuries, and in both, orgies of speculation, fraud and mismanagement were witnessed. Both suffered from the evils of high rates and vicious discriminations; and in an effort to correct these evils both eventually created quasi-judicial commissions clothed with wide powers of regulation.