truth in the statement that cost has less, and value more, to do with rates for particular services than with entire schedules. The proposition that the value of the service does not count at all in fixing rates is evidently only less erroneous than the proposition that it is of coördinate importance with cost. To say that nothing counts but cost is to say that courts require a rate of profit which is absolutely uniform on a fair value which is definitely ascertainable; whereas the fact is that the fair value of an entire property is matter of opinion, the proportion of it which should be attributed to a particular service is matter of guess, and various rates of profit are thought proper in various cases. The value of the service, in the sense of some of the considerations of public policy which affect the question, what the rate ought to be, is an actual rate-making criterion, although subordinate to cost. And it seems highly desirable that this subordinate effect should be allowed to some of these considerations. The argument rests in part on the assumption that a general diffusion of things is desirable. As time goes on, more kinds of things are used by more people in more places. This constitutes progress in the sense that it is the direction in which we are moving, and it is generally assumed to be progress in the sense of being desirable. And attention to the value-of-the-service sort of consideration in the making of rates encourages this diffusion. Take the prosperous or depressed condition of an industry which a public utility serves. To say that an industry is prosperous means that it is disposing of an unusually large amount of its product, or selling it at an unusually high price, or both. From the fact of large sales it follows that the dissemination of the product does not, relatively to other commodities, need encouragement, and is not likely to cease or become insignificant if it is made necessary to charge a higher price. From the large margin of profit it follows that a higher rate to the public utility might not make it necessary or feasible to charge a higher price for the commodity. From both circumstances or either it appears that the use of the article will not be disastrously interfered with by a higher charge on the part of the public utility. The reverse of all this is true in the case of a depressed industry. It is, by hypothesis, marketing unusually little of its product, or selling it on an unusually narrow margin, or both. The use of the article, already subnormal, will be further restricted if the price of it is raised; and the small present profit makes it probable that the price will have to be raised if the public utility's rate is raised. All this would constitute no excuse for charging the prosperous industry a rate which would yield the utility more than a reasonable return, to the enrichment of the utility or its other consumers, or for charging the depressed industry a rate which would not cover cost, and throwing the resulting burden on other consumers. But it does constitute a reason for giving the benefit of the doubt, in valuation of plant, apportionment of costs, and determination of what return is reasonable, to the utility in the case of the prosperous customer and to the purchaser in the case of the depressed one. A similar argument can be made for considering the value of the article served, and allowing a more generous return, within the limits of cost, from the more valuable than from the less valuable article. The dearer a commodity is, the smaller in general is the fraction of its cost which consists of freight rate or other public-utility charge. But for the fact that freight rates are graduated more or less in accordance with the value of the article, the rate would be a smaller fraction of the article's whole cost in the case of the dearer in exactly the proportion that it is dearer. A cent a pound in a freight rate may make a difference of 1 per cent in the price of a dearer article and of 50 per cent in the price of a cheaper one. It follows that a higher public-utility charge does not so greatly interfere with the use of the dearer commodity as of the cheaper. So far as high-cost commodities are in the nature of luxuries, this proposition doubtless fails in some degree; since it is in general easier to check the demand for a luxury than for a necessity. But this, as an argument against high rates on luxuries, is offset by the consideration that the distribution of luxuries, while important, is less important than the distribution of necessities. Their use may be the more checked by a higher rate, but the checking of their use is the less unfortunate. On the whole, therefore, the benefit of the doubt concerning costs and returns may well be given to the company as against the luxury, and to the necessity as against the company. And with luxuries, or beyond them, should be classed for this purpose articles the consumption of which is regarded as an evil; and with necessities, articles the consumption of which is thought specially desirable. The interest of manufacturers, dealers, and employees furnishes an argument which parallels, in large part, that based on the interest of consumers. It is obviously to the interest of the people engaged in an industry that it survive. So far as anything tends to kill it, to them it is, in that proportion, an evil. And a prosperous business is obviously less likely to be ruined by increasing its costs than a depressed one. The case is less strong for making anything turn on a mere comparison of rates in different localities; yet there does appear to be a certain advantage, other things being equal, in uniformity. People in one locality tend to be placed at a disadvantage in competition with people in another if they have to pay higher rates to public utilities. Moreover, the general prevalence of a given rate, since it tends to show what costs are and rates should be in many places, is some evidence, though slight and indirect, of what they are and should be in a particular place. Though the fact that rates are higher or lower elsewhere is no reason for fixing them above or below cost anywhere, it is some reason for taking a broader or narrower view of cost. In summary: It is frequently said, by eminent courts, commissions, and text-writers, that the value of a service is entitled to quite as much weight as the cost of the service in the fixing of public-service rates. The decisions do not bear out, but contradict, such statements. The decisions establish that the value of the service which means substantially public policy is not a criterion either superior to or coördinate with the cost of the service. This is entirely sound and largely inevitable. But the uncertainties of cost (though narrower than the uncertainties of value) offer room for value to operate as a subordinate criterion, by fixing rates higher or lower within the range of cost; and some aspects of value do, and quite as many should, operate in that Henry White Edgerton. way. BOSTON, MASS. HARVARD LAW REVIEW Published monthly, during the Academic Year, by Harvard Law Students In the closing days of the battle of the Argonne, Captain Reuben B. Hutchcraft, Jr., 106th Infantry, was killed in action. He was leading a reconnaissance patrol, and, encountering a machine-gun fire from which the character of the terrain afforded no adequate protection for his men, he led them in a successful charge on the machine-gun nests which were put out of action. He himself, however, was killed. Captain Hutchcraft graduated from the University of Kentucky in 1907, and received the degree of LL.B. cum laude from Harvard in 1911. From 1909 until 1911 he was an editor of this REVIEW. After his graduation from the law school, he practiced law in Kentucky, his native state. He was twice elected to the Kentucky legislature, and was a member of the state Tax Commission, and a professor in the law school of the University of Kentucky. With his intellectual ability, his enthusiasm, his devotion to the public welfare, and his engaging personality he was a man who could ill be spared by his commonwealth and his country. FORGERY OF AN INTERSTATE BILL OF LADING AS A FEDERAL CRIME. By the Pomerene Act approved in August, 1916, Congress undertook to regulate the effect of interstate bills of lading. That this statute in its main provisions is constitutional is hardly open to doubt, since the decision of Atchison, Topeka & Santa Fé R. R. v. Harold. This case held a Kansas statute unconstitutional which provided that the innocent holder of the bill of lading should be vested with rights not available to the shipper. Not only the provisions of the 1 241 U. S. 371 (1916). Pomerene Act, which relate directly to the contract between the shipper and the carrier are thus governed by federal law, but those which relate to the transfer of the bill of lading between third parties, if for no other reason than because the rights of the transferee necessarily affect the obligation of the carrier. If the purchaser of the bill of lading acquires an indefeasible title to the goods, the carrier must recognize that title, and will be liable in damages if he fails to do so. In United States v. Ferger, however, it has recently been held that section 41 of the Pomerene Act, which makes criminal the forging of an interstate bill of lading, is unconstitutional, "since the forged bills of lading were nothing but pieces of paper fraudulently inscribed. . . . They were not receipts for goods.. They did not affect interstate commerce." The court excluded from contemplation, as possibly presenting a different question, the counterfeiting of an existing genuine interstate bill of lading. An argument of this character is applicable not alone to forged bills of lading, but to any case where Congress seeks to punish a simulation of a lawful means or agency for promoting a constitutional object. The court refers in its opinion to the counterfeiting of money of the United States, and distinguishes the admitted power of Congress to punish counterfeiting money from the asserted power to punish counterfeiting bills of lading on the ground that the Constitution itself gives power to Congress "to provide for the punishment of counterfeiting the securities and current coin of the United States." This express statement in the Constitution certainly does deprive the illustration of counterfeit money of value as an argument; but Congress has undertaken to punish not only counterfeiting its own money and securities, but those of foreign countries, and this legislation has been held constitutional,3 though no direct authority is given in the Constitution similar to that regarding domestic money and securities. The Supreme Court did, indeed, in reaching its conclusion, rely mainly on the provision in the Constitution which gives Congress power to punish offenses against the law of nations, but also relied on the power of Congress to regulate commerce with foreign nations; and the fact that the forging of foreign securities might be a subject of foreign commerce was held a reason for protecting such commerce by punishing the forgery. Another statute, also held constitutional, shows the power of the government to punish simulation of what has been put under the protection of the national government. It has been enacted by Congress: 5 "Whoever, with intent to defraud either the United States or any person, shall falsely assume or pretend to be an officer or employee acting under the authority of the United States . . . shall be fined," etc. It will be observed that this provision punishes the fraudulent demanding or obtaining from "any person" any money, paper, etc.; and this provision has been sustained by the Supreme Court, though the guilty defendant purported to hold an office under the United States which 2 So. Dist. Ohio, October, 1918. 3 United States v. Aijoua, 120 U. S. 479 (1887). |