of it are brought into their legitimate relation
to each other. After the union of rival companies, railroads continue
to be in that intermediate state in which the effect of an unused
capacity for carrying has its natural effect in charges which
discriminate widely between different localities and between different
kinds of freight. The railroad traffic does, indeed, begin to follow
the course which we have illustrated in the case of transportation by
water. It takes a few steps in that direction, but further progress is
then stopped by combinations.

The fundamental laws of economics still apply. The static standard of
freight charges exists, and one can form some idea of what actual
charges would be if the forces which elsewhere tend to bring prices to
their theoretical standards could here operate unhindered. The
hindrances, however, are such as definitely to preclude such a result.
The rates do not become in a true sense normal. Even under such
active competition as at times exists they do not become so, while
without competition they never tend to become so. It would, however,
be a gross mistake to assume that static standards have no application
whatever to railway transportation. The whole subject is most easily
understood when those standards are first defined and the baffling
influences which prevent actual rates from conforming to them are then
separately studied. There are influences which bring the various
charges of railroads within a certain definable distance of normal
standards.

[Illustration:
C
|
. ABANDONED
| ROUTE
.
|
.
|
RAILROAD v
A------------------------------>B
\ /
\ /
\____ /
\___ __________/
\____/
WATER ROUTE
]

The situation of railroads we take as we find it--one of complete
consolidation in case of many roads, and of harmonious action, or
quasi-consolidation, in the case of others. In general their charges
are fixed by the place value they create, as that value is established
by influences other than the charges themselves. It might seem that
the char