to the making of them.
The natural value of a commodity at A is what it costs to make it
there, and the value at B is either the cost of making it at B, or
that of making it at C and carrying it in wagons to B, or that of
making it at A and carrying it by water to B. In any case there is a
natural and simple process of fixing the costs both at A and at B, and
the difference between them is the limit up to which the railroad can
push its charges if it will. Where the business which furnishes the
freight is not fully developed, the railroad may moderate its charges
for the sake of letting it grow larger. The hope of increased traffic
in the future may cause a reduction of demands in the present. We
shall see what other influences may keep the charges below their
possible level; but the natural difference between two local values of
goods is the basis of the charge for carrying them from one point to
the other. Consolidated lines, if they had as perfect a monopoly of
carrying by railroad as has the single line in our illustration, would
base their charges on this simple principle, though for a number of
reasons they might not take all that the principle would allow.

_How Imperfect Consolidation Works._--Imperfect consolidation, when it
follows a period of sharp competition, has to deal with obstacles
which prevent a complete carrying out of this policy. Many rates have
become far lower than the rule of monopoly would make them, and there
are difficulties in the way of raising them. A weak combination of
parallel lines may keep its charges within bounds, partly from a fear
that larger ones may afford too great an incentive to secret rate
cutting and may so break up the union, and partly from a respect for
what the people may do if the exactions of the railroads become too
great. The more complete forms of consolidation have not the former of
these dangers to fear; and if, without being restrained by the state,
their charges continue moderate, it is mainly due to the fact that
other lines less firmly consolidated are unable safely to make a
radical advance of rates, and that this often prevents such a course
in the case of lines which would otherwise be able to take it.

_Limits on the Charges of a System of strongly Consolidated
Lines._--This means that where a great system of railroads occupying
the whole of a vast territory is so firmly consolidated as to have a
complete monopoly of carrying by rail within the area, it