provocation. The dread of the
extreme penalty insures a cautious policy in increasing charges which
have been established under a transient regime of competition. Partial
monopolies adhering to rates many of which were established under the
pressure of competition--such are the railroad systems of America. The
existing condition shows some of the effects of competition which has
ceased and of legislation which has not taken place. As the
combinations shall become greater and stronger, the situation
everywhere will become more and more akin to that which existed in a
local way when a single line of railroad had no effective competition,
and the charges which the traffic would bear were fixed in the way we
have described and absorbed the place value which the carrying
created. It is a method which exposes the public to an extortion
which, though not unlimited, is unendurably great. Consolidation,
therefore, means the control of rates by the state; but it is
essential that this control be exercised with due regard for the
economic principles which rule in this department of industry. Thus
only can there be secured the results of a natural system unperverted
by monopoly.

The principles which a study of simple cases suffices to establish are
as follows:--

1. Freight charges are essentially a variety of price. They express
the exchange value of place utility.

2. The static standards or norms toward which these prices tend are
fixed in the same way as are other static standards of value,--by a
rule of cost,--though in the case of railroads the working of this
rule is exceptional.

3. When carrying is done by simple means and by competing carriers,
the ultimate basis of charges is the cost of the carrying; and this is
estimated in the simple way in which, under perfectly free
competition, the cost of making commodities is estimated. The total
outlay is charged against the total product.

4. A single railroad between one point and another, when it is not
affected by the rivalry of any other railroad, can get for its service
the difference between the cost of goods at the place where they are
made and the cost at the point of delivery, on the supposition that
they would either be made at this point or carried thither by more
primitive means. Under such a partial monopoly the costs incurred by
the railroad itself do not directly set the standard of its charges,
but other costs do so.

5. In this case the so-called var