iable costs incurred by the railroad
furnish a minimum limit below which its charges cannot go, but to
which they tend to go in the case of traffic which cannot otherwise be
secured.

6. This place value which the railroad can confer on the goods is
small (1) when the cost of making the goods at their place of
departure is not much less than that of making them at their place of
destination, or (2) when it is not much less than the cost of
obtaining them from a third point, or (3) when it is possible to carry
them from the place of their origin to their destination by water or
by any other cheap means of transportation.

7. Variable costs are positive additions to the total outlays
previously incurred by a railroad, and they result from adding a
definite amount to its previous traffic. They are less than
proportionate parts of total costs, including interest, some part of
operating expenses, cost of maintenance of roadway, etc.

8. The comparative smallness of the variable costs is chiefly due to
the fact that the carrying capacity of railroads is only partially
used. These costs become relatively larger as traffic increases, and
would practically coincide with proportionate shares of total costs if
the traffic should reach its absolute maximum.

9. If the place value above defined is large enough to cover the
variable costs attaching to certain traffic and afford any surplus
whatever, the railroad usually takes this traffic.

10. On the business which it gets the charges vary widely and, as it
appears, capriciously, but they are at bottom governed by the economic
principle stated--that of place value as established in ways in which
the charges of the railroad itself do not figure.

11. Competing railroads tend to bring rates downward toward a minimum
which is fixed by the merely variable costs of the carrying as done
by one or more of the railroads themselves.

12. The competition between railroads is arrested while they are not
using their full capacity, while the merely variable costs of an
increment of traffic are still abnormally low, and while many rates
are so.

13. Railroads which compete for freight between terminal points are
strongly impelled toward consolidation; and those which compete along
their entire lines are forced to resort to it.

14. Consolidation in its more imperfect forms tends to establish rates
that are abnormally high, but this tendency is somewhat checked by the
danger that the c