Principles of railroad transportation

Front matter

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BOUGHT WITH THE INCOME OF THE

Contents

I- — Introduction — Definition and Scope of Transportation 1-9

Transportation defined, 2. The technics of transportation, 2. The service, 2. The economics of transportation, 3. Transportation economics and the science of political economy, 3. Transportation and the production of wealth, 4. Transportation and the use or consumption of wealth, /L Relation of transportation to the exchange of ^alth or commefce,^ 4. Relation of transportation to the distribution of wealth, 5. Transportation and political science, 7. The scope of this volume, 9.

Part I The American Railroad System

II. — Origin of the American Railroad . . . 13-24 Antecedents of the railroad, 14. Country roads and turnpikes, 14. Canals and improved rivers, 16. Early history of the railroad in America, 20. References, 24.

III. — Growth of the American Railroad Net . . 25-37 Growth in mileage by decades, 26. Importance of the decade from 1 850-1860, 26. Railroad consolidations, 28. The decade 1860-1870, 30. The first transcontinental lines, 30. The panic of 1873, 31. Construction from 1880-1890, 31. Construction since 1890, 32. Comparison of American and European railroad mileage, 33. Magnitude of the railroad system in the United States, 33. References, 37.

V

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IV. — The Mechanism of the Railroad — Development

OF Track and Locomotive 38-60

Early track construction, 39. Development of the railroad rail, 39. Ties and ballast, 44. Early locomotives, 45. Later types of locomotives, 51. Classification of locomotives, 57. Recent improvements in locomotives, 58.

V. — The Mechanism of the Railroad {Concluded) —

The Car, Terminal and Operation . . . 61-83 Early passenger cars, 62. Sleeping cars, 63. Steel passenger cars, 63. The air brake, 65. Freight cars, 66. Terminal facilities, 68. The passenger terminal, 69. The freight terminal, 72. Electric telegraph, 76. CRailroad signaling, yy. Electrification of steam railroads, 78. References, 82.

VL — The Present Railroad System of the United

States 84-96

Railroad mileage and number of corporations in 1914, 84. The three large territorial groups of railroads, 85. Territorial grouping into seven sections, 85. Grouping by ownership and control, 88. Supply of railroad facilities in the United States and foreign countries, 94. References, 96.

VII. — The Railroad Corporation and Its Charter . 97-107 The corporation defined, 97. The corporation and partnership distinguished, 98. The railroad company is a quasi-public private corporation, 99. The power of government to regulate railroads, 100. Railroad charters, 102. Size of railway corporations, 104. Insolvent corporations, 106. References, 107.

VIII. — Railroad Capital 108-130

Stocks and bonds, 108. Classes of bonds, 109. Classes of stocks, no. Railroad capitalization in the United States, no. Stock watering, 113. Motives for stock

CONTENTS vii watering, 113. The promoter and the underwriter,- 116. Methods of stock watering, 117. Effect of stock watering, 120. Bases of railway capitalization, 121. Public regulation of railroad capitalization, 124. State laws, 125. The Hadley Commission, 127. Federal regulation, 128. References, 130.

IX. — Earnings, Expenses and Dividends . . , 131-143 Sources of revenue, 131. Operating revenues, 131. Nonoperating income, 133. Operating expenses, 134. Fixed charges, and other expenditures, 135. Net income and dividends, 135. The operating ratio, 138. Relation of earnings and dividends to business conditions, 141. References, 143.

Part II The Railroad Service

X. — The Freight Service — Classification of Freight 147-159 The freight business the most important railroad service, 147. Volume of freight traffic in the United States, 148. Classification of freight, 149. The three great classifications, 150. Commodity tariffs, 155. Uniform classification, 156. How an agent ascertains rates on class and commodity freight, 158. Through and local freight, 159.

XI. — The Freight Service (Concluded) — Business Organization 160-180

Freight shipping papers: (i) bills of lading, (2) the waybill, 160. Unit billing, 168. Organization of freight service, 168. Demurrage, 170. Reciprocal demurrage, 171. Fast freight lines, 171. Cooperative freight lines, 173. Car interchange and the per diem system, 175. Records of car movements, 175. The railroad clearing house, 176. Private cars and private car lines, 177. References, 179.

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XII. — The Passenger Service .... 181-200

General characteristics of the passenger service, 181. Comparison of the trend of passenger fares and freight rates in the United States, 182. Volume of passenger traffic in the United States, 185. Comparison of railroad travel in the United States and foreign countries,

186. Classification of passenger travel in Europe,

187. Varieties of passenger service in the United States, 188. Relation hetween the Pullman Company and the railroad corporation, 193. Passenger tickets and baggage checks, 195. Methods employed to increase traffic, 196. Opportunities for developing passenger traffic, 197. Electricity and the passenger service, 199. References, 200.

XIII. — The Express Service of the Railroads . 201-217

General character of the express service, 201. The origin of the express service and its subsequent development, 203. The organization of the American Railway Express Company, 206. Express shipping papers, 207. The contractual relations hetween the American Railway Express Company and the railroads, 207. Express rates, 209. Volume of express business, 213. The parcel post and the express service, 214. Should the present express service be discontinued? 215. References, 216.

XIV. — The Mail Service of the Railroads . . 218-234

The mail service increases with the progress of civilization, 218. Classification of mail matter, 219. The parcel post rate system, 220. General statistics of mail traffic, 223. Mail transportation, 223. The railway post office, 225. The services performed by railroad companies in transporting the mails, 226. Railway mail pay, 227. The postal deficit and its cause, 232. References, 234.

CONTENTS ix

XV. — The Organization of the Service . . 235-249

The corporate organization of a railroad company, 235. The secretary's department and law department, 236. The treasurer's department, 237. The accounting department, 237. The operating department and its subdivisions, 238. The traffic department, 241. Other departments, 241. Organization of the Pennsylvania Railroad Company and the Illinois Central Railroad Company, 242. References, 249.

XVI. — The Accounts and Statistics of the Railroad

The usefulness of railroad accounts, 250. The materials of railroad accounts and statistics, 251. The comptroller's reports, 252. Annual report of the president, 252. The income statement, 253. The profit and loss account, 256. The general balance sheet, 257. The need for accuracy and uniformity in railroad accounts, 258. Government regulation of railroad accounting, 259. Five leading sources of railroad statistics, 262. Suggested extensions of the scope of transportation statistics, 265. References, 268.

Part III The Railroads And The Public

XVII. — 'Interrailway Relations — Railroad Competition AND Agreements to Maintain Rates 273-287

The public nature and the unity of the transportation service, 273. Railroad companies are cooperators and competitors, 274. Early interraiWay relations, 275. Early arrangements for through traffic, 276. Interrailway rivalry; its beginnings, 277. The struggle for the Chicago-Atlantic traffic, 278. The rivalry of the Atlantic ports, 279. Early competition in the West and

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South, 280. Nature of railroad competition, 281. The railroad business one of "increasing returns," 283. The restraint of interrailway competition a necessity, 284. Cooperation or consolidation is the alternative, 284. Agreements to maintain rates, 284. The Saratoga Conference, 286.

XVIII. — Interrailway Relations {Continued) — Pools

AND Traffic Associations . . . 288-303

Definition of pooling, 288. Description of traffic and money pools, 288. The beginning of railroad pooling, 290. Pooling in the West, 291. The traffic association and the pool distinguished, 292. Pools in the South, 292. Early agreements in trunk line territory, 294. The trunk line pool and the Joint Executive Committee, 296. The situation as regards railroad pooling in 1887, 298. Pooling prohibited by the Interstate Commerce Act, 299. Pooling contracts were illegal at common law, 300. Reorganization of pooling contracts to eliminate the pooling feature, 301.

XIX. — Interrailway Relations {Concluded) — The

Present Situation 304-320

Efforts of trunk lines to regulate competition after the prohibition of pooling, 304. Traffic associations decided to be a violation of antitrust law of 1890, 306. Effect of the decision in the traffic association cases, 307. Progress of railroad consolidation, 307. Methods of consolidation, 308. "Community of interest," 309. Traffic associations and informal agreements, 311. Pools legalized, 314. Classes of traffic associations, 315. Shippers' organizations, 318. References, 319.

XX. — Monopoly and Competition in the Railroad

Railroad corporations must be large and must cooperate, 321. Scope of railroad monopoly must be under-

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Stood in considering charges and government regulation, 323. What is meant by monopoly, 323. The oil business an example of monopoly, 324. The railroad business has not fceen a complete monopoly, 325. Railroad cooperation is of two kinds; the attitude of the law toward each kind, 326. Railroad competition is of two kinds, 327. Railroad competition is not confined to junction points, 328. The competition of markets, 328. Influence of competition upon local rates, 330. The monopoly of the railroad is only partial, 332. Government regulation of a partial monopoly may be necessary, 332. The term natural monopoly not strictly accurate, 333. References, 333.

XXI. — Theory of Rates and Facts . . . 334-348

Need of a theoretical basis of rates and fares, 334. Meanings of the term "cost," 335. The impossibility of determining exactly the cost of a particular service, 336. Cost an undesiralble as well as an impracticable basis of railway charges, 337. The value of the service theory of charges, 340. The value of commodity theory, or the taxation principle, of charges, 342. Charging "what the traffic will bear," 343. What constitutes a theoretically just rate? 344. Discriminations may be just or unjust, 346. The socialization of rates and fares, 347. References, 348.

XXII. — Rate Making in Practice . . . 349-364

The problem of rate making different for private and state railroads, 349. Classification the first step in making freig'ht rates, 350. The machinery for making freight rates, 352. Considerations which influence the decisions of traffic officials, 354. Railroad cooperation in rate making, 355. Rate systems in the United States, 356. The trunk line rate system, 356. The southern rate system, 357. The western rate system, 358.

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CHAPTER

Transcontinental rates, 359. Import and export rates, 360. The machinery for making passenger fares, 360. The problem of fixing passenger fares as compared with the freight rate problem, 361. The general tariff policy of American and foreign railroads, 363. References, 364.

Part IV The Railroads And The State

XXIII. — Railroads and the State. Regulation in

THE United Kingdom and Germany . 367-406

The twofold relation of the government to the railroads, 367. The form which the state's relation to railroads may assume, 370. Railroads of the United Kingdom received no state aid, 371. Early competition and consolidation in Great Britain, 372. Railroad cooperation, 373. British regulation of railroad consolidation, 374. Early regulation of railroad rates in Great Britain, 375. The Act of 1854, 378. The Act of 1873, 379. The Railway and Canal Traffic Act of 1888, 381. Maximum rate laws, 383. The Act of 1894, 384. British railroads and the war, 385. The Ministry of Transport Act of 1919, 387. The Railways Act of 192 1, 389. Early railway policy in Germany, 390. The nationalization of Prussian railways, 394. The Prussian railway organization, 395. The results of railway nationalization in Prussia, 398. German railways and the war, 400. The present railway policy of Germany, 400. Railway policies of other countries, 402. Conditions which determine the railway policy, of a state, 404. References, 405.

CONTENTS xiii

XXIV. — Public Aid to Railroad Construction in . . THE United States 407-421

Aid given by the States to railroads, 408. Forms of aid given by the States, 409. Amount of aid given by the States, 409. The results of state aid were unsatisfactory, 410. National aid to raiWay construction, 411. Terms of the land grants, 412. The grants to the Pacific roads, 412. Repeal of the land grants, 415. The loan of public funds to aid railroads, 415. Concerning the policy of loans and land grants, 417. County, municipal, and individual aid to railroad building, 418. Local individual aid, 419. References, 420.

XXV. — Regulation of Railroads by the American State Governments — The State Commissions 422-447

Powders of the Federal and State governments over railroads, 422. Little regulation before 1870, 423. Charter limitations on rates and profits, 424. Early railroad commissions and their functions, 426. The demand for rate regulation, 427. The tvi^o types of railroad commissions, 427. The Massachusetts commission of 1869, 427. Railroad regulation in the West and South, 429. The granger laws and the Illinois commission, 430. Granger laws upheld by the Supreme Court, 432. The Wabash decision of 1886, 433. Modification of the early granger lawrs, 434. Recent methods of state regulation; the utilities commission, 435. The powers of present state commissions; the law of Illinois, 436. Railroad commissions and corporation commissions, 439. Objections to state regulation, 440. Changes effected by the Transportation Act of 1920, 443. References, 445.

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XXVI. — Railroad Regulation by the Federal Gov-

Origin of the demand for Federal regulation, 448. The Windocn report of 1874, 449. The Cullom report of

1886, 450. Early attempts at Federal regulation, 450. The enactment of the Interstate Commerce Act of

1887, 451. Chief provisions of the law, 451. The operation of the law; the commission's orders not binding, 456. Power of the commission to secure testimony, 458. The power of the commission to regulate rates, 459. The long and short haul clause, 460. Import rates, 463. Results accomplished 'by the law of 1887, 464. Needed changes, 464. References, 466.

XXVII. — Federal Legislation from 1903 to 1914 467-488

The Elkins Act of 1903, 467. The Expediting Act of 1903, 468. Enactment of the Hepburn amendment of 1906, 469. Main provisions of the Hepburn amendment, 469. The question of judicial review, 474. The grounds upon which the courts set aside orders of the com'mission, 475. The Mann-Ellcins Act of 1910, 477. Other amendments to the Interstate Commerce Act, 1910-1915, 480. The Federal Antitrust law applicable to railroads, 483. Federal regulation of railroad operation, 484. General character of the system of Federal regulation as it existed in 19 10, 486. The need for modification, 487, References, 487.

XXVIII. — New Railroad Problems; Government

Operation 489-511

Decline of earnings, 489. Railroad bankruptcies, 492. The Adamson Act, 494. Effects of the war, 496.

CONTENTS XV

PAGE

Government control, 504. The Railroad Administration, 505. Operating results, 509. Financial results, 510. References, 511.

XXIX. — The Transportation Act of 1920 . 512-533

r"

Reconstruction plans, 512. The Cummins and the Esch bills, 514. The Transportation Act, 515. Labor disturtbances, 523. Rate increases, 524. The business depression, 525. Operation of the law, 528. References, 533.

XXX. — The Courts and Railroad Regulation . 534-562 Laws are partly court made, 534. Function of the judiciary in railroad regulation, 536. Development of judicial review, 536. State rate regulation, 537. The relation of the courts to unreasonable rates made by railroad companies, 541. Injunctions to prevent rate advances, 543. Injunctions to prevent rate wars, 544. Injunctions against secret rebates, 547. Injunctions and lathoT disputes, 548. The general law regarding strikes, 548. Injunctions to protect property and personal rights, 549. Injunctions compelling railroad employees to work, 550. Use of the injunction in the Deibs strike of 1894, 551. Regulation of the use of the injunction by the Clayton Antitrust Act, 553. Railroad receiverships, 554. Railroad insolvency in the United States, 556. Causes of railroad insolvency, 557. Objections to the present system of railroad receiverships, 559. Suggested changes, 560. References, 561.

XXXI. — The Problem of Government Ownership AND Government Regulation in the United States 563-577

The twofold nature of the problem of government regulation, 563. The two methods of government control,

564. Government ownership a question of expediency,

565. The experience of one country not necessarily a safe guide of action in another, 566. Should the xvi CONTENTS

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United States adopt a policy of government ownership ? 567. Probable effect of such a policy upon the railroad service, 567. Probable effect upon rates, 569. Socialization of rates and fares possible under government ownership, 571. Effect of government ownership on politics and government, 572. The success of government regulation in the United States, 573. Need for a constructive policy, 575. References, 577.

Appendix — Questions and Topics . . • 579-6o9 Index . . « • 611

LIST OF ILLUSTRATIONS AND MAPS

ILLUSTRATIONS

PAoa

The stagecoach, generally used for passenger travel before

the introduction of the railroad .... 14 The Conestoga wagon, the predecessor of the freight car

in the Middle Atlantic States IS

The Rocket, 1829 21

Advertisement illustrating the transportation service in

Advertisement showing what the transportation service

36 Track with wooden stringers, surfaced with straps of iron 38

41 46 48 48 49

Track of granite sills plated with straps of iron Track of cast iron rails resting on granite blocks .

Rolled iron U-rail, 1844

Peter Cooper's locomotive, 1830 ....

The Old Ironsides, 1832

De Witt Clinton engine and train, 183 1 . John Bull engine and train, 1831 ....

Lancaster engine and train, run on Pennsylvania State Railroad, 1834

First Campbell locomotive, 1836 ....

American (4-4-0) type of locomotive .

Ten- wheel (4-6-0) type of locomotive . Mogul (2-6-0) type of locomotive ....

Consolidation (2-8-0) type of locomotive Mikado (2-8-2) type of locomotive ....

xvii

49 SO SI 52

S2 xviii LIST OF ILLUSTRATIONS AND MAPS

Atlantic (4-4-2) type of locomotive . . . • 54

Pacific (4-6-2) type of locomotive .... 55

Triplex articulated (2-8-8-8-2) locomotive . . • 5^ -Passenger coach, 1835. Used on Pennsylvania portage

railroad over the Alleghany Mountains, Pennsylvania 61

An early passenger coach ...... 62

All steel passenger coach 64

All steel box car .66

All steel gondola car 68

Grand Central Station, New York City .... 7° Bird's-eye view of the Grand Central Terminal, New York

City 71

Union Station, Washington, D. C. . . . . -73

Electric locomotive ....... 79

Gas electric motor car ....... 81

Diagram o£ railroad capitalization and dividends, i8go-

1918 115

Railway earnings in the United States since 1890 . . 140

Straight bill of lading 1 61

Order bill of lading 163

Merchandise waybill ....... 165

MAPS

PACTNQ PAGE

Canals and railroads in New York in 1840 ... 12

Canals and railroads in Pennsylvania in 1840 . . .13

Map of the United States showing railroads in 1850 . 28

Map of the railroads in the United States in i860 . . 28

Map of the United States showing railroads in 1870 . 28

Map of the United States showing railroads in 1880 . 28

Map of the United States showing railroads in 1890 . 28

Map of the railroads in the United States in 1921 . . 28

LIST OF ILLUSTRATIONS AND MAPS xix

FACING PAGE

Vanderlbilt group go

Pennsylvania group 90

Morgan group 90

Union Pacific and Southern Pacific Systems ... 90

Hill group 90

Chicago, Milwaukee and St. Paul 90

Atchison, Topeka and Santa Fe 90

Territorial districts of the United States adopted by the

Interstate Commerce Commission .... 90 Section of express map showing method of numibering

blocks 208

Section of parcel post map for unit No, 869 . . .218

Chapter I Introduction— Definition And Scope Of Trans- Portation

Transportation defined, 2. The technics of transportation, 2. The service, 2. The economics of transportation, 3. Transportation economics and the science of political economy, 3. Transportation and the production of wealth, 4. Transportation and the use or consumption of wealth, 4. Relation of transportation to the exchange of wealth or commerce, 4. Relation of transportation to the distribution of wealth, 5. Transportation and political science, 7. The scope of this volume, 9.

Transportation has to do with travel, traffic, and communication; it is concerned with the movement of persons and things, and with the transmission oj^ideas. The term is appHed both to the instruments by which movement is accomplished and to the service performed by those agencies. The several instrumentalities — waterways, highways, railroads and the vehicles used upon them, the telegraph and telephone — are spoken of collectively as the transportation system. In the study of transportation attention may be directed either to the system or to the service.

The system is the machine that performs the service, and a study of it is a technical one, covering the engineering problem connected with the construction, maintenance, and operation of the means or mechanism of transportation, and also including the business principles and methods prevailing in the management of the several parts of the various organizations engaged in performing the transportation service. The engineering side of the technics of transportation is studied in the civil and mechanical engineering schools, which give instruction in the principles and methods of building the structures and machinery pertaining to each of the several transportation agencies — instruction in improving rivers, building canals, highways, and railroads; in designing and constructing ships, engines, locomotives, and cars; and in the several branches of electrical engineering. The principles and methods of administration, or the business technics, with the exception of such as may be included in the study of accounting and telegraphy, are as yet but little taught in American schools. They must be mastered in the school of experience. In this regard the educational facilities in the United States are somewhat inferior to those in some European countries.

In studying the transportation service, only incidental regard need be given either to the agencies which perform the service or to the technics of the administration of those agencies. The purposes of the study are threefold : ( i ) To understand the nature and scope of the transportation service both as a whole and with such detail as may be necessary to an intelligent consideration of each of the several branches of the service; (2) to analyze the relations of the companies and individuals who perform the services to the users of the service — the relations, actual and desirable, of the carriers and the public; (3) to ascertain the degree and form of supervision or control that the Government should exercise over the relations of the carriers and the public.

In contrast with the technics of transportation, the study

SCOPE OF TRANSPORTATION 3

of the service may be called the economics of transportation— the study which treats of the characteristics of the transportation service, the business relations of the carriers and the public, and the governmental supervision or control of transportation. This study comprises a part of each of two social sciences : economics or political economy and civics or political science.

Political economy, or economics, is the science of business affairs, or, as it is sometimes defined, the science which treats of the efforts of men to satisfy their wants. Among the manifold instrumentalities men have devised to assist them in the business activities which they carry on to create the wealth whereby their wants are satisfied, transportation agencies have come to be indispensable, and a study of the services performed by those agencies constitutes an important part of the science of business affairs. The position of transportation economics in political economy can be specifically stated by explaining briefly the relation of the transportation service to the production, consumption, exchange, and distribution of wealth.

Production consists in making matter more useful for purposes of consumption. It is the creation of utilities. To give matter the ability to satisfy wants, two things must be done : The commodities must be given the form or the qualities which the user desires them to possess, and the articles must be taken to Ihe user. The form and intrinsic qualities that make matter useful result from agriculture, manufacture, and the various industries by which things are grown and shaped. The transportation service puts commodities in the place where they can be used. An article that has been grown, mined, or manufactured has received only a part of the services by which it becomes useful. Only the intrinsic utilities of form or quality have been created; the usefulness which depends upon the location of the article— its place utilities — has yet to be given it. Place utilities are created by the transportation services, which are thus a part of the general process of production.

The relation of transportation to production inay also be shown by considering the general effect which improvements in transportation services have had on the use or consumption of wealth. Men produce commodities, because they want the commodities, because they wish to hoard up, or use — that is, "consume" — them ; accordingly, what men produce depends upon the kinds, number, and intensity of their wants. From this it follows that any force or influence that changes men's wants will also affect their productive activities. This truth is illustrated by the fact that the uncivilized man will do but little work, because he wants but a few things. The only way to make him work is to create wants in him.

The causes which modify the wants of men, and thus change what they produce and consume, are many, but nothing will do more to create new wants or more intense ones than a decrease in the cost and an increase in the quantity and variety of consumable commodities. The availability of commodities has been multiplied many times by improvements in transportation, and the effect of this upon human wants has unquestionably been great. Indeed, with our present facilities of transportation, there is practically no limit to the number of wants we can satisfy, and our rapidly increasing demands have spurred us on to an ever-widening range of production.

Commerce consists in exchange of commodities between separated localities — it is the agency by means of which the consumer and producer are brought together. The process involves a sale and purchase of goods, their transmission from the seller to the buyer, and the settlement of business accounts. Transportation is one of the mechanisms through which this is accomplished. Among the other agencies of commerce are the stock exchanges, the bourses, the markets.

SCOPE OF TRANSPORTATION 5

the banks, the trust companies, and insurance companies; but of these several auxiharies the transportation service is the least dispensable. With the growing subdivision and specialization in productive effort, with the continually increasing tendency to locate industries where they can be carried on most economically, with the constant extension of the areas from which the materials of industry are drawn and over which the products are marketed, commerce, and particularly that part of commerce which is concerned with the movement of persons and things, becomes of ever greater consequence in all productive enterprises. The production of wealth has been greatly enhanced by the enlargement of commerce, and the extension of commerce has been possible mainly because of the improvements that have been made in the agencies by which the various transportation services are performed.

The relation of transportation to the distribution of wealth is somewhat complex. Wealth is the creation or product of three factors: land or the resources of nature, capital, and human effort, physical and mental. Nature is the source of wealth, capital is the tool, and man is the agent by which the source is drawn upon. The income which men derive from the possession of natural agencies and resources is called rent, that secured from the ownership of capital is termed interest, that obtained from effort is named wages. The income or rent received by the owner of "land" depends upon two things: the productivity or intrinsic characteristics of the land or natural resource, and its location. The rent which owners of agricultural land can command depends upon its fertility and its location with reference to markets; rents from mines and forests are determined by productivity and location; rents on building sites result mainly from location. As far as rent depends upon location, the determining factor- is transportation, and every improvement or change in the facilities or costs of transportation services must have an influence upon the total amount of "rent" received by the owners of natural agents and must readjust the distribution of that form of income among its recipients.

The relation of the transportation service to the income from capital is twofold; the total income from capital has been greatly increased by the modern transportation facilities, but the rate of return has been lowered. Capital is so generally and extensively employed in production today, as the result of improved transportation, the use of machinery, and other well-known causes, that we have come to speak of modern productive processes as capitalistic in contrast with those of a hundred years ago, when most things were done by manual labor and when land and labor received nearly all of the income from production. But the accumulation of wealth has been so rapid as to make capital abundant and to cause the rate of interest to decline rather than rise. This fall in the rate of interest, however, has been slower than it would have been had not the opportunities for investment been greatly multiplied by the extension and improvement of the means of transportation.

By wages, the income resulting from human effort, is popularly meant the money payment received by those who toil with hand or brain; but in scientific discussion the word more frequently means the amount of useful commodities received by the workers. The "real" wages of a day's labor are the commodities which a day's labor will secure. Possibly transportation has had no more marked effect than that of increasing the quantity and variety of useful things which come within the range of the toiler's income. The luxuries of past generations have now become necessities, because of the reductions in the costs of production effected by improved transportation and other forces. Furthermore, as the laborer's real wages have increased, his efficiency has become greater and his impulses to effort have been strength-

SCOPE or TRANSPORTATION 7

ened. To have is to want more, to strive harder. We call this raising the standard of living, the progress of civilization.

As the result of cheap transportation, those who produce have multiplied their wants and their efforts; and with the present highly developed transportation service to aid them, their efforts are far more productive than they would otherwise be. Human effort creates enormously more wealth than was formerly possible. Whether, in the distribution of wealth among the classes who control or contribute to the forces of production, labor or human effort receives an adequate share of the total, is a question concerning which there are differences of opinion. The absolute income of labor is greater than it was when cruder processes of production prevailed, and that income continues to increase; but it is by no means certain that the forces controlling the distribution give labor an equitable share.