tado's powers and privileges. A reference to the legislation of the Siete Partidas and of other early codes shows the duties that he had to perform and the privileges that he should enjoy. Again, in the ordinances of 1563, the offices of adelantado, alcalde mayor and corregidor bestowed upon the leaders of expeditions for discovery and settlement are differentiated from one another in rank and in the stipulations to be fulfilled. This legislation must be regarded as the crystallization of earlier practice and an evidence of what had been the custom during the preceding half century. The two latter titles certainly carried with them functions, and it is reasonable to infer that the same was true in the case of the adelantado. The ordinances, furthermore, provide that there shall be an investigation (residencia) of his administration, precisely as in the case of other officials who had served the crown. And if this were not enough, a survey of the actual administration of their respective provinces by adelantados, such as Ayllon, Montejo, Pizarro, Mendoza, Cabeza de Vaca, Belalcázar, Irala, Menendez de Avilés, Garay, Oñate and others,' who succeeded in exercising the authority with which they were invested, would show that the title was one of office and not simply of honor. The reason for the discontinuance of the office and title of adelantado in America lies in the fact that their bestowal belonged in a peculiar sense to the period of discovery and conquest. By the beginning of the seventeenth century most. of the territory claimed by Spain had been brought under the administrative control of viceroys and under the judicial power of audiencias. Since no region was left in which administrative and judicial functions could be combined to the advantage of colonial organization in the hands of a special officer like the adelantado, the office necessarily disappeared along with the circumstances responsible for its introduction. COLUMBIA UNIVERSITY. ROSCOE R. HILL. 1 REVIEWS. Valuation of Public Utility Properties. By HENRY FLOY. New York, McGraw-Hill Company, 1912.—viii, 390 pp. Engineering Valuation of Public Utilities and Factories. By HORATIO A. FOSTER. New York, D. Van Nostrand Company, 1912.-xvi, 345 pp. Valuation of Public Service Corporations. By ROBERT H. WHITTEN. New York, Banks Law Publishing Company, 1912.xl, 798 pp. Significant both of the general interest in the problem of the valuation of public utilities and of the newness of that problem, is the fact that, although there had previously been no extended treatise on the subject, three considerable works have appeared simultaneously. Of these, two are by practicing engineers, Messrs. Floy and Foster; the third is by an economist and lawyer, Dr. Whitten. While all deal with the same topic and bear almost identical titles, there is the expected difference in the treatment. Messrs. Floy and Foster tend more to the consideration of technical problems connected with valuation, and with the methods and procedure in conducting investigations. Dr. Whitten, on the other hand, places more emphasis on the legal conceptions, is more liberal in citation of decisions by ccmmissions and courts, and deals somewhat more with underlying principles and theoretical considerations. The two former take a more practical view and branch off into tables, formulas, and forms; the latter adopts a broader and perhaps a more academic view. The engineers, as is to be expected and perhaps to be pardoned, show an extreme confidence in their profession, claiming not only that the engineer must estimate costs and depreciation, but that he alone is competent to deal with the distribution of costs, good-will, and franchise values-questions which belong to the sphere of accounting, eccncmics and law rather than to that of engineering. And all three authors agree in an attitude of condescension, if not of contempt, toward the accountant, and toward what are called "mere bookkeeping entries." In all the works emphasis is placed on valuation for the purpose of fixing rates. All accept the conventional doctrine that the basis of valuation varies with the purpose for which the valuation is made. One may question whether this distinction is not at times overemphasized, as when Mr. Floy claims that, for taxation, property should be estimated not at its normal value but at the price which it would bring at forced sale. Accepted custom might make it inequitable to value a single parcel higher than its forced-sale value, or at more than an arbitrary percentage of its real value. But this does not at all establish a principle of valuation. If the basis of taxation is ability to pay, there is no reason to emphasize forced-sale value. A palatial country house might bring at forced sale no more than a much less costly, but more normal city home. The ability of the owners to pay would probably be proportionate to the cost rather than to the forcedsale value. Dr. Whitten, on the other hand, while giving full importance to the distinction between a valuation for rate making and one for condemnation, does show that in essence they are more nearly the same than has generally been admitted. For rate-making the more frequently used bases of valuation are original cost, cost of reproduction and present value. The engineers favor cost of reproduction as tending to approach an expression of present value, or at least a hypothetical present value which might exist were competition present. Dr. Whitten, on the other hand, uses reproduction cost merely as a convenient rule for approximating original cost, which he takes as the real basis for valuation. In older companies, he claims, it is impossible to resurrect the records, and no one can ascertain the actual cost. But an estimated cost of reproduction approximates the original cost as nearly as can be hoped for. Messrs. Floy and Foster attempt no theoretical justification of any given basis of valuation. Dr. Whitten's more theoretical mind harks back to the sacrifice of the investors. Not what the plant is intrinsically worth, but what the owners put into it, is said to be the equitable basis for rate regulation. The company, he says, "devoted a certain amount of money to a public use and is equitably as much entitled to a fair return on that investment, provided the business can be made to earn it, as though it had actually loaned that amount to the public " (page 87). But the argument is unsound. Aside from the obvious fact that the investment is not a loan (and if it were a loan, it should be repaid whether there are earnings or not), objection can be made to using an analogy which quite begs the question. Equally fair would be the analogy to a long-time lease of property to the public, the lease calling for periodical revaluations. In such a case no one would claim that the original cost of the property affects the rental to be paid after any subsequent revaluation. vestment of capital in a public utility resembles more a loan or a lease. To claim that because certain rules govern a loan, they must also govern investment in a public utility is a logical non-sequitur. The question at issue is whether an in Much is said in current discussion as to equity in valuation. But so long as no agreement is reached as to what constitutes equity, it is feared that conclusions will be unsatisfactory. Perhaps it will ultimately be found that the solution is not altogether one of equity, but rests in part on expediency in the distribution of the risks and the advantages involved in industrial progress. In competitive industries little attention has been given to the regulation of profits, although there are indications that such regulation may some time be attempted. But in public utilities competition is abnormal, and the present régime calls for regulation of prices and limitation of profits. Some find a criterion in attempting to secure the level of prices that theoretically might be expected had competition prevailed. Others go to the opposite extreme, even attempting to prevent the effects of such competition as actually exists, as is done where railroad rates are fixed so as to allow a fair return on the cost of the more expensive of two competing lines, although the new competitor thereby gets unusual gains. The former view emphasizes cost of reconstruction; the latter, original cost. Difficulties arise whichever course is taken. If cost be chosen as the proper basis, shall the public bear the risk of making ventures in new enterprises, or shall all essays at improvement be delayed until in some mysterious manner they have been proved to be successes and not merely ventures? How can the wise investor and the inefficient one? on the investments of both alike? with the burden of unwise ventures. progress and to stifle initiative. public distinguish between the Or shall it allow "fair returns One course threatens the public The other threatens to impede A solution to the dilemma is proposed in allowing unusual rates of return on speculative ventures, but refusing to continue such returns indefinitely. Thus Dr. Whitten says that, granting that twenty per cent was a fair return on capital invested in the first gas plant in New York, it is ridiculous to claim that ninety years later it is still entitled to the same rate. But there are difficulties in declaring the returns on a single enterprise to be excessive when the rate was no more than necessary to secure capital for the investment. Would it, for instance, be equitable, when one has gained the single capital prize in a lottery, to say that he was more than compensated for the risk, and hence to appropriate part of his winnings, although the price paid was much less than the sum realized from the sale of all the tickets? If this were attempted should the single ticket be considered, or the total investments in that lottery by the individual who won the prize, or all purchases by all purchasers? Undoubtedly returns can sometimes be shown to be excessive, but it is hard to establish the fact satisfactorily. For the public to cut down the profits of the exceptionally fortunate enterprise resembles somewhat the refusal of an insurance company to pay the full amount of a policy, because it represents an inordinate gain on the premium paid by the man who was insured only a year before his death. But the greatest difficulty arises in connection with industrial improvements. An investment is made, wisely and economically, and rates are fixed to yield a fair return. But in later years new methods are introduced, new inventions are made, which would make it possible to render similar services at greatly reduced rates. In ordinary industries competition would arise, rates would fall, and the loss would fall on the original investor. But if returns are allowed on the basis of the original cost these results are not secured. The Supreme Court, in Smyth v. Ames, 169 U. S. 466, thus argues that to reduce rates so as to yield fair returns only on the price at which a new road might then be built would not satisfy the common sense of right and wrong, and would be neither reasonable nor just. Society is therefore to a considerable degree cut off from the savings which might arise from industrial improvements, if the original cost is taken as the basis of rates. Equity may indeed be involved in the problem so far as earlier enterprises are concerned. But in the broader question of a policy of regulation for new enterprises extending into the future, it seems that a satisfactory solution can be reached only in connection with the farreaching problem of the proper sharing, between investor and public, of the risks and the benefits of industrial improvements. And this problem, which is not attempted in the volumes under review, involves much more than a mere application of accepted notions of equity. The cost of reconstruction, as the basis of rate-making, does much to secure to the public the advantages arising from improvements. But even its advocates generally apply it in a limited, ineffectual way, with a squint toward original cost. Estimates of reconstruction costs almost always consider the conditions under which the plant was originally constructed. The present prices of labor and material are taken, but these are applied under conditions approximating those when the plant was built. And seldom is any consideration given to the cost of constructing a substitute plant which utilizes a new invention but renders equally efficient service. The present practice in |