consistently allows rates to be reduced if manufacturers find a way to produce steel rails more cheaply, but does not reduce rates to correspond with an entirely new invention.

In treating depreciation the three authors show some differences. Dr. Whitten is the most logical and systematic. Mr. Floy is greatly at fault in confusing present efficiency with present value, and in making the irreconcilable statements that a machine has a definite life and that it is of equal value so long as it runs with equal efficiency. This is most baldly brought out in his diagram and in the statement: "Apparatus that is in use and rendering a service economically may for the purpose for which it was intended be as valuable as when originally installed, although its age may be approaching the limit of its life. . . . If its annual maintenance charge is no greater than in the earlier years of its history, its' service value' to the company as a going piece of property is as great as when first installed." An efficiently operating plant may conceivably maintain a constant value, but that can be only where the unit considered, as for instance the entire railroad, is regarded as settled, perpetual and non-depreciating. Uniform value and terminable life are mutually contradictory, except where the value is nil. The "one-hoss shay" wore evenly for one hundred years and then suddenly broke down. In its last year it worked just as efficiently as in the first, and had no greater maintenance charge. But no one can say that it was as valuable as when it was new, or even as when it had still two years of service before it. But both in text and diagram Mr. Floy indicates that the purchaser will pay practically the same for a machine that has one year of anticipated life as for one having two years, and almost as much as for one having fifteen years. Mr. Foster's view of depreciation in this respect is sounder. He errs, however, in stating that annual depreciation is the sum of the allowance for obsolescence, inadequacy etc. Mr. Floy rightly shows that the depreciation which will first cause abandonment should alone be considered.

The subject of replacement, closely allied to that of depreciation, is not satisfactorily discussed, so as to bring out the exact relation between the two. Furthermore, there is some confusion as to the effect of borrowing to provide replacements and improvements. In a public utility, where rates are arbitrarily fixed to cover costs, the conditions are somewhat different from those in an ordinary commercial enterprise. Rates may be fixed either so as to provide for necessary replacements, or at a lower figure sufficient merely to cover running expenses, leaving replacements to be provided by issue of new securities. It is not certain that consumers, so far as they constitute a fixed body, are

better off under one plan than under the other. Mr. Floy seems to claim an advantage under the first plan, and by the use of illustrative figures shows a saving thereby of nearly twenty-five per cent. But this alleged saving is due entirely to the difference in time of payments, and the estimation of interest thereon. In buying a house for $10,000 it is not necessarily cheaper to pay all cash than to pay by giving a mortgage at three per cent. It is true that in the latter case, the total payments over a period of fifty years, would, if the mortgage were to run for that term, amount to $25,000 as against $10,000 where all cash is paid. Whether it is more desirable or not depends on the value of money in the hands of the purchaser. But where the body of consumers is changing, a real inequity may be wrought by compelling one group of consumers to pay for the expenses properly belonging to another group. Of this real difference Mr. Floy takes no notice.

Similar considerations should be regarded in dealing with the problem of the treatment of early deficits, arising in the process of building up a going concern. Dr. Whitten criticizes the Wisconsin commission for advocating the capitalization of such deficits. The issue as he interprets it is between paying uniform dividends even though they are unearned in earlier years, and paying small or no dividends at first with compensatingly higher dividends later. But the commission, in the decision criticized, is not discussing any such an alternative. It is considering the relative desirability of allowing a permanent income on the sum representing capitalized deficits, or of charging consumers enough to reimburse the deficits. The commission argues against the repayment of the deficits, where these were necessarily incurred in building up the business, as being too heavy a burden on the consumers during the period of repayment. Dr. Whitten probably agrees with this, for he says elsewhere that the costs properly chargeable to one period should not be transferred to the consumers of another period. Hence deficits which represent the cost of establishing the business, and are therefore allocable to the entire life of the concern, should not be borne exclusively by the consumers of any single period. Even though the franchise terminates after a definite period, consumers need not reimburse the deficits, for they constitute part of the going concern value, for which the successor company will pay, and which will form a basis of charges to future consumers. Where the expense covers a permanent improvement consumers should provide return on the investment, not return of the investment.

Dr. Whitten further construes capitalization of deficits as the issuing of capital stock to represent such deficits. He is perhaps correct in

assuming that the commission could not have justified such a procedure. But he certainly exaggerates the evil of so doing. A company with $100,000 capital invests it all in a plant. Accumulated deficits necessary to the establishment of a going concern amount to $25,000. Provided that the valuation for rate purposes is held to be $125,000, which is sanctioned by Dr. Whitten as well as by the commission, it is relatively unimportant, so far as rates are concerned, whether or not this $25,000 is represented by an issue of stock. Nor is it significant whether rates are fixed so as to allow ten per cent on the original investment of $100,000 (as Dr. Whitten proposes) or eight per cent on $125,000. It is, however, a vital matter whether an expense of $25,000 shall be borne by all future consumers or shall be collected exclusively from the consumers of the first ten or twenty years.

The amortization of franchise costs is discussed by all three writers, but without reference to some important problems connected therewith. It is evident that if the company pays a given sum for a twentyyear franchise, the consumers should pay enough not only to allow a fair return on the investment, but also to reimburse the cost of the franchise. But this implies a similar treatment in the case of the succeeding company; and thus, from period to period, successive bodies of consumers are repaying to successive companies the cost of their several franchises. This means that the rates are made high enough to cause the consumers to pay into the city treasury the entire amount that the city receives as payment for franchises. It is virtually using the rates paid to a public utility as a means of taxing the consumers for the benefit of the city, and this when the utility is owned by a private corporation and not by the city itself. It may be perfectly good financial policy thus to use a public utility as a means of collecting taxes from unconscious consumers. It is, however, rather interesting to note that with rates regulated so as to bring a fair return, the price received for a franchise is no burden to the company, nor gain to the city, but is merely a device for collecting taxes.

THE UNIVERSity of California.

HENRY RAND HATFIELD.

Railway Transportation. By CHARLES L. RAPER. New York, G. P. Putnam's Sons, 1912.-xi, 331 pp.

Professor Raper states on his title page that his work is "based, with the author's permission, upon President Hadley's Railroad Transportation," and in his preface he informs us that his "chief purpose is to revise and enlarge Hadley's book." The enlargement has resulted in

an increase of 62 pages. of the earlier work remains. The plan of the book is simple and thoroughly systematic. After a short introductory chapter Professor Raper subdivides his subject according to countries and discusses successively the railways of Great Britain, France, Italy, Germany and the United States. These are the countries whose railway history is most interesting to the student. To those who would include Switzerland in the list, it should be said that this state has been considered incidentally in the last chapter of the book where the author gives his conclusions as to the success of the state operation of railways. He groups what he has to say about each country under five heads, as follows: the development of the lines, the general conditions of traffic, the passenger service and rates, the freight service and rates, and the ideals and machinery of state control.

The revision has been so complete that little

Those who desire to check the author's statements of fact will have difficulty, for in the entire book there are but four specific references to sources. The absence of foot-notes may possibly be regarded as an indication that the book is designed not so much for the special student as for the general reader. But for the general reader the value of Professor Raper's work is impaired by the inclusion of too large a proportion of uninteresting facts and by serious defects of style. In places, indeed, the English is inexcusably poor (e. g. pages 22, 58). Some of the faults of expression are so serious as to make his statements appear quite misleading. For example, in the treatment of the development of French railways, many sentences are so badly constructed that one who reads the discussion without previous knowledge of the facts is likely to get an entirely false impression of what actually occurred.

Other evidence indicates that the book is not intended as a strictly scientific piece of work. This affords the best explanation for the inexact statements which crop out. Thus the author says that charges for taxes are independent of the volume of traffic and earnings (page 231). The management of the Illinois Central doubtless wishes that this statement were always true. On page 12 appears the statement: "A railway, or any other form of transportation, can, therefore, never afford to be hostile to the interests of a community nor the community to its transportation facilities." While this may be true if by community" one means the entire country, the statement is certainly not valid for particular communities and therefore does not summarize, as Professor Raper seems to infer, a complete solution of the railway problem. Indeed, some of the most vexatious questions

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arise because railways can afford to be hostile to the interests of one community in favor of those of another. Again (page 6), the author observes that "the creation, perfection, and operation of the Interstate Commerce Act have, we think, been the severest test of the efficiency of the Congress of the United States it has ever had." Of this it may be remarked that the work undertaken by Congress seems comparatively simple when we reflect that the Interstate Commerce Act was copied almost verbatim from English statutes.

The author follows President Hadley in an error when he emphasizes the importance of the report of the Italian Commission of 1878-1881 (page 109). This report, it will be remembered, presents its recommendation against governmental operation of the railways as though its decision had been reached only after a thorough investigation. It is now known that the report is not worthy of the weight which has been ascribed to it, since the commission was appointed with a view to securing that particular recommendation.

Taking Professor Raper at his word that his chief purpose in writing the book was to revise Hadley, it is quite evident that he has done his work too thoroughly. Aside from the general arrangement and a striking phrase here and there, the new book owes little to the older one. What is especially to be regretted is that the most interesting and valuable parts of Hadley are among those which have disappeared in the revision. It must be remembered, however, that the revision of another's book is a difficult as well as a thankless task. An author owes it to himself to do his own revising; he is the only one properly fitted to do it. To revise President Hadley's book was a particularly difficult undertaking, for it is a book which owes its long life not so much to the array of facts which it presents as to the inspiring discussion and interpretation of those facts. It is unfortunate that Professor Raper has failed to transfer this quality of inspiration into his new book.

ROBERT M. HAIG.

American Syndicalism: The I. W. W. By JOHN GRAHAM BROOKS. New York, The Macmillan Company, 1913.-264 pp.

A considerable part of his book, Mr. Brooks tells us, was delivered as lectures at the University of California in 1911. The author has thus been interested in American Syndicalism long before the word became familiar to American readers and long before the I. W. W. became of national significance. Members of the I. W. W. have told me