viii PREFACE TO THE FIRST EDITION One point in connection with the reprints from decisions of the Interstate Commerce Commission is peculiarly deserving of note. This volume is a collection of cases in economics and not in law. While legal propositions are sometimes necessarily involved, they are subordinate for our purposes to questions of economic fact. Our interest, for example, in the Import Rate decisions of the Supreme Court arises primarily from the fact that in the settlement of a difficult point at law economic relationships and conditions are revealed. A certain practice may be illegal, and yet sound economically, or the reverse. This explains why many of these reprints have been entirely stripped of legal material in the process of editorial condensation. The case is thereby not only much abridged but at the same time simplified for the use of economic students. The book is not intended to be used alone in the conduct of courses, but in connection with some standard treatise the upon economics of transportation, such as Hadley's, Johnson's, or the editor's discussion in the Final Report of the United States Industrial Commission of 1900 (pp. 259-485). For permission to reprint the selections from books and technical journals, acknowledgment is due to the editors of the Quarterly Journal of Economics, the Political Science Quarterly, and the Journal of Political Economy; and to Messrs. McClure, Phillips & Co. and the University of Chicago Press. Honorable Martin A. Knapp, the distinguished chairman of the Interstate Commerce Commission, has in this, as in all other enterprises tending to a further elucidation of the difficult problems of railway economics, rendered most valuable aid. The various authors whose contributions are herein reprinted have given, in all instances, the most cordial permission. I wish, however, to acknowledge my peculiar indebtedness to the Honorable Charles Francis Adams, not alone for his willingness to permit an abbreviated reprint of his Chapters of Erie, now out of print, to be made, but for his friendly aid in the direct accomplishment of that purpose. May the volume, headed by his early contribution to the subject, help to further the public-spirited purpose which inspired his work a generation ago! WILLIAM Z. RIPLEY INTRODUCTION. (Analysis of chapters.) By William Z. Ripley CHAPTER A CHAPTER OF ERIE. (Early speculative and financial XVIII. EXPORT AND DOMESTIC RATES. (Atlantic and Gulf com- XXII. THE UNION PACIFIC-SOUTHERN PACIFIC MERGER DIS- INTRODUCTION The first impression conveyed by our historical selections is that they unduly emphasize certain infamous events in the development of the American transportation system. There is surely nothing more discreditable in the economic history of the United States than the defrauding of the government and of innocent investors by the use of development and construction companies, of which the Credit Mobilier was a leading example, by such men as Stanford, Durant, and Crocker; the wrecking of the Erie Railroad by Jay Gould and Jim Fisk; and the utterly unscrupulous manipulation of railroad rates by the Rockefellers and their associates, in order to destroy competition with the Standard Oil Company. Happily such occurrences are exceptional in the economic life of a nation. Nevertheless their description is essential to an understanding of the whole, just as pathological research is needed for a true comprehension of the normal and healthy physiological processes. It would have been far pleasanter to record in detail the course of events by which the wonderful achievement of opening up a great continent to settlement was accomplished. Practically this is impossible within reasonable limits of space. Not the prosaic and normal, but the spectacular, phases of our economic life have been as yet adequately described. The most that can be claimed for the selection of certain of these events is that, while perhaps extreme examples, they are significant as indicating possibilities under the then prevailing state of public opinion and law. Another less practical, and in fact more important, reason for throwing these infamous events into high light, lies in their instructive character as illustrating the evils generally attendant upon a pioneer stage of development, together with the abuses which naturally arise under conditions of absolutely free competition. The great advance in public morality which to-day refuses to tolerate such abuses becomes at once apparent. In the case of the chapters from the history of the Erie Railroad and its evil spirit, Jay Gould, the corruption of the state judiciary was perhaps the most deplorable feature of the affair. But the necessity of strict financial accountability of the directors of great public-service corporations, both to the government and to the stockholders, is made evident with equal clearness. Public sentiment more sensitive to financial delinquencies to-day than it was a generation ago - has compelled the creation of governmental agencies for securing publicity. By such means scandalous abuses of trust are more easily detected and punished. Too often in the past, well-merited punishment has not taken place through the agency of the duly constituted legal authorities. The evil doers have received their just deserts only through condemnation by contemporary public opinion, perpetuated afterward by historical record. To keep alive some of these old scandals cannot fail to impress the fact that the evil which men do lives after them. It is not to be condoned, either by purely private morality, or by material success achieved during life, followed by large benefactions after death. The chapter upon "Standard Oil Rebates" has had a more direct bearing upon contemporary affairs. The undoubtedly typical events therein described were a powerful factor in rousing public sentiment in favor of the original Act to Regulate Commerce of 1887. Their fearless republication, fully authenticated by documentary evidence, in the admirable History of the Standard Oil Company by Miss Tarbell, confirmed as it was in its main conclusions by the masterly "Report upon the Transportation of Petroleum," by the United States Commissioner of Corporations,1 was an equally powerful influence in crystallizing public sentiment in favor of the recently enacted Hepburn Bill of 1906.2 Public opinion to-day is unanimous in the 1 Ripley's Railroads: Rates and Regulation, chap. vi, on "Personal Discrimination," gives the necessary historical setting. 2 Idem, chaps xiv-xvii, describes and analyzes this legislation. |