Supreme Court of the United States. The question of what net return they must be allowed to earn if they are to be enabled to furnish the nation all the railroad service it will need is an economic question, and must-or should-be determined on economic considerations. Past experience, and the conditions actually to be dealt with, will alone throw light on it.

What was the actual experience—what were the conditions-which caused Congress in 1920 to put in the Transportation Act the provision requiring that, in determining the net return it would let the railways earn, the Interstate Commerce Commission should consider the need of the people of the United States for an adequate increase in facilities of transportation? Up to the end of 1917-when government operation of the railways was begun the rates of the railways had been subject to effective regulation by State and Federal authorities for about ten years. In five of these years the return the railways had earned, calculated on the basis of the "property investment" shown by their books, had averaged 5.50 per cent; and the return earned in these years had resulted in an investment being made in improving and expanding railway properties averaging $705,000,000 a year. In five other years of that decade the return the railways had earned, calculated in the same way, had averaged 4.5 per cent a year; and the return earned in these years had resulted in an investment being made in railway properties averaging only $425,000,000 a year-or 40 per cent less. There was no escape from the conclusion that the net return earned mainly determined the amount of new capital invested from year to year.

During this period-and especially the latter part of it-the physical development of the railways had rapidly declined. The increase in railway mileage in the ten years before 1911 averaged about 4,500 miles a year; in 1916, for the first time in the history of the country, less mileage was built than was torn up; and this has been true in every year since. The increase in the number of locomotives in the ten years before 1911 was 2,400 a year, and in freight cars about 70,000 a year; while in 1915 and 1916 there were declines in the number of both. From

1916 on, serious shortages of transportation were constantly recurring.

What light does this pre-war experience throw on the economic question of what net return the railways need to earn now? The commission holds they are entitled to earn 534 per cent on the valuation. This is equivalent to 51⁄2 per cent on their property investment account, which was the basis of calculation before the valuation was made. Ten years' experience before the war showed that when the railways earned less than 51⁄2 per cent on their property investment their development declined so much that they became unable satisfactorily to handle the nation's business. Like all other business concerns, they must, in order to sell bonds and stocks, pay higher rates of interest and dividends now than before the war. They have no way to raise large amounts of new capital with which to buy additional locomotives and cars, build new tracks and enlarge terminals except by selling bonds and stocks. Consideration of pre-war experience and present conditions makes unavoidable the conclusion that they must be allowed to earn an average return of at least 534 per cent on their valuation if they are to be able to sell enough bonds and stocks to raise and invest during the next ten years the threequarters of a billion to one billion dollars of new capital annually which the Joint Commission of Agricultural Inquiry of Congress and all authorities that have studied the subject agree they must raise and invest if they are to keep abreast of the demands of the country's industry and commerce.

In the light of this actual experience and these actual conditions, what may we reasonably conclude would be the effect of reducing their valuation as much as seven billion dollars, which is widely advocated? A return of 534 per cent on the thirteen billion dollar valuation left would be $748,000,000. This would be equivalent to 31⁄2 per cent on their present property investment, or relatively less than they have ever earned since complete statistics have been kept except in one year of the depression following the panic of 1893 and in the years 1921 and 1922. This permanent reduction of the return they were allowed to earn would soon bankrupt a large part of the railways

and render practically all of them unable to pay any dividends on their stocks. It would make it impossible for them to sell any new bonds and stocks, and would therefore stop all increases in their capacity for handling traffic.

But production and commerce cannot increase without a corresponding increase of transportation service; and the wealth and income of the nation cannot increase without an increase of production and commerce. Between 1904 and 1912, long before the inflation caused by the war, the increase in the wealth of the people of the United States averaged eight billion dollars a year. That vast increase of wealth was due to the growth of production and commerce. This growth of production and commerce could not have occurred if in the decade before 1912 the carrying capacity of the railways had not been actually doubled by an increase of 60 per cent or six billion dollars-in the investment in their properties.

The facts which have been presented disclose a situation so paradoxical as to raise the question whether any great national economic problem can be solved by a policy of government regulation of industry which necessarily is determined mainly by public opinion. Railroad transportation is costing the American people six million dollars a day more than in 1917. This increase in earnings is being consumed by increases of operating expenses and taxes. There is no mystery about the increase of operating expenses. Most of it is due to the fact that wages of labor and prices of fuel and materials are double what they were in 1917. None of the increase in earnings is going to the owners of railroad securities. The "net operating income," from which interest and dividends are paid, is less than in 1917, although the investment in the railways is larger. But there is no great popular uprising, no great political agitation, in the West or elsewhere, to help the managements of the railways reduce their operating expenses-almost two-thirds of which consist of wages or their taxes, which are levied by government authorities and have for some years amounted to more than the total dividends paid by them. The drive is being directed against their net income.

A movement purporting to be intended to secure large reductions of rates, but which is directed almost wholly against the net income of the railways, amounting to only between one-sixth and oneseventh of the total amount of the rates charged and collected, manifestly is largely political, and might be regarded as equally inconsistent and futile. But while it may be inconsistent, it is easily conceivable that it may not be futile. Regulation of the railways which should permanently reduce their net income, as is contemplated by those who advocate reducing their valuation by one-third or more, would absolutely stop their development and probably make continuance of private ownership and management impossible. Indeed, experience before the war, which mainly dictated the provisions of the Transportation Act, showed that a much less restrictive policy than that now being advocated was sufficient then to bring the development of the railways almost to a stop.

While all those who now advocate a drastic reduction of railway valuation do not favor government ownership, it is significant that this policy is advocated by practically every person, publication, and organization in the country that does advocate government ownership. Many hundreds of thousands of farmers, especially in the West, have been influenced to participate in the agitation for reduction of the valuation and of the net return the railways are allowed to earn by the representation that this would bring about large reduction of rates. What change in their attitude will occur, if they are convinced that the policy they have been supporting does not lead toward substantial reductions of rates, but does lead toward government ownership?

This is a very interesting and important question. Organized labor apparently is in favor of government ownership. The American Federation of Labor and most of the railway brotherhoods have declared for it. Business men are almost unanimously opposed to it. The farmers hold the balance of power and will in the long run determine the future of railway regulation and, in doing so, the future of railway ownership and manage

ment.

WiLL JAMES 111- 23

'T took me a long time to figger out

Riding them winter months didn't

my summer's wages. I know I'd bought me a few winter clothes and paid out for a couple of weeks of livery stable board for my horse; then the hotel bill besides some real fancy meals had took a lot of my money. I'd bought the rounds when my turn came and stepped out with the boys, and even though I was breathing sober steady ever since I hit town, I couldn't for the life of me make out how that money went so fast. I'd saved it careful too that summer before, even rode my old saddle and made it do till the shipping was done, so I could manage to live a life of ease for the few winter months.

and I thought that this once I'd be able to hole in comfortable for that snowy cold period; but my pockets sprung a leak, and being that I couldn't get no comfort of what was past and spent, I begins to look into the future and wonders what cow outfit would hire a cowboy this time of year. I'm running the irons of the outfits I know of through my mind and looking into the future real deep, when I raises up straight in my bed, and looks out of the hotel window to see snow, coming down and adding up on the fourteen inches already on the level. Yep! I figgers the range will be needing riders.

I finds myself whistling some as I clean up, and somehow and another when I comes down the steps into the hotel lobby it don't look like much to me. There's a few tinhorn gamblers with the "hop head" complexion sticking around, and a couple of fat slick-looking gents a swapping jokes by the big stove. I steps up to the bar, gets me a eye opener on my looks and sashays out in the dining room where I figgers on throwing a bait to hold me till I reaches my next stopping place.

My ham and eggs is down to half when old Tom Meyers, superintendent of the "hip-O❞ steps up and asks how I'm setting. "Pretty fair," I says and don't tell him none of my plans, thinking that he's full handed anyway. I don't show where I'm at all interested when he says he's needing of a man at "Stone Pile" camp. "It's mean weather out right now," I says, "and I'm afraid I'm getting kinda soft, but how much are you paying?"

With a month's wages handed to me in advance I pays my bills at the hotel, bar, and stable (they hadn't been running long) and it feels kinda good to be riding out again even if the snow was deep and more of it was coming. My horse was a sniffing of it and lining out full of life. After the long spell in the stall he was glad to be out and going somewhere, and somehow I wasn't a bit sorry either.

A couple of days and along what I figgered to be about sundown (it was still snowing and the wind was coming up) I reaches the camp where I'm to get my winter horses and ride from. There's three or four rolls of bedding belonging to boys what'd stayed to town for the winter (same as I'd figgered on doing) and I uses one of 'em till I can get my own roll.

There's two ranch hands at the camp shovelling hay to near a thousand head of "hospital cattle" (weak stock), besides a cook and a rider not counting me, and the next morning when I sniffs and smells the bacon from my bunk I know that I've settled down to some tall hard work.

It's still dark when I saddles my horse and lines out. I'd rode that country many times before and knowed how and where the cattle was running. The dry stock was in good condition, outside the few old stuff an cows with calves and "leppies"

(orphant calves) what are to be brought in and fed.

Along about noon I have a few bunches spotted what had weak ones in and starts back for camp, cutting 'em out as I go and driving 'em along making about a mile an hour. Them being weak and the snow being deep it ain't long till they begin to get tired, and me knowing that the less I rush 'em the better time I'll make, I'm driving 'em easy and keeps 'em just barely moving. As the driving is kept up and the cattle want to rest they begin to spread like a fan, heading all directions and I have a hard time keeping 'em together; but taking it real easy manages to get 'em a half a mile closer to camp, when a couple of dogies on the outside begin to get on the "prod" (fight), which means it's time for me to quit.

I had twelve head in that bunch and it took me six hours to drive 'em about five miles. It was way after dark when I dropped 'em and hit for camp, and I still had a good ten miles to go.

It takes me three days to bring 'em in, and at the end of the third and late again finds me pushing a mighty weak, tired bunch of dogies through the gates of the feed yard at the camp and headed for the big shelter sheds. Half of 'em was wanting to fight but when they see the hay what was spread and waiting for 'em they kind of forgot I was around and went to eating.

For a spell that kind of work kept on. There was days, when we'd be drifting with the herds and the blizzard a howling full force, when you could hardly see your hand in front of you and the only way you knowed the direction you was headed was by the wind. If that wind switched to another direction without you knowing of it (you wasn't apt to know in the blinding storm) you was running good chances of getting lost unless you run acrost some landmark what told of your whereabouts.

The snow drifted and piled high but in drifting it cleared some ridges, and there's where the strong cattle along with the range horses was finding their feed.

Then the weather cleared and stayed a steady cold. Me and the other cowboy had covered the whole country and hazed in all what needed feed; riding was getting easy.

And one day when we hear of a dance

what was going to be pulled off at the crossing we figger there could be no better time for it to happen; so saddling up our private ponies us two boys and the cook

set out for the crossing forty miles away. Too bad the ranch hands couldn't come, being they had to shovel so much hay every day, no more and no less, but they