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Boston and Albany Railroad, 1875.

Tons from other States

1,357, 794 Tons to other States

301, 100 The tonnage from the West into the New England States over this road appears to be about four times the tonnage from the New En. gland States to the States west of the western boundary of Massachusetts.

Lake Shore and Michigan Southern Railway, 1875. East-bound freight..

3, 381, 876 tons. West-bound freight ..

1, 640, 614 tons. The west-bound tonnage upon this road appears to have been but 48.5 per cent. of the east-bound tonnage; or, in other words, 51.5 per cent. of the west-bound cars were hauled without loads.

Michigan Central Railroad, 1876.

Eastward ....

Through tonnage east.

825, 450 tons. Through tonnage west

268,193 tons. The west-bound tonnage appears to have been but 32.5 per cent of the east-bound tonnage; or, in other words, 67.5 per cent. of the west-bound car-space was empty.

The relative tonnage east and west over the Mississippi River bridge at Clintou, Iowa, (the crossing of the most important branch of the Chicago and Northwestern Railroad,) was, during the year 1873—

336, 303 tons. Westward

94, 505 tons. The west-bound tonnage appears to have been but 28 per cent. of the east-bonnd tonnage; or, in other words, 72 per cent. of the west-bound cars ran empty.

This circumstance, with respect to the unequal amount of tonnage in the two directions, gives rise to some very important questions in the economy of transportation. Evidently, on a road which carries all its tonnage in one direction, the freight-charges must be so fixed that the traffic in that direction shall pay for hauling the cars both ways.

There are many roads in this country upon which the equipment is largely employed in this manner, especially roads engaged in the transportation of coal and other niinerals. On many roads cars are used which are especially adapted to a traffic which can only be secured in one direction. But wherever it is practicable to procure return freights of any class, the following question presents itself: At what rates can freights be carried on the return trip which will afford better results than hauling the cars back empty ?

A few years ago Mr. William P. Shinn, a civil engineer and railroad manager, entered into an investigation as to the cost of transporting freights on the Pittsburgh and Fort Wayne Railroad, and he arrived at the following conclusion :

I find that an additional car, loaded from Pittsburgh to Chicago and taken back empty, will costCbicago to Pittsburgh, loaded

$43 50 Returning empty..

17 00 Cost both ways, (loaded one way)

60 50 Cost both ways (loaded both ways)

87 00 Cost of back load.......

26 50 So that a rate of 31 cents per 100 pounds from Chicago to Pittsburgh pays for the car going loaded and returning empty, and it is profitable to load it back at any rate over 13cents per 100 pounds.

Or, to state the result in other terms, it was found that upon a road on which the average cost of transportation was 16 mills per ton per mile, it would be more profitable to carry return freights at a rate of 53 mills than to allow empty cars to be hauled over the road on the return trip.

Mr. Shinn also considered the important economic question as to the freight-charges which would justify an increase of equipment and the providing of additional terminal and other facilities in order to accomo modate an increased traffic, if such traffic could be procured in the direction of the principal movement of tonnage. The question admits of as many special answers as there are railroads in the country, but the general answer appears to be that traffic may be carried at any rate which will yield more than the proper charges for the interest on the cost of such equipment, the cost of maintaining and hauling the additional cars over the road, and the cost of the labor required in the management of the additional traffic.

Mr. L. P. Morehouse, assistant engineer of the Illinois Central Railroad, has investigated the sabject here under consideration in a scien. tific and practical manner. He ascertained, as the result of a careful computation, that the average cost of the freight-traffic of that road was 15.8 mills per ton per mile, and yet he found that a car which would run empty in the direction of the lightest traffic could be profitably loaded with a freight which would yield only the rate of 3 mills per ton per mile, or only about one-sixth the average cost of the whole freight-traffic of the road. Mr. Morehouse also ascertained that within the limits of the power of a locomotive an additional car could be added to a train and transported even in the direction of its greatest traffic at the rate of 4 mills per ton per mile. He ascertained, moreover, that if the cars on the Illinois Central Railroad could always be run loaded, thus avoiding entirely the hauling of any empty cars, the freight-charges imposed could be reduced one-half and still yield the same amount of net earnings.

Mr. Morehouse also, in a somewhat general manner, proved, with respect to the Lake Shore and Michigan Southern Railroad, that, although the average cost of the total freight moved was 9 mills per ton per mile, yet such freight could be carried in cars, which would otherwise run empty, at the rate of only 21 mills per ton per mile.

Mr. Albert Fink, vice-president and general superintendent of the Louisville, Nashville and Great Southern Railway, ascertained that the cost of transporting freight on that road may not exceed one-seventh of one cent (1.43 mills) in certain cases where cars would otherwise run empty ; or, in other words, that a rate at all in advance of one-seventh of a cent per ton per mile would pay the expenses of haaling freight in cars which would otherwise return empty, the average cost of transportation on the road being nearly ten times this rate, or 1.3 cents per ton per mile.

Evidently, therefore, the question which presents itself to the mind of a railroad manager with regard to the acquisition of additional traffic is not, Will such traffic pay the average rate of conducting the entire traffic of the road ? but Will it yield any profit beyond the cost of handling and hauling and the incidental expenses properly applicable to it? It is not a question as to whether the traffic will or will not bear its full proportion of the total expenditures of the road, but as to whether it will or will not form a profitable adjunct to the existing traffic.

Considerations such as these have led many companies to compete for a traffic for which there were shorter lines with easier grades and supe. rior facilities of all kinds. In such cases the shorter roads may regard the competitive traffic as an integral part of their general traffic, and be inclined to adjust their freight-charges accordingly. favorably situated competitors, regarding the competitive traffic as a mere adjunct to their principal business, may, on the other hand, be inclined to secure a share of it if it will yield any margin of profits beyond the mean operating expenses especially chargeable to it.

During the last five or six years the least favorably situated of several competing roads has oftentimes determined the rates which have been agreed upon as the result of a 6 railroad war,” the roads upon which the cost of transportation was least reducing their rates upon such compul. sion. A striking illustration of this has for several years been presented in the course of the contest between the New York Central and the Grand Trunk Railways for the traffic between the Western States and the New England States. The Boston and Albany Railroad, the New York Cen. tral Railroad, and the western connections of the latter road, form the shortest and least expensive line between Boston and Chicago, yet for years the Grand Trunk road has competed with this shorter line upon the condition that it should be permitted to charge 10 per cent. less than the New York Central in order to enable it to secure a share of the through traffic. The force of this illustration will be clearly perceived by referring to maps Nos. 3 and 4 at the end of this report, the former representing the Grand Trunk Railway with its Vermont Central connections permeating all parts of the New England States, also the western connections of the Grand Trunk Railway; and the latter (map No. 4) representing the New York Central Railway with its New England and its western connections. A very striking illustration of the policy of engaging in traffic which will merely yield a profit beyond the additional expenses incurred by engaging in it has been presented during the last six years in the competition which has been going on between the trunk railroads connecting the West with the Atlantic seaboard and the Lake, Erie Canal, and Hudson River water-route. At the time when the railroads first began to engage in the transportation of grain and other heavy products of the West, the rates on the lakes and on the Erie Canal were very much below the average cost of transportation upon the railroads. For sev. eral years, however, the roads had been carrying all the better pay. ing freights of the higher classes. The managers of certain of the east and west trunk lines at last determined to engage in the transpor. tation of grain and other heavy freights at rates below those obtainable on the classes of commodities then carried, upon the ground that the receipts from such freights would form a valuable adjunct to the princi. pal business of their roads, or, in other words, that such receipts would more than cover the additional expenses incurred.

How far this policy of supplementing the more profitable traffic of a road by additional traffic at very low rates may be pursued is a nice question, both in theory and in practice.

The failure to appreciate the possible effect of the competition of longer lines has led to serious mistakes in railway construction. Roads forming shorter lines than any existing roads have been constructed between certain points with the expectation that the advantage of distance alone would enable them to control the through traffic; but it has been subsequently found that the longer lines were able to retain a full share of the traffic, and perhaps by virtue of other favoring circumstances, such as the magnitude of the total traffic, cheaper construction, cheaper fuel, or more skillful management, the longer lines have been able to carry the traffic for less than the cost of carrying it over the shorter line. Circumstances such as these have tended greatly to multiply the elements of competition and to afford to the public cheap rates of trans. portation,

Many railroads in this country are actively engaged in the transportation of certain heavy commodities of low value at rates below the average cost of transportation, the traffic, however, yielding better net results than refusing to engage in it.

Second. There are questions of policy based upon the relations sustained by the railroads to each other and to the commerce of the country, or, in other words, questions growing out of the competition of rival roads and of rival markets, which affect the establishment of freighttariffs. Circumstances of this character present themselves under a great variety of forms, and it is impossible to ascertain their value with any degree of precision. The questions to which they give rise are practical rather than theoretical. The interests of the great trunk lines, as well as of almost all lines of less importance, are very closely identified with the interests of certain commercial cities. The merchants of the chief commercial cities seek trade throughout extensive portions of the country. Every State is thus brought within the range of the competition of two or more commercial centers. A road terminating at one city must of necessity so fix its freight-tariffs that the charges for the transportation of competitive traffic shall not be so much greater than those enjoyed by a rival city as to discriminate against its trade; otherwise a deflection of commerce might take place and the road leading to the former city would in the end sustain a loss of business. This is the cause which, lying behind more immediate and apparent causes, has been the controlling condition during those contests which have been waged between the great trunk lines connecting the West with the seaboard.

This subject is treated of somewhat at length in the section of this report entitled “The competitive forces which exert a controlling influ. ence over the movements of the internal commerce of the United States."

The more important questions of policy which present themselves to the mind of the railroad manager in the ordinary course of business and during those struggles in which at times he engages with rival railroad interests may be summarily stated as follows:

1. What must be the average rate on the total traffic in order that it may yield sufficient net income in order to meet all the expenses of operating the road, together with interest upon its outstanding obligations ?

2. What rate will yield a profit, however small, beyond the expenses, strictly applicable to the mere handling and moving of freight?

3. The tonnage of a road being largely in one direction, at what rate may freights be profitably carried in cars which would otherwise run empty!

4. A road being constructed and in operation, at what rate will it be profitable to procure the requisite equipment and other facilities in order to secure traffic, which cannot be secured at a rate equal to the average rate which must be obtained from the total traffic ?

5. What rates will the markets bear :

6. What rates must be established in order to maintain a position or to gain an advantage during a war of rates ?

These considerations indicate that the expression profitable rates" is one which in practice has several distinct significations, dependent apon both constant and variable quantities. It is quite as important that the railroad manager should understand the bearing of each of these questions upon the interests intrusted to his care as that he should be informed in regard to the actual average cost of conducting the total traffic of the road.

The subject presents a broad field for investigation, and there is a very great demand, both in the interests of the public and of the proprietors of railroads, that a better understanding of it should be attained.

The foregoing remarks in regard to the cost of transportation, and to questions of policy affecting freight-rates, are presented with the

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