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another in the supply of the consumers' wants. As in the case of dwelling-houses the incidence of an onerous extra rate in a particular locality depends on the elasticity of demand for accommodation in that particular locality. As Sir Edward Hamilton says, “A large part of the rates payable in respect of Bond Street and Oxford Street may be contributed by all of us, in the shape of an enhancement of the price which we pay for our commodities” (so far as the rates are onerous and differential], if“ all of us ”—or the better halves of us—would insist on shopping in those fashionable resorts, notwithstanding the imposition of an extra charge. But if the attempt of shopkeepers in Bond Street and Oxford Street to stick on additional prices would divert a great part of their custom to humbler localities, then, as Professor Bastable says, “the [extra] rates would fall (ultimately] on the ground landlord.” ?

Compare as to these propositions, the following testimony of the experts; the reasons why more of it is not forthcoming being recollected." 3

Courtney, p. 86:-" As regards rates on trade premises, these must ordinarily form part of trade expenditure, and be ultimately borne by the customers availing themselves of the services, or consuming the commodities of the trade supplies.”

Sidgwick, p. 105:-" The burden of any special taxation of traders not balanced by a corresponding taxation of other classes tends, when the taxation is old, to be partially diffused through the community, through the effect of this industrial disadvantage in diminishing the abundance and cheapness of traders' services.”

Bastable, p. 141:-“ Rates on business premises are further complicated by the possible effect they may have on prices to consumers. An equal tax on all business premises in a country would be a tax on profits, since it could not be evaded by change; but a rate on such premises in a particular locality would appear to be shifted either forward to the consumers in higher prices, or backward to the ground owners in lower ground rents."

Cannan, p. 168 (with reference to a tax on bicycles taken as representative of the imposts inquired about]:-“ its effect reaches not only to those who use bicycles and benefit [e.g., by having their errands done cheaper] because other people use them, but also to those who would have used bicycles or would have benefited by other people using them if the obstruction of the tax had not intervened.”

Blunden, p. 191 :—" The real incidence of the rates on shops and other business premises would appear to be mainly upon the customers of the goods made or sold therein.”

Mackay, p. 228:4" The question then is, can an occupier for trading purposes throw forward a part of the burden on his customers ? As in the cases already considered [residences], this appears to me to depend on whether the demand is sufficiently elastic not to be deterred by the increased price which

i Mem., p. 39.

2. Mem., p. 142,

.

3 Ante, pp. 186, 190.

the highly-rated tradesmen will undoubtedly be inclined to ask. To take an instance, the reason that a Bond Street shopkeeper probably charges more than a tradesman in an unfashionable neighbourhood is not because his rent and taxes are high, but because a demand of a very special character, the demand of the fashionable world, concentrates itself on the articles to be sold in Bond Street shops. There is a point, however, at which customers will be deterred and driven to meaner streets; they are free, so to speak, to buy abroad."

The parallels which have now been exhibited between the typical cases of dwelling houses under leasehold and the other varieties of urban premises and tenure are similarly close, and will not need to be drawn again at length, in the case of old houses which is next to be discussed.

Houses built and occupied before the imposition of the tax or rate fall into two categories according as there is or is not competition between old and new houses. The experts seem properly to take the former as the general case. Perhaps they hardly allow enough weight to the circumstance that so far as new houses are often not identical commodities, but substitutes for the old ones, the extent to which an impost will be shifted from the former on to the latter class cannot be predicted accurately. This agency, it should be observed, is distinct from friction. It is not the trouble and expense of a move that prevents an intending occupier of a new house on whom the capitalist builder threatens to shift an onerous impost from dealing with the more yielding owners of old houses who must take what they can get; it is that old houses have not exactly the same attractions as new ones.

Friction properly so-called no doubt plays a dominant part in the case now under consideration. The occupier, as Mr. Price says with special reference to the existing Inhabited House Duty,

“ will probably need a more powerful motive than the payment of a slightly diminished Inhabited House Duty before he takes the unpleasant, and, it may be, difficult, step of changing his abode or manner of life; and regarding the mass of occupiers as a whole, it is improbable that the payment of duty at an increased rate on houses of higher value induces an appreciably large number to move into tenements exempt from duty altogether, or into those taxed at a lower rate." 2

The comparative strength of friction in case of business premises and residences is ably discussed by Mr. Price. The difficulties of prediction on a matter of this sort are illustrated by the incident that on the question whether friction is more operative in the case of a reduction or of an increase of (onerous) rates, 1 See the division at p. 183 ante.

? Mem., p. 180.

opposite reasons apparently both valid are adduced by Mr. Price and by the present writer. On the one hand

“it seems more probable that the reduction or abolition of a rate would be likely to produce less effect on the rent than the increase of an old or the imposition of a new rate. The removal of a burden would not, in all probability, so powerfully stimulate the efforts of the other party to obtain a share of the relief, as its imposition would urge the party on whom it primarily fell, to shift a portion to other shoulders.”—Mem., p. 186.

On the other hand

“there is some reason for believing that friction resists an increase less than a reduction of rates. For one of the chief processes by which a change of rate is propagated is the competition between new and old houses, described in sections (2) and (3) of heading (a) in Answer (6) (Mem. p. 130]. In the case of a new rate being imposed, intending occupiers of new houses bid against actual occupiers of old houses whose leases are expiring. In case of a rate being reduced, actual occupiers of old houses whose leases are expiring bid against intending occupiers of new. The competition is naturally keener in the former case. A slight difference of rate may decide an intending owner to apply for an old rather than a new house. But a considerable difference of rate may be required to determine an actual occupier to incur the trouble and expense of a move."'-Mem., p. 135.

Mr. Price's judicious remarks on friction cover also the case in which there is no building of new houses in the neighbourhood in competition with the old houses. In this case theoretically the whole of a tax and of a rate so far as it is onerous is (on the expiry of the occupier's lease) borne by the rack-rent owner, so long as his lease runs, and is ultimately shifted on to the ground landlord. Compare the evidence of the experts :

Sidgwick, p. 103:-“A new tax on inhabited houses proportioned to their annual value tends to cause men to be content with less house accommodation; and so far as this cause operates, a part of the burden of the tax must fall on the owners of houses, ...."

" In localities where the demand for houses is so slack that it is not worth while to build, the burden of the tax will remain partly on the owners of houses so far as the demand for them is strictly local."

Marshall, p, 121 :" Where the population is receding, and building has ceased, onerous rates tend to press on owners."

Bastable, p. 141 :—" Where a locality is stationary, the increase of rates falls on the houseowners, who would otherwise get more rent.”

Practically, as several of the experts have pointed out, the

1 It being borne in mind that all the detriment attending the aggravation, and all the advantage attending the reduction, of the rate would redound to the owner of old houses in the absence of competition with new houses.

2 See Mem., p. 129, last par.

transference of the onus from the occupiers is inpeded by friction. What is the amount of this force of friction as compared with the simpler motives which the more abstract theory assumes is a question of considerable practical interest which will recar in the sequel. A right conception of the relations between owners and occupiers of old houses is essential to the consideration of proposals for the relief of the occupier which forms the subject of the next answer.

F. Y. EDGEWORTH (To be continued.)

STATE REGULATION OF RAILWAYS IN THE

UNITED STATES.

FROM 1830 until 1862 the powers of the Federal Government, in regard to internal improvements, were strictly construed. The developing railway enterprise of the country had, therefore, to look to the State governments for charters and for assistance. Although the Federal government did from time to time, when loose constructionist views were in the ascendant, make grants of land in aid of railway enterprise, it was always careful to indicate the predominating power of the State government in connection with railroad chartering. In the various grants made, prior to 1862, the aid was given not directly to the railroad but to the state. The state might, then, apply such assistance to the furtherance of the enterprise.

Under such conditions the body of law concerned with railways was a creation of the State Legislatures. In the United States, as in England, it was at first believed that railroad enterprise would be under the pervasive control of competition. And the various clauses, providing for regulation, contained in the earlier railroad charters of the United States bear a marked resemblance to those contained in the contemporaneous legislation of England.

The charter legislation of the Eastern States, in which the earliest railroad development is to be found, contained, in general, two sets of regulative provisions. (1) those concerned with rates, (2) those concerned with state purchase.

In regard to rate regulation a diversity of practice manifests itself. As early as 1827 a railway charter of New York, that of the Ithaca and Owego, applied the canal idea of conpetition. Persons providing suitable means of transport might, subject to the tolls and general regulations of the railroad, make use of the road-bed. The practice of New York was by no means uniform.

1 See charter of the Ithaca and Owego Railroad, Laws of New York, 1827, p. 17. See also evidence of Mr. Şimon Sterne before the Senate Committee on Inter

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