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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 transference of the onus from the occupiers is impeded 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 recur in the sequel. A right conception of the relations between owners and occupiers of old houses is essential to the consideration of
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.
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
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. Simon Sterne before the Senate Committee on Interstate Commerce, p. 53. See also charter of Baltimore and Susquehanna Railroad, Laws of Maryland, Chap. LXXII., Sec. 20, act passed Feb. 13th, (1828; and also charter of Baltimore and Ohio Railroad, Ibid., act passed Feb. 28, 1827.
At times ton-mile rates were prescribed. At others the determination of the rates was in the discretion of the directors. In general the earlier acts provided for maxima only, no provision for legislative regulation of rates being contained.3
In a very short time, however, some modifications of this policy, or rather lack of policy, appeared. Along with the acts which leave the regulation of rates in the discretion of the directors go acts providing for regulation by the legislature. An act of Maryland, passed in 1828, provided that at the expiration of twentyfive years from the passing of the charter the legislature might legislate on the matter of rates. In 1829 Maryland provided that when the dividend exceeded 10 per cent., on the cost of construction, in any given year, the excess over this figure was to be paid over to the state. And the directors were also required to so reduce rates that they should not in future produce in excess of a 10 per cent. dividend. In 1830 Massachusetts provided for a quadrennial revision of rates, by the legislature, when the dividend exceeded 10 per cent. In the following year it was provided that the revision should be decennial. It was furtber provided that the rates should not be so reduced as to produce less than a 10 per cent. dividend.? De so far as the legislation of New York took any action it was in the direction of prohibiting rates which
1 See charter of Ithaca and Owego, Laws of New York, Chap XII., Sec. 11, 1828—a further amending act.
2 See act empowering Orange and Sussex Canal Company to construct a railroad, Laws of New York, 1828, Chap. CLXIX., Sec. 5.
3 E.g., Laws of New York, 1828, Chap. CCXXXVIII., Sec. 11 (charter of Great Ausable Railroad); Massachusetts Public Acts, Chap. XXVI., Sec. 6, approved June 12, 1829 (charter of Worcester Railroad); Acts of New Jersey, act passed Jan. 21, 1831, Sec. 10 (charter of Paterson and Hudson River Railroad); Laws of North Carolina, 1832–33, Chap. XXV., p. 22 (charter of Portsmouth and Roanoke); and also the acts referred to in the preceding footnotes.
4 Laws of Maryland, Chap. CLXXXVII., act passed March 14th, 1828 (charter of the Elkhorn and Wilmington Railroad). It was further provided that the rates should not be so reduced as to give a dividend below 6 per cent.
5 Laws of Maryland, Chap. CXXXIX., Sec. 15, act passed Feb. 25th, 1829 (charter of the Baltimore and Washington). It was provided in Sec. 17 of this act that if, at the end of two years after the completion of the road, it appeared that the tolls authorised in the act did not give a dividend of 6 per cent. on the whole of the capital stock, they might be so increased by the President and Directors as to bring the dividend up to 6 per cent. But the rates were not to be increased by more than 50 per cent.
6 Laws of Massachusetts, 1830, Chap. XCIII., Sec. 10 (Charter of Franklin Railroad).
7 Ibid., 1831, Chap. LVII., Sec. 5.
would produce more than 12 per cent. or 14 per cent. No method of revision by the legislature was indicated.
It will be noticed that the policy, above outlined, bears a marked resemblance to that enacted in England. The railroad legislation of Canada bears also a marked resemblance to the policy of the Eastern States.
The earliest railroad charter, containing a “ state purchase clause, was enacted by New York in 1828.5 The legislature was given the option, within a period of fifteen years from the completion of the road, to purchase it on the payment of the cost of construction together with 14 per cent. additional thereon.6 New Jersey, in 1831, declared that the State had a right to assume ownership of a road, fifty years after its completion, on payment of the cost of construction and equipment. The most consistent policy, in this regard, was that of Massachusetts. At first it was enacted that any road, at any time after ten years from its completion, might be purchased on payment of the cost of construction together with 10 per cent. thereon.* A later act made the term, within which purchase might not take place, twenty years ; it further defined the phrase "cost of construction ” by stating that this was also to include the cost of keeping the road in repair.9
The later provisions for State purchase, contained in the English acts, were undoubtedly influenced by the provisions looking to this policy contained in the American acts.10
In the period 1830-1850 a feverish interest in the development
1 E.g., Laws of New York, 1828, Chap. CCCIV., Sec. 17 (charter of Hudson and Berkshire Railroad). See also laws of same year, Chap. CCLXXVI., Sec. 11 (Salma and Port Watson Railroad).
2 E.g., Laws of New York, 1828, Chap. CCCXL., Sec. 11 (Geneva and Canandaigua Railroad).
3 Cf. Cohn Untersuchungen iiber Englische Eisenbahnpolitik, Band 1, p. 35, an the Regulation of Railways Act of 1844.
* Cf. my article in Journal of Political Economy for June, 1898. An early Chapter in Canadian Railway Policy.
5 Laws of New York, 1828, Chap. XXII., “ An Act to amend an Act to incorporate the Mohawk and Hudson Railroad Company."
6 Ibid., Sec. 3.
? Acts of New Jersey, Act passed Jan. 21, 1831, Sec. 17 (charter of Paterson and Hudson River Railroad).
8 Massachusetts Public Acts, 1830, Chap. XCIII., Sec. 14 (charter of the Franklin Railroad). Revised Statutes of Massachusetts, 1836, Chap. XXXIX., Sec. 84, stated that the provision for state purchase applied in all charters granted.
9 Massachusetts Public Acts, 1831, Chap. LV. (charter of the Boston and Taunton Railroad).
10 Some of those interested in railway policy in England declared that English practice had granted charters of too long duration, and that the American system was to be preferred. E.g., Hansard Debates, Vol. XXXIII., pp. 977-988, speech delivered by Mr. Morrison, M.P. for Inverness, May 17th, 1836.