In recent years some of the newer Commissions of the "strong" type, e.g., those of Texas and Arkansas, have been given powers intended to be regulative of capitalization. So far this legislation has not been attended by any great degree of success.

2

The State Commissions are confronted by certain difficulties which militate against their success. The Commissions form simply one part of the regulative system. If the interstate rates are lowered there is required, at once, an adjustment of intrastate rates, otherwise the trade of the State is injuriously affected. This problem is one which is exceedingly difficult to deal with. At present1 the inter-state rates to Texarkana, Texas, have been so lowered that the Texas Commission has to deal with the recasting of the system of distributive rates within the State. Under the Inter-state Commerce Act rates may be reduced on three days' public notice. This may upset all the calculations of those engaged in distributive business within the State from local supply points. A sudden decrease of the inter-state rate without a corresponding readjustment in the intrastate rate may lead to disarrangement of trade. At the same time the railroads, doing business within the State, will be importuned for lower rates to meet the increased competition the jobbers within the State are subjected to from changes in the interstate rate. A policy of cooperation between the Federal Commission and the State Commissions is necessary if this matter is to be dealt with properly. Another difficulty attending the regulation of rates through the instrumentality of State Commissions is that their policy in regard to rates is not uniform. One State may apply a much more drastic policy than a neighbouring State. And so there will be a lack of uniformity of treatment. Such a grievance has, from time to time, existed. But it is not of continuing importance, for the courts have declared that they have the final say in regard to the reasonableness of the rates enforced. The history of the Commission movement shows that over-drastic rates belong to the inception stage. In the later stages the policy has been, on the whole, prudent.3

statement of the Michigan law see statement of Mr. W. McPherson, Jr., Report of the Cullom Committee, Appendix, pp. 34-6. It may be noted that a similarly lax method of procedure is shown in the railway legislation of Canada. 1 May, 1900.

2 Cf. Illinois Commission Report for 1888, p. xvii; Twenty-sixth Report of the Georgia Commission, pp. 12-13; Texas Commission Report for 1896, pp. 26-7. The Texas Commission recommends that twenty days' public notice should be given before changes in rates (whether increases or decreases) are made.

3 Cf. T. M. Cooley, in Introduction to The American Railway, pp. xxiv-xxv. For a pro-railroad point of view see "State Regulation of Railways," by H. P. Robinson, in the North American Review for April, 1898, pp. 398-99.

In

Another set of difficulties the Commissions have had to face is connected with the tenure of office of the Commissioners. general political considerations play too great a part in the choice of Commissioners.1 The methods of choice are either by popular vote, or by nomination of the Governor of the State approved by the State Senate. In Massachusetts, New York and Illinois the latter policy is followed; while in the majority of the "strong' Commissions preference is shown for the former. In both of these cases the danger is that men will be chosen simply because of their political predilections. If both the Governor and the Senate appreciate the seriousness of the regulative problem they will attempt to appoint the men best fitted for the position. This has, on the whole, been the policy of Massachusetts. But even under such conditions it will, almost of necessity, happen that the men chosen will be of the politics of the majority. It may also be noted that normally the salaries attached to these positions are small in comparison with the importance of the functions committed to those chosen for this work. When the choice is by popular election the influence of politics is all pervasive. Where parties are evenly balanced there can be no continuity of policy. The ebb and flow of Populism and Republicanism in Kansas is sufficient illustration of this statement. In Iowa where there is normally a majority in favour of the Republican party there has been the opportunity for a more continuous policy and consequently more success has been obtained. It is also to be noticed that in this state the policy has been followed of re-electing the men who have proved efficient. Where the provision for popular election requires, as in Arkansas, that each Railroad Commissioner shall be chosen not by the vote of the State at large but by the vote of a designated portion of the State the evils of politics are still further aggravated. The short tenure of office affords another defect against which the Commissions have to contend. The Commissioners are elected for terms not exceeding, on the average, three years. In many States there is also a feeling that no man should have more than two terms of office. The co-operation of these two conditions renders it difficult, in many of the States, for the Commissions to develop a continuous policy. But the especial difficulty which bulks even more largely than those already enumerated is the lack of indication of technical requirements of fitness for Commissionerships. In three States there are provisions with reference to technical requirements. Vermont requires that one Commissioner shall be a lawyer, one a civil engineer, and one a 1 Cf. Fifteenth Report of the Kansas Commission, 1897, p. 12.

business man; Maine that one shall be a lawyer, one a civil engineer, and one a railroad man: while Georgia requires that one shall be a lawyer, one a business man, and one a railroad man.1 In the other States of the Union it depends on the wisdom of the Executive or the caprice of popular choice whether technical training is deemed a requisite for a Commissionership.

The changed attitude of the railroads shows that, on the whole, the Commission legislation has been accepted as satisfactory. In 1871 when the Massachusetts Commission suggested to the railroads a revision of tariffs one General Manager wrote that he "had not supposed and did not now suppose that the Commission intends seriously to attempt advising the trained and experienced mangers of roads, in this Commonwealth, upon the details of their duty--." 2 At present the Massachusetts Commission testifies that its recommendations are normally obeyed. In the period 1872-73 the attitude of the railroads towards the Western Commissions was one of defiance.1 At present these Commissions state that in general, the railroads are willing to meet them more than half way.5

In summing up what has been accomplished by the Commissions it is not fair to judge them by their failures. That there have been failures it is simply the part of candour to admit. The Texas Commission has attempted to regulate rates on the cost of service principle. At all times this principle is difficult of application. In the case of Texas its application has proved well-nigh impracticable. At the same time there has been an undue belief in the efficacy of regulative legislation. The attempt to follow a too drastic policy has led to the intervention of the Federal courts. California is often pointed to as an example of the inefficient working of the rateregulating power of a Commission. The trouble has been that the California Commission attempted, instead of proceeding by gradual steps, to revolutionise conditions. The result has been that, even at the outset, the Commission was discredited and its power

1 Cf. Table I. in Clark's State Railroad Commissions, &c.

2 Cf. Adams, op. cit., p. 136.

3 Twenty-first Report of the Massachusetts Commission, 1890, p. 44.

4 Adams, op. cit., p. 136. See also evidence of Mr. Cook, Chairman of the Illinois Commission, before the Committee on Transportation Routes to the Seaboard, p. 248.

5 Cf. Twenty-seventh Report of the Illinois Commission, 1897, p. vii.; also th Reports of the Georgia Commission for 1889, p. 11, and for 1897-98, p. 18.

In 1894, in the case of Reagan v. Farmers Loan and Trust Co., 154 U.S. 362, the court enjoined the Commission from putting into operation its proposed schedule of rates.

weakened. The railroads have not been remiss in furthering the acceptance of this view. The experiences of Nebraska are sometimes pointed to as an example of the failure of a regulative policy. It must be remembered, however, that this State, instead of creating a Commission, has created a Board of Transportation composed of State officials, who have already been elected to perform other duties, together with certain assistants known as Secretaries. Owing to the fact that these State officials have already other duties the bulk of the work of regulation is delegated to the secretaries. This creates a division of responsibility which interferes with the carrying out of a careful and efficient regulative policy. The decision of the United States Supreme Court, in 1898, in the Maximum Rate Case, was, however, directed not against the actions of this board, but against the Newberry Maximum Rate Law, passed in 1893, which was declared by the Court to be too drastic in its operation. The experience of Kansas is also pointed to in this connection. The oscillations of politics, already referred to, have prevented the adoption of a continuous policy in this State. In 1885 the Commission was opposed to maximum rates. In 1897 it was in favour of them 3 The difficulties of regulation have been aggravated by changes in the form of the tribunal concerned with the regulative work. Some two years ago a Populist Legislature rescinded the Commission law and passed a much more drastic piece of legislation providing for the creation of a Court of Visitation. On May 5th of this year the Supreme Court of the State declared this legislation unconstitutional on the ground that it vested legislative, administrative and judicial powers in one body. At present Kansas has no

machinery for enforcing a regulative policy.

The operation of the Commission brings out in clearer light the difficulties of the problem of regulation. It also shows the increasing appreciation of what regulation means. In spite of the defects in the system the outcome of Commission regulation has been much better than might have been anticipated. Men who have been chosen on purely political grounds have, in many cases, been sobered by the cares and responsibilities of office. In both types of Commission, the advisory feature has force. In Illinois, by 1878, the Commission had come to occupy the position of a regulator between the railroad and the public. This 1 See "Railroad Control in Nebraska," by Professor F. H. Dixon, in the Political Science Quarterly for December, 1898.

2. Third Report of the Kansas Commission, p. 17.

3 Fifteenth Report of the Kansas Commission, p. 12.

See The Railway Age, May 11th, 1900.

was the outcome not of any power conferred by the act but of a broadening appreciation of the responsibilities of the Commission to the railroads as well as to the public. The recent reports of Iowa and of Georgia show a similar condition. The Commissions which have been characterized by the most consecutive policy have gradually been establishing for themselves the position of impartial tribunals concerned with the interests of both parties.1 The Commissions have been able, through a mediatorial power exerted through correspondence, to prevent disputes coming to a head.2 By the performance of these functions, and by the affording of information concerning railroad business to the public, a more harmonious relation between the railroads and the public has been brought about. The "strong" Commissions have redressed extortions and discriminations. They have been, in part, successful in harmonizing the differences between interstate and intra-state rates, thereby helping the interests of the local producers. Both types of Commissions have exerted a control over matters concerned with the public safety and convenience.

Perhaps the most important general service rendered by the Commissions has been the enforcing, on the public mind, of a clearer appreciation of the limitations of the competitive principle in railroad enterprise. In the early days the Massachusetts Commission, impressed by the railway policy of Belgium, which was then going through one of its accidental phases, pronounced in favour of a system of regulation through the maintenance of a government line in competition with other lines operating under private ownership and management.3 More recently the Commission has put itself on record, with reference to the limitations of competition, in words worthy of quotation-" whatever may be the true policy with respect to continental systems of transportation, competition on a narrower scale, between lines of limited extent and scope, has failed to accomplish its expected results, and has been practically abandoned by legislatures and the public as a theory and method of railroad regulation." The same position, in more guarded phrase, is taken by the Minnesota Commission.5 The limitations of the older theory of perfect

1 Cf. Georgia Commission Report for 1897-98, p. 4; Iowa and Illinois Reports present the same general position. The Texas Report of 1897, p. 5, also lays stress on this phase of policy.

2 See in this connection evidence of Mr. Peter A. Dey before the Cullom Committee. Mr. Dey, in the course of his evidence, said that the existence of the Commission "has enabled the people to see both sides of every question that has been discussed." Evidence, p. 957. 3 Massachusetts Report of 1872.

Twenty-fourth Report of the Massachusetts Commission, 1893, p. 5. 5 Minnesota Commission Report, 1890, p. 19.