= = 9.9624. Range 2. Calculated. By Pareto's Law, taking the number above £100,000 to be 290 and their average value to be £297,000. Then a = 1.5 and log A Over £1,000,000 The Law ceases to accord with the facts at about £150,000 capital. This may be connected with the change at about £55,000 in Note III. In both cases the numbers at the higher ranges, of income or of capital, are smaller than would be expected from a study of the lower ranges. The connection between the capital passing and unearned income taxable teems with difficulties. Thus there are 321 persons paying tax on incomes of over £55,000, but only 9 millionaires dying per annum. Again, full tax is paid on £632,000,000 per annum, and this might be expected to contain only earned income of persons having over £3000 a year; but only £280,000,000 in all passes at death per annum, which is held to correspond to 24 times that sum (Statistical Journal, 1908, p. 74), so that reckoning interest at 4% the income from property would be £280,000,000. Because of these difficulties, no direct use has been made of these statistics in this paper. See Note I for the causes of the different rates of tax. Owing to various reasons the incomes named do not belong exactly to the fisca years against which they are given. The incomes as given are before abatements are subtracted. From 52d Report, p. 139, note: repeated in 53d Report. Tax at 9d. was allowed in approximately three-quarters of a million cases. From 56th Report, Table 126. [Corresponding tables are given in This table shows the number of personal assessments under Schedules D and E, as distinguished from companies, public loans, etc., and ownership of land and houses and occupation of land. It is not possible to say what part of the income of persons (not employés) and firms is "earned" and what part is taxed as unearned. Since firms are formed by different numbers of partners, it is not possib e to give the numbers of persons in them nor any data as to individual incomes. More assessments than one are frequently made on the same person, if his income arises from various sources. We cannot then connect in detail Tables 93 and 126, and cannot distribute the earned income by amounts. But it is clear that a considerable part of the £250 millions under £700 is earned. THE DEVELOPMENT BY COMMISSIONS OF THE PRINCIPLES OF PUBLIC UTILITY VALUATION SUMMARY Theories of valuation in process of development by Commissions, 269.- Plant and equipment. "Reproductive "value or original cost? 271. Treatment of land value; peculiar position of St. Louis and New York Commissions, 274. — Pavements, 279. — Overhead charges; two methods of computing, 281.- Development expense and going values; Wisconsin method and New York method, 284. method in New Jersey, 287.- Conclusion, 291. - Peculiar THE Supreme Court of the United States has established the principle that a public utility is entitled to a reasonable return upon the fair value of the property being used in the public service, and that the question of such reasonableness is a matter for judicial review. It has failed, however, to formulate any definite principle as to what constitutes the fair value of a property for rate making, other than to point out that certain factors must be given consideration,1 and to say that the value which should be used as a basis for rates is the value of the property at the time it is being used.' In spite of the indefiniteness in the decisions of the Supreme Court, there are being developed in the United States at the present time well defined precedents and usages in the valuation of public utilities for rate making purposes. Theories of valuation are being developed by the public service commissions, to whom the legislative bodies have delegated the regulatory power. 1 Smythe v. Ames, 169 U. S. 466. * San Diego Land and Town Co. v. National City, 174 U. 8. 739. It is to the decisions of the commissions which regulate rates that one must look for the development of theories of valuation, in their intricate details and refinements. The purpose of this paper is to describe and compare some of the principles of valuation for rate making purposes developed by some of the leading public utility commissions in the United States.1 It is noteworthy that the Massachusetts Board of Gas and Electric Light Commissioners, the oldest rate making commission in the United States,' has contributed nothing to the theory of valuation. No specific appropriation has ever been given to the Board for the purpose of making valuations, and no organization has ever been created. Since its organization, the Board, under legislative direction, has imposed restrictions upon the issue of securities. It has been customary to base an estimate as to the amount upon which the company should be permitted a reasonable return, upon the amount of securities which have been approved by the Board or which might have been so approved. Therefore this commission has seldom made valuations, and when it has based a rate to the consumer upon the value of the property, it has failed to indicate the principle by which it arrived at a valuation. But other state and municipal public utility commissions, all of which have been established since 1907, have developed a considerable body of theories and principles of valuation. 1 The commissions of the various states which possess some powers of regulation of railroads only are not referred to in this paper. Only "public utility commissions" are included, that is, those possessing power over several utilities. The California and Wisconsin Railroad Commissions, herein referred to, have wide powers of regulation of various utilities. The Massachusetts Railroad Commission was established in 1869, but it cannot fix rates, its powers being only recommendatory. The Board of Gas Commissioners was organized in 1885, and in 1887 was re-organized into the Board of Gas and Electric Light Commissioners. PLANT AND EQUIPMENT The general rule is to appraise plant and equipment at its present, or "reproductive," value. This amount is arrived at in various ways, sometimes by a valuation conducted by engineers in the regular employ of the commission, sometimes by the testimony of expert witnesses familiar with the particular business and plant values therein, sometimes by a valuation conducted both by engineers for the company and for the commission. In the two cases last named, the amount often represents a compromise. Whatever the method, the amount accepted is presumed to represent proximately the depreciated value of the plant and equipment owned by the company, at the existing prices of land, labor and materials. The St. Louis Public Service Commission, however, which has proven itself probably the most efficient and successful municipal commission, employs the original cost theory, and is its leading advocate. In its valuation of the property of the Union Electric Light and Power Company in 1911, the Commission rejected the theory of cost of reproduction, saying that "it disregards the actual conditions under which the property was produced, and sets up a purely hypothetical case.' Therefore, instead, the Commission assigned to each item" its original cost in place and ready for service." Again, in its report on the valuation of the United Railways Company, in November, 1912, the St. Louis Commission says "The Commission in its valuation has relied mainly upon original cost as the theory most calculated to bring about a just result. The Commission believes that in trying to determine the amount of property upon which a public service company is entitled to a reasonable return from the public |