Do "Cost of Transportation" Exhibits in Rail-Road Rate Cases Show Cost?
| Author | Allen S. Olmsted |
| Published date | 01 January 1916 |
| Date | 01 January 1916 |
| DOI | http://doi.org/10.1177/000271621606300119 |
| Subject Matter | Articles |
214
DO
"COST
OF
TRANSPORTATION"
EXHIBITS
IN
RAIL-
ROAD
RATE
CASES
SHOW
COST?
BY
ALLEN
S.
OLMSTED,
2D,
Philadelphia.
The
cost
of
transportation
is
an
important
element
in
the
reasonableness
of
a
railroad
rate.
This
general
proposition
is
universally
accepted.
The
difficulty
comes
in
applying
it
to
a
specific
case.
When
the
circumstances
permit,
a
favorite
means
of
applying
the
general
proposition
to
the
specific
case
is
by
means
of
an
exhibit
purporting
to
show
the
cost
of
carrying
the
commodity
in
question
either
to
all
destinations
or
between
certain
points
and
over
certain
routes
believed
to
be
representative.
The
final
figure
in
these
computations
is
said
to
be
the &dquo;cost&dquo;
of
the
particular
service.
But
is
the
word &dquo;cost&dquo;
properly
applicable
to
this
figure?
A
careful
study
of
the
nature
of
these
exhibits
will
indicate,
it
is
believed,
that
the
word &dquo;cost&dquo;
so
used
is
a
misnomer.
If
the
so-
called &dquo;cost&dquo;
of
a
particular
service
is
really
something
different,
it is
misleading
to
call
it
&dquo;cost,&dquo;
and unsound
to
treat
it
(as
we
do)
as
though
it
were
cost.
These
computations
consist
of
two
different
processes.
One
is
an
allocation
to
a
particular
traffic
of
costs
attributable
solely
to
it;
the
other
is
an
apportionment
between
the
particular
traffic
and
other
traffic
of
costs
jointly
caused
by
both
kinds
of
traffic.
The
distinction
is
vital.
The
purpose
of
this
article
is
to
expound
the
essential
difference
between
these
processes
and
the
con-
sequences
of
that
difference.
The
process
of
allocation
consists
of
separating
from
the
total
costs
those
costs
which
are
caused
entirely
by
one
traffic.
In
the
separation
of
freight
and
passenger
expenses,
certain
items,
such
as
the
wages
paid
freight
conductors
and
the
cost
of
fuel
burned
by
engines
in
freight
service,
are
at
once
seen
to
be
exclusively
freight
costs.
Not
a
cent
of
these
expenses
was
caused
by
the
passenger
traffic
and
not
a
cent
need
have
been
spent
if
there
had
been
no
freight
traffic.
This
is
a
clear
matter
of
fact,
and
we
can,
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