aving in the cost of some manufacturing process of 50
per cent. One manufacturer adopts it because it greatly increases his
profits, and one by one his competitors follow suit. The competition
between them cuts the prices lower and lower, till finally the consumers
of the goods get all the benefit from the saving effected by the new
machine, and the manufacturers' profits are no greater than they were
originally. But the important point to be noted is this, that the
benefit to the manufacturer continued long enough to repay him for
introducing the machine. So in our attempts to base railway rates upon
cost of service, we must permit the profit from the introduction of
economies, the use of improved appliances, etc., to be gathered by the
railway company long enough to induce it to work toward that end.

All we need to do to effect this end is to _somewhat delay_ the change
in rates to correspond to change in cost of service. As already stated,
it is most necessary that rates should be _stable_, and it is proposed
to make any change, either advance or reduction, only through the action
of a Government Commission. Now, suppose that some such clause as this
forms a part of our railway law: "upon the petition of any railway
corporation, or of not less than twenty-five patrons of any single
'railway district,' it shall be the duty of the Railway Commission to
investigate regarding a readjustment of rates to correspond more closely
to the cost of service. If it shall be found that in the given 'railway
district' the net receipts over the operating expenses and fixed
charges have been for one year not less than 9 per cent. on the capital
of the operating company invested in the given railway district; and
that for two successive years they have been not less than 8 per cent.;
or, if they have been for one year 8 per cent., and for two years 7 per
cent., and it shall be proven to the satisfaction of the Commission,
that any due and proper measure of economy, to which the attention of
the officers was called in writing has been wilfully neglected, or that
any uncalled for and manifestly extravagant expenditures have been
entered into during that time, then it shall be the duty of the
Commission to lower the rates. If it shall be found that for one year
the net earnings have been less than 31/2 per cent., and for two years
less than 41/2 per cent., unless it shall be proven that this deficit has
been fostered by neglect of due eco