| THE ETHICAL PRINCIPLE IN PHYSICAL VALUATION FOR RATE MAKING |
By E. W. JAMES
OFFICE OF PUBLIC ROADS, U. S. DEPARTMENT OF AGRICULTURE
THE history of the control of public service corporations in this country is very short, but its interest is great enough to warrant even now a historical monograph of considerable length. Though the movement toward governmental control is new, it has been rapid. It culminated about a year ago in the passage of a law authorizing the Interstate Commerce Commission to make a valuation of railroads under its jurisdiction. Physical valuations have been provided for in Wisconsin, Nebraska, Washington, Massachusetts and other states. In general, the state valuation laws, as, for instance, that in Nebraska, provide for the valuation of practically all public service corporations. When we consider the history of corporations in the United States, the adoption of this policy with a view to control of public utilities appears logical enough, and opens a new field of discussion. Some parts of our railroads are eighty years old. Many were built under unusual conditions. The early days of many public service corporations display a tangle of promotion, corruption, lease, combination, purchase and reorganization. Original records in many cases are lost. As a result, the discussion of physical valuation has been largely confined to consideration of the ultimate, technical details of some practicable method, to the neglect of important underlying principles. Valuation has been usually argued from the point of view of the material interests of the disputants. It has been only within the past two or three years that really serious conclusions have been arrived at; and the discussion since the passage of the Physical Valuation Act affecting the Interstate Commerce Commission has alone provided some basis for a formulated set of principles around which interest now centers, A small vocabulary of technical terms has developed in the course of the debate as to principles and methods.
There is an aspect of valuation that has not received the emphasis it deserves. A study of the economic and social phases of the subject may be made much more illuminating than it has been. It appears that such a study would provide a solvent for several of the problems now in dispute among writers of undoubted ability and experience. In the first place, the public attention has not been directed toward corporation control because it had nothing else to busy itself with. The movement toward physical valuation is not an erratic one. The public's point of
