Another once much-favoured theory is that the railways should charge so much for cost of service, plus a reasonable profit for themselves.
Here, in the first place, there is the impossibility of deciding what is the cost of the service rendered in regard to each commodity and each consignment thereof that is carried. No basis exists on which the most expert of railway men could decide the respective costs of transport for each and every article in a train-load of miscellaneous goods, nor could any one apportion the exact amount that each should bear in regard to interest on capital outlay and other standing charges which must needs be covered as well as the proportionate cost of actual operation.
Then we have the fact that, even if these figures could be arrived at, many of the commodities carried would be unable to pay the rates fixed thereon. This would especially apply to coal, iron-stone, manure and other things either of low value or of considerable weight or bulk. Whatever may be the real cost of carrying them, commodities of this kind cannot pay more than a certain rate. If that rate is exceeded either they will be sent in proportionately smaller quantities or they will not be sent by rail at all.
We arrive, in this way, by the logic of actual facts, at the fundamental principle, adopted by railway companies, of charging "what the traffic will bear"; and by this is meant "charging no more than," rather than "charging as much as," the traffic will bear. Findlay, in his book on "The Working and Management of an English Railway" (fourth edition, 1891) says of the practice based on this principle:—
"The rates are governed by the nature and extent of the traffic, the pressure of competition, either by water, by a rival route, or by other land carriage; but, above all, the companies have regard to the commercial value of the commodity, and the rate it will bear, so as to admit of its being produced and sold in a competing market with a fair margin of profit. The companies each do their best to meet the circumstances of the trade, to develop the resources of their own particular district, and to encourage the competition of markets, primarily, no doubt, in their own interest, but nevertheless greatly to the advantage of the community."
The application of the principle is worked out by the division into various classes of all minerals and merchandise carried on the railway. The classes are known respectively as A, B, C, 1, 2, 3, 4, 5, the rates charged being lowest for commodities in Class A and highest for those in Class 5. The type of article included in each class may be indicated by the following examples:—
Class A (applicable to consignments of four tons and upwards).—Coal, coke, gravel, iron-stone, limestone, stable manure, sand.
Class B (applicable to consignments of four tons and upwards).—Bricks, concrete, various articles of iron and steel, granite (in blocks), lime (in bulk), salt (in bulk), common slates.
Class C.—Parsnips, pitwood (for mining purposes), potatoes (in bulk or in sacks), salt (packed), soda, straw (hydraulic or steam-packed), waste paper (for paper-making).
Class 1.—Cardboard, cotton (unmanufactured), onions, printing paper, finished wrought iron in shafts (for driving mill wheels), soap, sugar (in bags, cases or sacks), tallow, vinegar (in casks).