3. Property should be taxed by a uniform rule and should not be classified for taxation.

4. No debt limits should be fixed for cities by state law, cities being allowed to decide for themselves how much they shall borrow.

5. Assessors should be appointive state officials and should not be elected by the voters of cities, counties, or towns.

CHAPTER XXIV
PUBLIC UTILITIES AND PUBLIC OWNERSHIP

The purpose of this chapter is to discuss the nature of public utilities, the various methods of regulating them, and the question whether they ought to be owned by the government.

Ordinary business is regulated by competition.

The Problem.—In the case of most ordinary business enterprises the factor which secures reasonable prices and good service to the customer is competition. The customer who finds that prices are high or that service is poor at one grocery store stops trading there and goes somewhere else. The merchant who finds one bank unsatisfactory moves his account to another bank. The wholesale dealer, if one factory does not send him goods promptly, or charges him too much, gives his future orders to some other factory. Stores, banks, and factories are in competition with other establishments of their own kind; in order to get business they are constantly trying to outstrip their competitors by lowering prices and improving service. In this sense “competition is the life of trade”. The rivalry of those who have goods or services to sell is in itself enough to afford the public protection.

Natural Monopolies.—But there are certain lines of business in which no real competition exists because they are monopolies. Monopolies, as has already been pointed out, are of three different types, natural, legal, or artificial (see p. [54]); and all public service enterprises (railroads, telegraphs, telephones, lighting plants, etc.) fall within the first of these classes—they are natural monopolies. We call them public services or public utilities; but this is not merely because they are of great importance to the public. Bread and meat are also of vast public importance but we do not refer to the bakery and the meat market as public services. |But public utilities are natural monopolies.| Telephones, telegraphs, street railways are called public services or public utilities because they are monopolies by nature. The citizen has no alternative by reason of competition. If he wants to go from one place to another, he cannot usually find two lines of railroad, or if so, their rates are the same. If the rates for electric lighting are exorbitant, he cannot tell the company that he will buy electric light from someone else, for he is dealing with the only concern from which electric light can be obtained in that particular locality. The man who lives in Omaha can send to Chicago and buy his shoes there if he finds that prices and quality are not satisfactory in his own city; but he cannot get his telephone service or his electric light in that way. He is absolutely dependent on local service and, as a rule, on one local service alone.

Their nature excludes competition.

Public Utilities do not Compete.—Why do we say that these public utilities are monopolies by nature? It is because their business, from the way in which it is carried on, virtually excludes competition. It would be physically possible to have two rival street railway companies operating on the same street, two gas companies, and two electric lighting companies; but imagine the congestion and inconvenience this would cause! Moreover, it would practically double the amount of fixed capital needed to provide the service and this would mean higher prices to the public in the end.[[231]] In years gone by many cities tried the plan of setting two public service companies in competition with one another, and in a few cities competing telephone companies still exist; but the competition is rarely in earnest and scarcely ever lasts very long. The rival public service companies, finding that competition is not profitable, presently form a combination and raise their rates. The controlling fact is that light, power, transportation, and communication (whether by telegraph, telephone, or post) can be more cheaply served by a monopoly than by competing companies. There can be, in fact, no effective competition between public utilities operating in the same area.