The factors which have most weight in fixing schedules of rates and
fares are what it will cost to perform the several services, what the
services are worth to those for whom they are to be rendered, and the
extent to which there is competition among rival carriers to secure
the traffic concerned. Though on the face of things it would seem that
the railways should fix the charges for their various services in
accordance with the costs of performing those services, it is neither
practicable for them to do so nor is it desirable from the standpoint
of public welfare that such a criterion should be adopted. It is
impracticable for the railroads to base their charges upon cost of
service, because it is impossible to determine accurately the elements
which enter into the cost of performing the particular transportation
service. The modern railroad is a very complex mechanism, employed in
the performance of a multitude of different services. No railroad
official is able to say just how much of the company's total expenses
are to be charged against any one particular freight or passenger
service.
The cost of service would be an undesirable basis of rates, because
the railroads would derive such a small part of their total necessary
revenues from the carriage of goods having a high value in proportion
to bulk and weight, that they would be obliged to charge much higher
rates than they now do upon the cruder products of the farm, forest,
and mine. These products are the basic materials of industry, and the
lowest possible rate for their transportation is essential to social
and economic progress.