ABSTRACT
In the fixation of railway rates the principle of differential charging is applied in a modified form by means of the various classifications. These are mainly based on the values of the different commodities, though other factors, such as cost of handling, speed of conveyance, or the amount sent at a time, are also taken into consideration. In practice charging according to the value of the commodities largely resolves itself into a special method of distributing overhead costs to the best advantage. On the whole the system is socially beneficial because low grade traffic would not be able to bear the average charge which would otherwise have to be imposed and the public is safeguarded from monopolistic exploitation in the rates on high grade articles by State regulation and nowadays by road competition. As it happens, low grade traffic is very important to the countiy as it consists mainly of ores, iron, coal, and other raw materials of industry. But in any case this low grade traffic passes in quantity and therefore the aggregate contribution of such traffic to overhead costs is very considerable, though each ton only yields a small surplus over the direct costs of carrying it. If the low rated traffic were rejected, the remaining traffic would have to meet all the expenses by itself. A. T. Hadley put the case very well. ‘Charging what the traffic will bear’, he said, ‘is a very different thing from charging what the traffic will not bear. It is a hard principle to apply intelligently; but when it is thus applied it adjusts 130the burdens where they can be best borne, and develops a vast amount of business which could not otherwise exist.’ 1
