The Freeman 1972 - The Ludwig von Mises Institute

1972 OTHER BOOKS 757Railroad regulation was basedon a philosophy, called by Martin"Archaic Progressivism." It hadseveral assumptions, all nowproved to be substantially invalid.One was that the railroads wereovercapitalized. This supposedlymade the shippers pay excessiverates in order to give the securityholders undeserved earnings. Thefallacy was ultimately exploded,as a result of the ICC ordered valuationof the railroads, but·it isstill believed in many sectors ofthe community and still taught inmany schools.Another fallacy was the conceptof a "reasonable rate." A freightrate is a price for moving goods,nothing more. Hopefully, it wouldpermit satisfactory recompense tothe carrier, covering the·cost ofservice and a return on investment.At the same time it mustbe at a level that will permit goodsto move. Somehow, the Progressivesin Congress - and elsewhere- believed in a concept of "reasonableness"substantially independentof market factors inherent inthe setting of any other price.This undefined and undefinableconcept buttressed the determinationof leaders in the "ProgressiveEra" to deny the railroads increasesin rates.Three times in the Roosevelt­Taft-Wilson period, the railroadswent to the Interstate CommerceCommission for general acrossthe-boardincreases in freightrates. The chapters in which Martindescribes these exercises infutility are entitled, "The FirstDenial," "The Second Denial,""The Third Denial." The philosophyof the times, the prevailingpolitical climate, the laws creatingthe Commission and directing itsactivities doubtless left any otherkind of decision outside the realmof probability; the parties involvedreally didn't know how theeconomy worked. They appearedquite unaware of how tinkeringat one point in the economic systemcould produce unwanted resultsin other areas. Even the railroadofficers, expert railroaders,were quite unaware ·of the ideasprevailing outside their own group- and how to contend with them."Defeat of the young by the oldand silly." This quotation fromone of Vachel Lindsay's poems ap""pears at the head of the chapter"Third Denial." The quotation isappropriate in view of the succeedinggenerations which havehad to contend with inadequatetransportation. The men who"'starred" in that era in placingthe regulatory shackles on therailroads may well be described as"old" and/or "silly." Typicallythey were men whose thinking onrailroads had congealed in theconditions of the 1870's, with rem-