74

ECONOMIC PRINCIPLES

lessen its total contribution, by reducing its volume in greater
proportion than the increase of rate would compensate.
Regard will probably be paid, not merely to actual volume
of traffic, but also to prospects of future profit from development
 stimulated by low rates. All classes of traffic will not
yield equal contributions to general expenses. Some kinds
may yield small amounts, others large amounts. From
points where competition is met, rates may be quoted
yielding but little to these accounts, on the ground that
higher rates would result in not securing the traffic, and that
the traffic does, if secured, yield something beyond cost of
handling, Naturally, an important consideration is introduced
 when facilities do not exist for taking all the traffic
which offers at rates possible to quote. In that case, there
will be a tendency to accept the more remunerative and to
raise rates against the less remunerative, perhaps to a
prohibitive level.
It is suggested above that any rate which combines the
two points (i.) of affording some surplus over the class of
expenses included under (z), and (ii.) of being such as to
make that excess as great as is possible to secure by any
variation of the rate, would be acceptable. This needs to be
qualified whenever the case contemplated in (8) (i.) occurs.
Unless the surplus is adequate to cover such expenses, there
is no gain in affording the service at the rate in question,
which is, by hypothesis, a rate yielding the utmost to be
secured from that class of traffic.
With this qualification, the main considerations affecting
the fixing of rates, where no regulation interferes, have been
Indicated. The surpluses, over expenses of handling, which
rates yield, being each as large as possible, their aggregate
will also be as large as possible. Unless this aggregate
suffices to cover the expenses of class (8), the railroad, even
if constructed, would only be operated at a loss, and unless
change of management were to secure a reduction of expenses,
 or a better exercise of judgment in applying the principles
 on which rates are determined, the abandonment of
the road would involve less loss than its continued operation,
The existence of such conditions would indicate that the