200 VALUATION, DEPRECIATION AND THE RATE-BASE 
in vain in such a case to attempt a regulation of rates based solely 
upon a fair return upon the invested capital. The whole field 
must be brought into view. The volume of business transacted 
is, in such a case, equally as important an element for considera- 
tion as is a rate-base when a limit is to be set upon the earnings. 
An express company, as here assumed, has no appreciating 
property. Its share in the unearned increment of the country 
should be brought into some relation to the amount of service 
which it renders, that is, to the volume of its business. 
The compensation for management likewise is intimately 
related to and should be figured with the volume of business as 
the starting point. 
It would, of course, be quite as feasible to start with the total 
cost of operation instead of with the gross annual receipts when 
determining what should be allowed for management and what 
should be allowed to cover participation in general prosperity, 
but the gross income as a basis has obvious advantages. Book- 
keeping will be simplified and the control is more readily effected. 
The annual cost of operation will be more difficult to ascertain 
and will show greater relative fluctuations than the annual gross 
income, and for the same allowance in the earnings, the per cent 
of the annual gross income will be less than the per cent of the 
operating cost, thus resulting in greater stability of the percent- 
age allowance when once fixed. 
From the standpoint of the public, there can be but little 
question that the compensation for management should, as here 
suggested, be brought into fair relation to the volume of business 
instead of making its appearance in the interest allowance on an 
arbitrarily established or assumed * going value.” No basis 
has yet been discovered for estimating “ going value ” except 
capitalization of net profits. When, therefore, ¢ going value ” 
deduced from the opinion of experts, supported chiefly by assump- 
tions, as distinguished from cost of developing business, is in- 
cluded in a rate-base, the procedure must appear illogical to the 
rate-payer and will always remain subject to attack, both as to 
principle and amount. The alternative procedure which is now