2 VALUATION, DEPRECIATION AND THE RATE-BASE
in the public service or not, is the task which was set in undertaking
 the preparation of this volume. It is hoped that the
same will fill the gap for a time until wider experience of the
valuation experts shall have eliminated the involved and ofttimes
useless procedures which are still in practice and explanations
of which have, therefore, been included in the text.
The Public and the Owner. — The question may well be
asked whether the reformer, who has been seeking protection
against the demands of the trusts and corporations which have
frequently been guilty of over-capitalizing, has not in his turn
gone too far in the endeavor to reduce the earnings of the corporation-owned
 public utilities. The public has demanded and,
in some measure, has obtained, from various rate-fixing bodies,
and from the courts, the introduction of methods of procedure
that are not always equitable, but the baleful effects of which
are slow in becoming manifest. There has, for example, been
no little confusion in the matter of defining depreciation and
not a few valuation experts have had difficulty in grasping the
fact, which when once recognized seems fundamental, that the
repayment of capital (amortization), is one thing and that the
making of provisions for the replacement of worn-out or discarded
 parts at the end of their term is another thing.
It is fundamental that the owner of a public utility should be
allowed:
a. To obtain, sooner or later, a reasonable return on his
investment.
b. To recover at some time the capital invested for the public
good.
¢. To reap a suitable reward for establishing and managing
the enterprise.
It is the knowledge that these principles have obtained universal
 recognition which prompts the capitalist to embark upon
such ventures as those known as public utilities.
Control of Public Utilities a Recent Innovation. — Until within
the last few decades the control by the public of the operations
of the public utility concern has generally been so loosely ex-