INTRODUCTION AND GENERAL NOTES } 
ercised that the margin for a possible profit was large; regula- 
tion was more or less perfunctory and, very frequently, due to 
the imperfect knowledge of the problem, neither the owner of 
the utility nor the rate-payer knew whether the earnings were 
deficient, reasonable, or excessive. The recent tendency of the 
public to insist upon its right to control and the attempt to 
make a close study of what would in each case be reasonable 
earnings has stimulated the work of the economist and the 
valuation engineer and has led to a consideration of many new 
phases of an interesting subject. 
Prof. John H. Gray in an address before the Economic Club 
of San Francisco on July 28, 1914, in presenting a historical 
survey of public utilities said: 
“We have very recently entered upon the experiment of 
administrative control through central commissions. But we 
have failed entirely to grasp the significance of the problem, or 
the steps necessary to solve it, if we fail for a moment to re- 
member that until the establishment of the Board of Gas Com- 
missioners in Massachusetts, in 1885, no industries, save that 
of transportation, were classed as utilities, and that the other 
states have been very slow to follow the lead of Massachusetts 
in this matter. In fact, it is only within the last decade that 
the problem may be said to have been taken up seriously by 
the country as a whole. That is altogether too short a time to 
adjust the law, the theories, or the practices to the economic 
needs and conditions of the situation. Much more is it too 
brief a period in which to have modified to any considerable 
degree the pioneer philosophy that still dominates the private 
owners of these industries. 
“The scientific theory is that the utilities should render 
adequate, safe, and universal service, at just, reasonable, and 
fair prices to all, and that the sovereignty shall be the final 
judge in every case of these matters. This statement implies, 
of course, that the total gains or rewards of the owners shall be 
reasonable under all circumstances, including that of virtually 
guaranteed monopoly, and that they shall have just compen- 
sation in case of expropriation.” 
Fundamental Principles Apply to Industrial Establishments. 
— The work which has been done in studying the fundamental