3 VALUATION, DEPRECIATION AND THE RATE-BASE 
bodies. They will meet, too, the requirements of the owners of 
industrial and other properties, who owing to lack of such in- 
formation occasionally allow over-capitalization and excessive 
dividends, coupled with inadequate earnings, to cripple their 
enterprises. 
The Panama Canal and Fundamental Principles. — The neces- 
sity for a clear understanding of the fundamental principles to 
be followed when rates are to be fixed may be illustrated by 
reference to the case of the Panama Canal. Here is a great 
work representing an investment by the United States of about 
$375,000,000. Itis a type of canal which involves large oper- 
ating expense. In connection with this canal the question 
arises: What should the earnings be? 
The problem of the canal tolls may be broadly considered 
along the following lines: 
First: Who is ultimately to pay for the canal? Is it to be 
the user of the canal? 
Second : Has the canal been built by the United States as a 
revenue-producing investment or is the canal to be regarded as 
worth what it has cost for military purposes and as an instru- 
ment of general benefit? 
Third : What shall be included in the operating expenses? 
The ordinary citizen is under the impression that the $375,- 
000,000 which the canal has cost is an investment similar to 
those which the United States has made in constructing the 
Eads jetties at the mouth of the Mississippi river, in constructing 
the Ambrose channel for access to the New York harbor, and in 
building the San Pedro breakwater for the protection of the 
harbor of Los Angeles and the Columbia and Eureka bar jetties 
for the improvement of other Pacific Coast harbors of more or 
less local importance. If this is the fact, the investment in the 
canal has been made as a non-revenue-producing investment 
for all time and there will be no need of recovering the cost of 
the canal from those who use it nor even interest on this cost. 
If the United States plans to collect the cost of the canal in in- 
stallments from the users of the canal, no matter how small