THEORY OF PRODUCTIVE EFFICIENCY 181 
in an arbitration with the railroads located West of the 
Mississippi River. The extent and scope of the analysis 
and arguments presented in this and subsequent cases has 
already been shown in detail in the preceding discussion. 
From this time forward, the “so-called productive effi- 
ciency argument” became a part of practically all railway 
wage proceedings. During the depression of 1920-1921, 
when railroad labor controversies reached a post-war cli- 
max, the “productive efficiency” argument was further 
elaborated to account for the financial condition of the rail- 
roads at that time. It was claimed by the economist of the 
transportation employees that the physical and operating 
deficiencies of the railroads had arisen from the improper 
diversion of past revenue gains, and the proper policy to 
adopt for the rehabilitation of the industry was not to at- 
tempt to reduce wages or labor costs by wage-cuts, but for 
the railroad fiscal agents to arrange extensive credits so 
that their physical inadequacies could be remedied and 
lower operating costs assured. The representatives of all 
classes of railroad employees supported this view as to the 
existing plight of the transportation industry in proceed- 
ings before the United States Railroad Labor Board in 
Chicago, in April, 1921. as follows :2 
The results of these methods of financial control, so far as 
the financial status and physical condition of the transporta- 
tion industry prior to the war is concerned, together with the 
relation of the employees to the final situation which devel- 
ped, may be briefly summarized as follows. 
1. The increased returns resulting from the efforts of op- 
erating and mechanical officials, and of railway employees in 
general, were absorbed by unwarranted security issues and 
1 See pp. 32-40. 
2The U. S. R. R. Labor Board, Docket No. 353. Statement of W. Jett 
Lauck on Behalf of the Organizations Represented in Groups 2 and 3, pp. 351 
et. seq.