RATE STRUCTURE--ITS IMPORTANCE
THE railroads are common carriers and as such must haul all the traffic offered. To do so they are obliged to maintain an expensive roadway and an elaborate passenger and freight structure evolved to meet the traffic requirements of industry. The overhead costs of railroading, such as road maintenance and equipment, rolling stock, yards, stations, and the like, are very high, and independent to a great degree of the actual traffic. At present ( August, 1932) they are being used at less than one half of their demonstrated capacity.
To support this structure a delicate and flexible system of rates has been worked out. They vary between the cost of maintaining the structure and the value of the service rendered to the customer by the railroads. The rail rates for the different categories of commodities must lie somewhere between these two limits, to the end that trade and industry are efficiently and adequately served, and the railroads have sufficient income. Naturally, if the rail rate on any commodity is excessive, it will not move, or else seek some other form of transportation.
Under this theory, which has become established practically in all countries, the heavier types of com-