Page:Harvard Law Review Volume 32.djvu/577

From Wikisource
Jump to navigation Jump to search
This page needs to be proofread.
541
HARVARD LAW REVIEW
541

VALUE OF THE SERVICE AS A FACTOR IN RATE MAKING 541 opposite view of the question whether rates may exceed cost and still be reasonable. But the American law is clearly that rates above cost are unreasonable; that there is no constitutional ob- stacle to reducing them to cost; and that they should be reduced accordingly, whatever the value of the service may be. It is clear that there can be no sense of the phrase value of the service, or reasonableness to the consumer, in which it is a cri- terion superior to, or coordinate with, cost of the service. If there were such a sense, it would follow, whatever the sense were, that the cost criterion would occasionally give way to it; and the cost criterion gives way to nothing. Rates may neither be fixed below cost when the value of the service is low, nor above cost when the value is high. Is this as it should be? This raises the question, what is meant by value of the service, or reasonableness to the consumer? The phrases are much used and little defined. The word value, since it is spoken of in this connection as a measure of what purchasers should pay, is evidently not used in its ordinary sense: for we or- dinarily mean by the value of a thing not a theory but a condition — the amount which people will and do pay for it. Neither, evi- dently, is value here used in the sense of cost: since it is offered precisely as a criterion distinct from cost. Neither does it mean the rate which will bring the producer the greatest aggregate profit (what the traffic will bear), nor the highest rate which some proportion or other of consumers will pay. There is little serious contention at present that rates should be kept up to such a point, and comparatively little need of a rule of law, or any other motive the bridge was a complicated bookkeeping question which the Commission did not answer categorically. After stating that "the net earnings of the bridge company are said to amoimt to about 20 per cent on the original cost of the structure," it inti- mated some doubt of the accoimting processes by which that result was reached; but it did not in terms dispute it, nor fix on any lower percentage as more accurate. And it did distinctly hold that the "generous returns" did not constitute a reason for lowering the rate. This conclusion rested partly on the consideration that " bridges are and have been regarded as precarious properties" — a matter which goes to the cost of the service, and indicates that the real rate of return is less than the apparent one. But it also rested in part, expressly, on notions of reasonableness to the con- sumer, including the proposition that "testing the charge of 25 cents for passage over this bridge with the tolls exacted for passage over other bridges we find it not un- reasonable." The bare cost basis would hardly have led the Commission to sustain the rate.