and to maintain the fares that will jointly yield maximum net profits. Net revenues are the resultant of three factors -traffic, rates, and operating expenses. The transportation department seeks to operate the railway as economically and efficiently as possible; the traffic officials endeavor to keep revenues at a maximum by establishing the rates and fares that will enable traffic to move in large and increasing volume. The rate and fare policy that yields largest net returns in the long run is not to make charges as high as they might be put at any given time, but, while keeping them high enough to be profitable, to maintain them at a level enough below the maximum to guarantee the unhampered growth of industry and travel, and thus of traffic. This, it may be said with confidence, has in the main been the policy of American railway managers.

In every country, however, social as well as economic. considerations influence passenger fares. The degree to which social aims affect rates and fares-the extent of the socialization of railway charges-is greatest in Europe, where the railways are owned and operated by the government. In other countries, where the railroads are still in the hands of corporations, the extension of government activities in matters of social welfare is such as to cause the state to insist upon a large measure of socialization of railway rates and fares. The adoption of the zone tariff system by Hungary in 1889 was largely for the purpose of increasing the long-distance travel between the peripheral portions of the kingdom and Budapest, the political and cultural, as well as the physical, center of the country. It was also desired to enlarge the volume of short-distance or suburban traffic into and out of Budapest and other large cities, and thus to enable people to live more comfortably. In Prussia the reduced-rate tickets to school children and to

workingmen, and, indeed, the very cheap, although inferior, fourth class, much used by the peasant and artisan classes, are evidence of the influence of social aims in the making of fares.

The railways in the United States, being owned by corporations and operated for private profit, naturally have charges that are determined mainly by commercial forces; but practically all companies grant reduced fares to clergymen and to persons connected with charitable institutions. In some sections special tickets are sold to school children, and to some extent many of the low-fare tourist, excursion, harvesters', land seekers', and other exceptional tickets are sold for the purpose of bettering social conditions. The main purpose of the railway managers is to secure present or prospective profit for the stockholders; but it would be as unjust as inaccurate to say that philanthropic and social motives are not also influential.

The general policy of American traffic officials, as has been pointed out, is to give chief attention to the development of the first-class and Pullman services and to meet the demand for cheaper accommodations rather by providing temporary and exceptional tourist and excursion services at fares from one half to four fifths the regular charges than by following the practice of the railways in most countries of maintaining a regular third, or, as we should call it in the United States, a second-class service.

In many sections of the United States a partial equivalent of the European third-class service is being provided by the rapidly spreading net of electric interurban railways; and for the most part the traffic officials of the steam railroads are of the opinion that it will be useless for the steam lines to endeavor to attempt to compete in services and fares against the electric rivals. It is thought best to

allow the interurbans to develop, and, if they become a serious competitor, to bring about the coöperation or consolidation of the steam and electric lines.

The average receipt per passenger per mile, or, as it is usually termed, the average fare, has been kept at the relatively high figure of two cents in the United States as the result of a threefold policy: (1) The omission from the regular passenger train accommodations of a grade of service below the first class. Such a service in the United States would correspond to the third class in European countries having well-managed railroads a class that is patronized by seventy to ninety per cent of all passengers in Europe. (2) The relatively large and the growing use of Pullman coaches and the operation of an increasing number of highspeed extra-fare trains, which means that the railways are seeking to meet the public demand for an excellent and expensive service rather than the demand for an economical service. (3) The rapid expansion of electric interurban railways, which are already handling much short-distance and low-fare traffic that would otherwise come to the steam railroads. The growth of electric railway patronage has lengthened the average journey of steam railroad passengers, and has tended to prevent the decline in the average fare per mile.

REFERENCES

1. W. E. Weyl, "The Passenger Traffic of Railways," publications of the University of Pennsylvania, Philadelphia, 1901. (A valuable volume containing much information regarding the passenger services of American and European railroads.)

2. W. S. Bronson, “The Passenger Rate of the American Railway," in Railroad Age Gazette, vol. xlvi, pp. 1127-1128, 1172-1174, May 28 and June 4, 1909.

3. M. II. Robinson, "The Legal, Economic, and Accounting

Principles Involved in the Judicial Determination of Railway Passenger Rates," in Yale Review, vol. xvi, pp. 355-399, Feb., 1908.

4. E. R. Johnson, "American Railway Transportation," New York, 1908. (Chapters X, on "The Passenger Service," XIX, on the "Theory of Rates and Fares," and XX, on Rate Making in Practice.")

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5. — “Elements of Transportation," New York, 1909. (Chapters VIII, "The Passenger Service," XII, Railway Rates and Fares Explained," and XIII, "How Rates and Fares are Made.")

CHAPTER XXXVI

INFLUENCE OF ELECTRIC RAILWAYS UPON THE FARES AND SERVICES OF STEAM RAILROADS

Growth of electric railways-Sections of country in which most developed Competition with steam roads in passenger service, in general-Advantages of electric lines as regards: Fares; Frequency of service; Convenience and comfort; And surmounting grades-Methods employed by electrics to attract trafficEffect of electric railways upon steam roads as regards: Shortdistance traffic; Local service; Local fares; Consolidation of electric with steam lines; And electrification of steam roadsCompetition of the electric with the steam roads in the freight and express traffic-Volume and nature of electric freight traffic --Character of the service-References.

THE growth of the electric railway system of the United States has been so rapid during the last half decade that the traffic and operating departments of many steam railroads have given it their earnest attention. As is shown in the table (see page 232) from a Bulletin issued by the United States Bureau of the Census, the mileage of electric railways in five years increased by 53.5 per cent, passengers carried by 63.3, and gross income 71.6 per cent.

The electric railways that chiefly concern the steam railroads are the suburban and interurban lines. The latter account for the larger share of the recent growth, and have become of primary importance in certain regions.

The interurban electrics are most highly developed in (1) the Central Western States-Ohio, Indiana, southern