In the following chapter the methods of estimating the volume of traffic of a new railroad enterprise will be discussed. The discussion there chiefly concerns the methods of estimating the volume of the business. Although the freight-rates obtainable on such business will usually bear some relation to the similar rates charged by other railroads, the rates will not necessarily be identical. In fact the estimator must have sufficient knowledge of commercial business to know the market prices of commodities in the markets reached by his road, and to know, for example, the market price of hay in a certain city and the rate that may be charged for transporting hay which will leave to the farmer a sufficient amount per ton to encourage him to raise and haul hay to the railroad for shipment. If the freight-rate charge is excessive, so that there is but little object for the farmer to raise hay, the railroad will lose such business altogether. It would be preferable for it to charge a lower rate per ton than is charged for other merchandise, rather than to discourage and lose the business altogether.

32. Low Rates On Low-Grade Freight

The preceding paragraph furnishes the basis of the justification of an apparent discrimination between different kinds of freight. From the operating standpoint it costs just as much to haul a ton of coal as to haul a ton of furniture or expensive machinery, and yet the universal custom is to handle coal, broken stone, and similar products which have comparatively little value per ton, at a much cheaper rate than articles of higher value. This is partly done on the general principle that the traffic will bear a higher value. In the case of coal, oven the low freight-rate is a large proportion of the total value of the coal. In the case of machinery or dry-goods, the freight charge is comparatively insignificant. The shipment of low-grade, bulky freights would be considerably discouraged by a marked increase in the freight-rates. . The much higher rates which are charged on high-grade freight is such a small proportion of their total value that their use is not appreciably limited by the freight-charges.

As a conclusion of this very brief discussion on freight-rates, it may be said that the fundamental principle of freight-rates is that the charge is made in accordance with what traffic will bear - interpreting this phrase to mean that the prosperity of the railroad is bound up with the prosperity of the community served, and that the railroad will have more business and obtain a greater profit by encouraging the business and permitting the prosperity of the community. And it will best accomplish this by reducing its freight-rates to the point which will so encourage business that the return to the railroad company will be a maximum.