Page:Harvard Law Review Volume 32.djvu/591

555 VALUE OF THE SERVICE AS A FACTOR IN RATE MAKING 555 margin, or both. The use of the article, already subnormal, will be further restricted if the price of it is raised; and the small present profit makes it probable that the price will have to be raised if the public utility's rate is raised. All this would constitute no excuse for charging the prosperous industry a rate which would yield the utility more than a reasonable return, to the enrichment of the utility or its other consumers, or for charging the depressed in- dustry a rate which would not cover cost, and throwing the re- sulting burden on other consumers. But it does constitute a reason for giving the benefit of the doubt, in valuation of plant, apportionment of costs, and determination of what return is reasonable, to the utility in the case of the prosperous customer and to the purchaser in the case of the depressed one. A similar argument can be made for considering the value of the article served, and allowing a more generous return, within the limits of cost, from the more valuable than from the less valuable article. The dearer a commodity is, the smaller in general is the fraction of its cost which consists of freight rate or other public-utility charge. But for the fact that freight rates are graduated more or less in accordance with the value of the article, the rate would be a smaller fraction of the article's whole cost in the case of the dearer in exactly the proportion that it is dearer. A cent a pound in a freight rate may make a difference of i per cent in the price of a dearer article and of 50 per cent in the price of a cheaper one. It follows that a higher public-utihty charge does not so greatly interfere with the use of the dearer commodity as of the cheaper. So far as high-cost commodities are in the nature of luxuries, this proposition doubtless fails in some degree ; since it is in general easier to check the demand for a luxury than for a necessity. But this, as an argument against high rates on luxuries, is offset by the consideration that the distribution of luxuries, while important, is less important than the distribution of necessities. Their use may be the more checked by a higher rate, but the checking of their use is the less unfortunate. On the whole, therefore, the benefit of the doubt concerning costs and returns may well be given to the company as against the luxury, and to the necessity as against the company. And with luxuries, or beyond them, should be classed for this purpose articles the consimiption of which is