Page:The Economic Journal Volume 1.djvu/521

Rh The difference in profits will bring about a difference in rent in proportion to the difference in profits. This state of things will be unsatisfactory to the consumers, limited to a supply of 72,000 quarts, to the railway companies, conveying only that number of quarts for a total amount of (24,000 x ld. + 48,000 x 2d.), and to the farmers and the landownerh in the outer zones. Then begins a change similar to what is going on all over the world a change which is exemplified by every railway, and which is illustrated also by shipping freights. A demand is made for the reduction of rates on long distant traffic; it is acceded to, and we have

Third hypothesis: Suppose the rates from to b,  to c,  to d are ld., ld., and ld. Milk may now be brought from outer districts; the supply of X is increased to 168,000 quarts; the gross earnings of the railway company rise from. to ,100; and then comes about an equalising movement in rent--to a large extent the expression of the difference in the cost of transport in the inner districts rents falling, in the outer rising. In other words, with differential, as distinguished from equal mileage, rates, there is an equalisation of rent or profits, together with an increase of the area of supply.

Most strikingly all this is illustrated in the case of shipping freights, which have no relation to the distance which cargoes are conveyed. The rent of corn land lying a few miles from the point of consumption is reduced to the same level as that of land four thousand miles off. Geographical advantages are almost annihilated by modern shipping freights, to the profit of all except the producers near the markets; and similar advantages are produced by differential rates.

These hypotheses correspond to the actual history of railways. In their early days, here and elsewhere, they adopted the practice. in force on canals--they charged according to distance. This policy excluded many districts from the full benefits of railways. Many commodities of large bulk and small value could not be moved at a profit. Consumers and producers lying apart were not brought together. This was altered after 1845, when the business of carrying wholly passed into the hands of the com- panies. Railway managers found that cost of transport did not increase proportionately to the distance traversed: that many of the charges were much the same whether goods were conveyed The theory o! the effect o! charges matically in Launhardt's Theor/e der Eisenbahnwesen, 1890, p. 1. in cost of transport is worked out mathe- 'arifbildunj der Eisenbahne. Archiv f'r