As a statistician should not be permitted to include all outstanding stock in order to feed the agitation against over-capitalization, neither should he be allowed to exclude all non-dividend paying stock in order to exaggerate the rate of dividends. Nor to do the latter should he include dividends which are duplicated through the process of railway ownership of railway stocks.

If the $38,186,813, which according to his figures are duplicated in the $221,941,049 paid in dividends during 1904, be deducted, the net dividends $183,754,236 would average a rate of only 5.04 per cent on dividend paying stock: and only 2.89 per cent on all outstanding stock, instead of 6.09 and 3.50 per cent, respectively, as stated by the official statistician.

COMMERCIAL VALUE OF RAILWAY PROPERTY.

In this connection the Commercial Valuation of Railway Property as found by Prof. Henry C. Adams for the Census Bureau (bulletin 21) becomes of interest. Acting in his dual capacity of statistician to the Interstate Commerce Commission and expert for the Census Bureau, Mr. Adams finds that:

"The commercial value of railway operating property in the United States, computed for the year 1904, was $11,244,852,000."

This value was obtained by capitalizing the net earnings of the railways by a mean rate of 4.256. As neither the net earnings nor the rate is anything but an approximation, the valuation is doubly so. Net earnings depend so much on what is included under operating expenses that the margin for error runs into the hundreds of millions. The fluctuations in the value of money are so great that the selection of a "mean rate" is wholly arbitrary and a variation a quarter of a point in the mean rate up or down would make a difference of over a billion in the result.

The market price of railway securities is the best practical measure of their value, and this is affected by many influences besides their net earnings and the current rate of money. Estimates based on algebraic formulae which give to the railways of South Dakota a valuation of only $16,300 per mile and to those of Wyoming $80,400 are hardly entitled to the government imprint or to be cited as "authoritative" as they are by the Commission in its preliminary report for 1905 and (albeit his own) by Statistician Adams in his statistics for 1904.

RAILWAY CAPITALIZATION IN 1905.

The total capitalization of the 201 railways reporting to this bureau in 1905, obtained from an independent source, aggregated $10,307,142,365 divided as follows:

Beyond this capitalization, however, is that of the roads. whose lines were operated under lease amounting to 20,208 miles At the average official capitalization of $64,265 per mile in 1904, this would increase the aggregate by $1,298,667,120, making the total for the 201 roads whose operations were reported to this bureau $11,605,809,485 or $62,058, after excluding mileage operated under trackage rights.

There is absolutely no means of even approximating the cost of construction and equipment represented in this capitalization. In his general balance sheet for 1904 the official statistician estimates the cost of construction of 198,841 miles of line. at $10,784,449,493 and of equipment at $727,087,638. As the cost of equipment in locomotives and cars alone sold to the railways during the past seven years has been in the neighborhood of $1,000,000,000 (vide New Equipment above) the inadequacy of Mr. Adams' estimate is apparent.

Railways are not always able to differentiate between what are repairs, renewals and improvements so as to distinguish between mere up-keep and initial expenditure. In England and European countries they cut this knot by charging practically all new material and equipment, whether it is mere substitution or renewal, to capital account with the following result:

Note (a) The state railways of Sweden cost $44,048 per mile, the private companies only $22,400 per mile.

Broadly speaking the inferior railway system of Europe cost or is capitalized at twice as much per mile as American railways as a whole.

DISTRIBUTION OF RAILWAY STOCK.

According to a report made to the Senate by the Commission, February 24, 1905, the number of stockholders of record at the date of the last election of directors prior to June 30, 1904, of roads reporting to the Commission was 327,851.

The statement accompanying this report, on which it was based, enumerated only 1182 of the 2104 roads that reported to the Commission in 1904, and very inadequately represented the distribution of stock in the hands of trustees.

The distribution of railway bonds is not ascertainable, but probably it is wider than that of railway stocks.

PUBLIC SERVICE OF RAILWAYS.

How the railways are performing their great duty of furnishing transportation to the passenger and freight traffic of the United States is shown in the briefest possible form in the following table:

In regard to this summary so far as it relates to passenger traffic the most noteworthy feature is the remarkable increase in the number of passengers carried one mile, which according to the official statistician, is "the truer basis for the measurement

of this traffic." While the number of passengers carried shows only a normal relative increase over the complete returns for 1904 the per mile passenger traffic for 193,404 miles in 1905 is absolutely 906,933,464 greater than the final figures for 212,243 miles in 1904. The cause for this remarkable increase is to be found in the heavy travel to the World's Fair in the fall of 1904 and to the Clark and Lewis Exposition at Portland in the early summer of 1905.

The effect of this heavy passenger traffic is reflected in the decrease in the receipts per passenger mile to 1.961 cents. It is not safe, however, to make any deductions from this rate, for it is liable to be considerably changed by the complete returns.

The revelations of the summary as to the freight traffic of 1905 in comparison with that for 1904 are noteworthy. While the partial returns for 1905 indicate a total for all the roads of approximately 1,334,000,000 tons carried or 25,000,000 increase over 1904, the returns for the 201 roads reporting to this bureau give an absolute increase of 6,262,714,423 ton miles.

The average rate at which this enormous tonnage was carried was almost a quarter of a mill below the rate of 1904 and is only

of a mill per ton mile above "The lowest point reached by this unit in 1899, when the rate per ton per mile fell to 0.724 cents" as stated by the official statistician.

How the economic results reflected in these average receipts. per passenger and ton mile have been made possible are partly explained in the figures as to train mileage and the number of passengers and tons per train. The apparent increase in tons per train from 307.76 to 332.03 is somewhat excessive, because the returns for 1905 cover all the great freight carrying systems of the country. But an examination of the reports of the individual roads indicates that it fairly represents the growth of the train load during the past year. Some roads report an average train load of over 500 tons.