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Purchase of this book includes free trial access to www.million-books.com where you can read more than a million books for free. This is an OCR edition with typos. Excerpt from book: CHAPTER III. RAILROAD OWNERSHIP AND RAILROAD SPECULATION. Distinctive features of railroad business—Corporate ownership—Its present extent—Past history—Good and evil connected with it—Speculation— Commercial crises—Events preceding the crisis of 1884—Speculative railroad building and its results—Attempts to control it—Railroad accounts—The income account and the general balance sheet—Difficulty of separating maintenance from construction—How far railroad reports can be serviceable to the investors. UNTIL about 1850, it was assumed that railroad business was subject to the same laws as any other business, and in particular to the so-called law of competition, by whose free action rates would be brought down to cost of service. It was gradually seen that this assumption was not strictly true; that in many instances it was very far from the truth. A railroad differs from many other business enterprises, in the existence of a large permanent investment, which can be used for one narrowly defined purpose, and for no other. The capital, once invested, must remain. It is worth little for any other purpose than the one in question. A railroad cannot contract its capital merely because it does not pay; nor can it be paralleled at short notice when it happens to pay remarkably well. In these respects it differs quite sharply from a bank or store; and, to a certain extent, from a factory. The different lines of business—bank, store, factory, railroad—form a series, at one end of which we have an elastic business capital,which can be readily expanded or contracted, while at the other end we have a large permanent investment of " fixed " capital, which cannot thus adapt itself to the wants of trade. This is why it is so often said that the ordinary laws of political economy do not ...
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