During the nineteenth century and the early part of the twentieth, the value-of-service basis for railway rates ruled unchallenged. Over the last forty years, and especially the last twenty, that system has been undermined from so many directions that it is rapidly becoming untenable. Willy-nilly, railways are being forced over to a cost-of-service basis by the competition of other carriers and by the relocation of industry. So long as they are expected to be self-supporting (and the logical problems of operating nation-wide utilities on any other basis are daunting), any traffic or service that does not pay its full costs must inevitably come under review. The cross-subsidization between different types of traffic which once took place as a matter of course is no longer possible, and railways are compelled to know their own costs and to sell their services in competition at rates based, to an ever-increasing extent, on cost. In the last fifteen years, for example, competition has converted the old class rate structure, which was the heart of value-of-service rates, into a mere shrunken survival, historically interesting, but no longer worthy of serious consideration.
There are other surviving specimens of value-of-service rates, but the Crow's Nest schedule for grain rates is the only one covering a major traffic. For historic reasons, the rates, in terms of current money, are now at or below those first established at September 1899, despite the change in prices and wages in the intervening period. There are, therefore, compelling reasons to examine them now.