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SPRINGER BRIEFS IN ARCHITEC TURAL DESIGN
AND TECHNOLOGY
Pablo Guillen
Urša Komac
City Form,
Economics and
Culture
For
the Architecture
of Public Space
123
SpringerBriefs in Architectural Design
and Technology
Series Editor
Thomas Schröpfer, Architecture and Sustainable Design, Singapore
University of Technology and Design, Singapore, Singapore
Indexed by SCOPUS
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Pablo Guillen Urša Komac
•
City Form, Economics

and Culture
For the Architecture of Public Space
123
Pablo Guillen Urša Komac
The University of Sydney Western Sydney University
Sydney, NSW, Australia Westmead, NSW, Australia
ISSN 2199-580X ISSN 2199-5818 (electronic)

SpringerBriefs in Architectural Design and Technology
ISBN 978-981-15-5739-2 ISBN 978-981-15-5741-5 (eBook)
https://doi.org/10.1007/978-981-15-5741-5
© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd., part of Springer Nature
2020
This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether
the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of
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The use of general descriptive names, registered names, trademarks, service marks, etc. in this
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The publisher, the authors and the editors are safe to assume that the advice and information in this
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This Springer imprint is published by the registered company Springer Nature Singapore Pte Ltd.
The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721,
Singapore
Contents
1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2 Why Cities Exist? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3 Cities Are More Important Than Ever . . . . . . . . . . . . . . . . . . . . . . 7
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4 Public Goods, Externalities and the City . . . . . . . . . . . . . . . . . . . . . 11
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5 Governing for the Public Good: The Problem of City
Governance and Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Reference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6 Growth and Shape of the Pre-industrial City . . . . . . . . . . . . . . . . . 17
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7 The Raise of the Rail-Based Mechanical City . . . . . . . . . . . . . . . . . 19
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8 Motorisation and the City: America Leads the World . . . . . . . . . . 27
8.1 The Logic of Congestion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.2 How About Smart Cars? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.3 Modern American City Thinking and Trends . . . . . . . . . . . . . . . 45
8.3.1 The Death and Life of the Great American Cities . . . . . . 45
8.3.2 Paul Mees, Public Transport for Suburbia . . . . . . . . . . . . 46
8.3.3 Edward Glaeser’s Urban Economics Critique . . . . . . . . . 48
8.3.4 Richard Florida . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
8.3.5 The New Left, the Gentrification and Other American
Planning Buzzwords . . . . . . . . . . . . . . . . . . . . . . . . ... 49
v
vi Contents
8.3.6 Light Rail Versus the Kochs and the Great American
Public Transport Melancholy . . . . . . . . . . . . . . . . . . . . . 51
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
9 The Japanese Experience: The Rise of the Minimal Car Use
Megalopolis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
10 Following America, Not Japan: Car Dependent Emerging
Megacities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
11 Motorisation and De-motorisation in Europe . . . . . . . . . . . . . . . . . 69
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
12 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Appendix A: Public Transport Definitions . . . . . . . . . . . . . . . . . . . . . . . . 79

Appendix B: Architecture for the Public Space in a Car Free City . . . . 81
Chapter 1
Introduction
Abstract This is a book about how the cities utilise space and how the resulting
urban form provides different ways to deal with the tangle of public goods and
externalities caused by agglomeration. We rely on well-known economic thinking
plus a historical analysis to why cities exist and why they have evolved to be the
way they are. We identify several defining factors: the geography and the technology
(both defining what is possible to do), culture (which defines what the society’s goals
are) and the necessary government regulation in the presence of public goods and
externalities (determined both by culture and the desire to achieve positive economic
outcomes). Regulation is the set of rules (not only planning codes) that underpins
how markets are allowed to work in the city. Our method is also comparative as it
explains the evolution of urban form in the US and how it stands in a sharp contrast
with the evolution of urban form in Japan. An emphasis is put on the difference in
regulations between both jurisdictions. We point out that, against the conventional
wisdom, how American cities are constrained by rules that are much further from
the “neoliberal” economic idea of free and competitive markets than the Japanese
ones. We demonstrate how Japanese planning fosters competition and variety in the
availability of goods and services. We also include an explanation of the origin of
the differences in those regulations. We hypothesise how changing regulations could
change the urban form to generate a greater variety of goods and to foster the access
to those goods through a more equitable distribution of wealth. Critically, we point
out that a desirably denser city must rely on public transport, and we also study how a
less-dense city can be made to work with public transport. We conclude by claiming
that changes in regulations are very unlikely to happen in the US, as it would require
deep cultural changes to move from local to a more universal and less excluding
public good provision.
Keywords Urban form · Regulation · Public goods · Externalities · Technology ·

Culture
This book is about explaining the most relevant planning and cultural differences
in the way cities are allowed to function, grow and change. Those are differences
in planning regimes with historical reasons we explore and rooted in culture. They
reflect, but also shape, the mainstream views of the population, but have also very
© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd., part of 1
Springer Nature 2020
P. Guillen and U. Komac, City Form, Economics and Culture,
SpringerBriefs in Architectural Design and Technology,
https://doi.org/10.1007/978-981-15-5741-5_1
2 1 Introduction
strong economic and spatial implications. That is, most people use, see and feel the
city as a consequence of planning rules they are not aware of. The aim of exploring
these planning differences is not only to help to come closer to best practice given
society’s goals, but even perhaps allowing to direct change or bring more consistency
to those goals.
Following a historical analysis of the evolution of cities influenced both by tech-
nological progress and cultural change, we argue that the unintended consequences
of mass motorisation are at the origin of many, if not most, of the ills affecting con-
temporary cities. We propose a new approach to limit private car usage in urban
environments based on the somehow laisser-faire Japanese experience and compar-
ing it to the more heavy-handed, micro-managed approaches to planning used both
in North America and Europe.
The car-dependent city generates problems that go much further than the obvious
of pollution and excessive energy usage. First of all, universal car usage has huge
implications in terms of land use, as cars need to be parked and will be actually
parked most of the time. The need of parking space (“no parking no business” is,
for instance, the de facto Southern California motto) means that buildings have to be
spaced from each other to leave space for car parking. The result is neighbourhoods
unappealing for pedestrians and leaving no option but driving. Business will be built
and located to the scale and convenience of motorists. This environment makes all
but impossible for small restaurants, cafes and stores to exist as they will not be
even visible from zooming cars. That is, car dependency has an impact in the variety
of goods and services offered. A car dependent city is therefore dominated by huge
stores located far from residential zones and accessible only by car. Such city, coupled
with a locally controlled strict zoning regime in terms of permitted uses, also results
in a closed or socially exclusive city.1 The poor won’t even be visible in the rich
areas and the rich have no reason to adventure driving through the poor areas as there
is nothing interesting for them there. The poor in the car dependent city will suffer
when their car breaks down. Soon they may not be even able to go or to look for work.
As the poor and the rich live far apart, schools will be easily segregated by income
and social mobility will suffer greatly. Last, but not least, there are health benefits
associated to the use of public transport. Indeed, every user of public transport is a
pedestrian who has to walk at least the so-called “last mile” (and probably the first
too). Daily users of public transport don’t need to use ridiculous walking machines
in the gym or standing desks in the office as walking and standing forms part of their
daily commuting to work, errands, shopping and entertainment routine.
Our main point is therefore that different planning regimes result in substantial
differences in urban form, even when these differences often arise from unintended
consequences of the rules chosen. For instance, the Japanese governments of the
1950s wished for a rapid motorisation but at the same time they found it unfeasible,
given the narrowness of most streets, to allow on-street parking. Therefore, national
1 Locally controlled planning has the aim of keeping poorer people away. Also, may be more
accurate to say that a city based on public transport facilitates, but does not guarantee, openness
and inclusivity. These themes will be treated in the body of the book ahead.
1 Introduction 3
laws were passed by the Japanese national parliament mandating one private parking
space per car and making overnight street parking illegal.2 People in Japan did buy
cars at rates not so dissimilar with their American and European counterparts but
soon found them difficult to use for everyday life in the urban environment (Berri
2009).
From our reading of the architecture and urban design literature, we believe that
both architects and urban designers are mostly unaware of the forces that actually
shape cities and of the regulation frameworks put in place to harness and direct those
forces. As a result, architects often overestimate their own contribution to the urban
form. When realising they are not reaching their intended goals, they blame strawmen
such as “capitalism” or “the system” and even wish for a catastrophe that would allow
for a fresh start, see among a myriad of trite articles such as Aureli (2008). Quite on the
contrary, we point out real world examples, mostly in Japanese and European cities,
that could potentially allow architects to achieve positive outcomes in terms of more
liveable cities. Japanese cities look like a straightforward result of what we believe
are wise and clear planning rules. We are not saying that architecture in Japanese
cities is to be emulated, as we will show examples of the commonly low-quality
Japanese architecture, but we point out how the Japanese planning rules would allow
for potentially excellent results. On the other hand, those excellent results would be
much harder to achieve within the Anglo-American planning framework.
To us, European cities do usually look better3 than the ones in Japan and America.
We believe this is partly because the old parts of town were built before cars were
available. Before the Industrial Revolution the relative cost of high-quality crafts-
manship in building must have been much lower than it is now. After all, there were
not that many interesting and skilled jobs for the vast majority of talented individuals
before the Industrial Revolution. After all, the association of clever craftsmen is at
the very origin of the Free-Mason organisation in the Middle Ages. Once education
becomes increasingly available to the masses the majority of the most talented indi-
viduals prefer to become teachers, lawyers, medical doctors, professors of economics
or perhaps software engineers in recent times. Craftmanship is shown in different
ways, that become more rewarded by society in the form of higher salaries. Con-
struction jobs are left to individuals who in the olden times were only deemed worth
of carrying bricks to the masons. Our theory will become painfully compelling every
time our estimated reader, most likely a member of the illustrated class of craftsmen
in one way or another, needs anything repaired or rebuilt at home.
However, it is also true that unlike in Japan European buildings have better sur-
vived the pass of time and the destruction of war.4 In any case, cities in Europe
are nowadays much more car dependent and crowded with cars than their Japanese
2 On street parking is seldom allowed. When allowed, is often metered and indeed, cars still parked
after midnight are towed, see Barter (2014).
3 At least the areas frequented by tourists. Admittedly a value judgement.
4 The widespread use of timber in Japan even for large and symbolic buildings, such as temples
and palaces, has a lot to do with that. European medieval cities were also mostly built with timber,
besides the cathedral and the castle. When the city burned, new buildings were made of more durable
materials. Japanese timber construction was prevalent up until mid twentieth century. Buildings
4 1 Introduction
counterparts. Whenever a city in Europe has managed to limit car usage, that has
happened as a result of a very micro-managed approach and, sometimes, a substantial
cost in terms of public transport subsidy.
In summary, we are advocating for an urban form that is sufficiently dense to
foster encounters at a human scale, encourages the supply of variety goods and
services, provides opportunities for recreation and the enhancement of the soul, it is
not planned around the idea of exclusion and it is serviced by affordable and efficient
public transport that keeps pollution to a bearable minimum. It seems that such a
city would attract and shape the best minds to generate wealth which, appropriately
taxed, could provide and expand the public goods and thus grow in a virtuous cycle.
References
Aureli, P. V. (2008). The project of autonomy: politics and architecture within and against capitalism
(Vol. 4). New York: Princeton Architectural Press.
Barter, P. (2014). Japan’s proof-of-parking rule has an essential twin policy. Reinventing park-
ing. https://www.reinventingparking.org/2014/06/japans-proof-of-parking-rule-has.html. Last
Retrieved on March 01, 2020.
Berri, A. (2009). A cross-country comparison of household, car ownership: A cohort analysis. IATSS
Research, 33(2), 21–38.
Sorensen, A. (2005). The making of urban Japan: Cities and planning from Edo to the twenty first
century. Routledge.
destroyed by fire-bombing during the war were replaced in haste during the post-war economic
recovery resulting in not-so-pleasant looks. See Sorensen (2005).
Chapter 2
Why Cities Exist?
Abstract We argue cities exist are the result of economics forces of agglomeration
mediated by technological progress. That is, urban growth is fuelled by economi-
cally advantageous division of labour. Available technology is the most important
constraint to city growth. However, other factors such as political stability, peace and
the control of plagues are also important.
Keywords Division of labour · Specialisation · Trade · Agglomeration
Humans become settled in a particular place as a result of the Neolithic revolution.

That is, the discovery of agriculture and husbandry, which tie people to the land.
Initially a group of humans with family ties would settle in a piece of land and work
together to produce enough food for the clan. In some places, such as particularly
fertile plain of Mesopotamia and the Nile valley, agriculture is especially productive.1
There, a relatively small group of farmers was able to produce enough food for
many people, much more than was needed for themselves and their families. Surplus
appeared, so it was no longer necessary for the entire workforce to toil the land.
So, some people will specialise in farming, but others can now focus on different
occupations and thus become full time builders, craftsmen, soldiers, priests or artists.
This division of labour encourages specialisation. Specialists will produce goods or
services they don’t need for themselves and trade with other specialists. Because of
trade everyone can now be better off than in autarchy, a situation in which people
only produce for themselves. Another interesting feature of production technologies
is that often specialists can produce better and more when they are next to each other
and, critically, also when they are close to people interested in their trades. That is,
close to the market. Those are the forces fuelling the process of agglomeration. Cities
are an economic consequence of specialisation, trade and agglomeration.
Therefore, cities would thrive as much as they can, sustain their population and
attract new dwellers, brought both by the economic opportunity and the fascination
by the plethora of opportunities the city provides. That is, not the variety of goods
provided but also a diverse, large population who may be willing to try new and
1 Most of our historical claims are standard and can be checked in any universal history manual, see
for instance Gombrich (2005) for a fairly comprehensive world history up to the twentieth century.
https://doi.org/10.1007/978-981-15-5741-5_2
6 2 Why Cities Exist?
different things. Architects, artists and professors come to the city because that’s
where their abilities are appreciated and paid for. All the wonders the city has to
offer, its arcades and plazas, its culture, its sophisticated food and theatre cannot
exist if architects, artists and professors, chefs and actors are not paid. If their job is
better in Melbourne, they might just leave Sydney.
Another important fact about cities is that they cannot be taken for granted. For
instance, they came next to disappearing in Western Europe at the time of the bar-
barian invasions. That happened not only because cities where directly attacked and
sacked by invaders but also because, once the authority of the Roman Empire of
the West collapsed, nothing could keep slaves working the fields thus agricultural
surplus disappeared. War and bandits cut trade routes. People had no option but to go
back to the fields to avoid starvation. Without cities, art and culture soon stagnated
in Western Europe, but flourished in the East where law and order still prevailed. For
several centuries to come, Byzantium was the new Rome.
Technology has a big role in increasing the productivity of agriculture and there-
fore causing migrations to cities. The iron Roman plough created an empire. The
steel plough of the early XIX century pushed again masses of workers from the fields
to the factories. The green revolution epitomised by tractors, chemical fertilisers and
insecticide finished the job in the XX century. It is worth noting that many of those
migrants were not only attracted by the opportunity the city had to offer but somehow
expelled from their traditional occupations in the fields. Many were escaping poverty
but ended up in a poor city slum.
Reference
Gombrich, E. H. (2005). A little history of the world. Yale University Press.

Chapter 3
Cities Are More Important Than Ever
Abstract We show how, contrary to predications made in the twentieth century,

the advances of transportation and information technology have not slowed down
the forces of agglomeration. On the contrary, because of the increased human and
physical capital accumulation plus the availability of desirable goods and opportu-
nities, city growth has been accelerating. The world is going through a gradual but
seemingly unstoppable process of urbanisation.
Keywords Economies of scale · Capital accumulation · Contemporary

urbanisation
Not that long ago many scholars have expressed doubts and hopes about the future
of the city. Telecommunication technology and motorisation were seen by most as
ways to stop the forces of agglomeration and allow humans to go back to live close
to nature. Congested, polluted cities were hoped to be a thing of the past by the
twenty-first century. Those hopes have been dashed. A recent study shows1 how
cities of different eras aren’t as different as we might think. Modern settlements
grow similarly to their ancient counterparts. In particular, city growth in all ages is
characterised by productivity increasing faster than population. The city is a source of
economies of scale.2 By and large, the economic success of the city is the main driver
of population growth and urbanisation. Note that the phrase “economic success”
has to be understood in a wide sense. On one hand cities are a good place for
production given the economies of scale fuelled by specialisation, but critically and
often overlooked, cities are also a good place for consumption as they offer a plethora
of varied goods, services and other opportunities3 not available elsewhere. That
explains why not everyone moves to Dubai, which offers excellent salaries (related
1 Ortman et al. (2015).

2 That is productivity, or output per worker, increases with the scale of production, see for instance
Nicholson and Snyder (2015) for a simple yet accurate explanation of most of the microeconomic
terms used in this book.
3 Basically, related to cities being full of people you don’t know yet and thus, as a Chicago School
economist would put it, enhancing the “choice set” in many realms, i.e. sexual partners.
https://doi.org/10.1007/978-981-15-5741-5_3
8 3 Cities Are More Important Than Ever
to production), but comes with serious shortcomings in terms of goods, services and
other opportunities on offer.4
The forces of specialisation and agglomeration are nowadays stronger than ever
before. As a result, population is concentrating in cities faster than at any time in
human history, Ritchie and Roser (2018). The world is going through a gradual but
seemingly unstoppable process of urbanisation. If by the beginning of the twentieth
century about 15% of the world population lived in cities, this proportion increased
to 50% in 2007. The accelerated shift of population from rural to urban areas has
also been accompanied by a very strong population and economic growth. World
population went from 1.6 billion in 1900 to 6 billion in 1999.5 All in all, urban
population went from about 250 million at the beginning of the twentieth century
to 3 billion at the end of the century. That’s a 12-fold increase or a 1100% increase
in percentage terms. Urbanisation and population growth are a staggering, unprece-
dented phenomena in human history. Both processes are a result of technological
and cultural changes that, starting in the mid-eighteenth century, gave birth to the
very efficient although still evolving form of production known as capitalism. That
is a mode of production characterised by capital accumulation. In the pursue of ever
higher profits, current profits are invested to expand the production capabilities by
purchasing new and/or better machines (capital) or more sophisticated and efficient
ways of combining capital with labour.6 Indeed, for good and bad, this is main force
behind our thriving, growing cities.
One fact common to all contemporary cities is the huge impact motorisation has
in its organisation. Humans now mostly live in cities, but most of the newer ones
have been built to move around in cars. The older ones had to accommodate to the
new technology. Far from being back to nature humans now live in a tar and steel
jungle where the rich can afford a lawn and a pool as, maybe, a poor substitute of a
meadow and a river of clear waters. Many people rub bumpers rather than shoulders.
The rush hour is still alive and well.
4 That is, if you don’t quite like golden taps and air-conditioned beaches.
5 This fast increase in population was much unexpected by the average person in the mid-twentieth
century. For instance, in the 1940 s Isaac Asimov assumes fairly low overall populations in his
futuristic science fiction novels, see Asimov (2004).
6 Note that capital accumulation is not unique to countries commonly known as capitalists. Both
capital accumulation and technological progress were indeed at the core of the planned economies in
so-called socialist countries. The essential difference lies in that most of the investment is decided
centrally in a planned economy rather than decided by privately owned companies in a not-so-
planned economy. Public infrastructure and public goods are still provided by the state even in the
most capitalist economies. The urban governance problem, particularly related to the city, lies on
what infrastructure to build and which public goods to provide for the city in order to reach which
goals. These problems will be discussed in more detail later on in the book.
References 9
References
Asimov, I. (2004). I, robot. Spectra.

Nicholson, W., & Snyder, C. M. (2015). Intermediate microeconomics and its application, twelfth
edition. Cengage.
Ortman, S. G., Cabaniss, A. H., Sturm, J. O., & Bettencourt, L. M. (2015). Settlement scaling and
increasing returns in an ancient society. Science Advances, 1(1), e1400066.
Ritchie, H., & Roser, M. (2018). Urbanization. Our World in Data.
Chapter 4
Public Goods, Externalities and the City
Abstract We explain the concept of public goods as understood in economics. That

is, non-rivalrous and non-excludable goods as opposed to rivalrous and excludable
private goods. We also explain the concept of externality as the effect on society as
a whole. We show how markets cannot effectively provide neither public goods nor
goods that involve externalities. We argue that cities, as a tangle of public goods and
externalities, need effective governance and thus regulation.
Keywords Public goods · Externalities · Non-market provision
As normally understood public goods are commodities or services provided without

profit, even for free or a nominal fee usually by the government or by a private
organisation on behalf of the government.
We will use in this book a somehow more sophisticated definition of public goods
borrowed from economics. Public goods are thus characterised as being both non-
excludable and non-rivalrous, see Nicholson and Snyder (2015). A good is non-
excludable when it is not possible to prevent people who did not pay from having
it. Streetlights are clearly non-excludable; anyone walking down the street at night
may enjoy them. The safety provided by a well-functioning police force is also non-
excludable. A good is non-rivalrous if it can be used by more than one person at
the same time in a way such that consumption from one individual does not detract
from the enjoyment of other individuals. Streetlights are also non-rivalrous, they can
be enjoyed by many people at the same time. Again, the same can be said about
the safety provided by a well-functioning police force.1 Note, however, that when
a constant number of policemen need to look after an increasingly large group of
people safety can be compromised. The good becomes saturated, rivalry comes into
place and we don’t have a public good anymore.
1 In
fact, the legal system as a whole is a public good. Without a legal system the enforcement of
property rights would be impossible. The mere existence of markets therefore relies on a public
good that must be provided by the government. This fact is as essential as overlooked.
https://doi.org/10.1007/978-981-15-5741-5_4
12 4 Public Goods, Externalities and the City
Private goods, such as pears and laptops, are obviously both excludable and rival-
rous. Goods that are non-excludable and rivalrous, such as a public good that became
saturated, are called “common pool resources”, i.e. fish stocks in the oceans. Finally,
some goods are excludable and non-rivalrous like a movie shown in a cinema. Those
are, by the way, called “club goods” in economics. For instance, a non-toll unsat-
urated road can be understood as a public good. Once it becomes saturated it is a
common-pool resource.
Now it is useful to argue that non-excludable goods are unlikely to be provided by
a for-profit private entity. For instance, if a fireworks show can be seen from people’s
balconies, not many people would be willing to pay for it. Even if most people who
like fireworks were willing to pay $10 for a show, many (or most) could not be
compelled to do so. Therefore, a private fireworks show would not happen because it
is unlikely to be a good business. That is, free markets will not provide public goods.
Free markets are also bad at exploiting common-pool resources.2 Club goods can be
efficiently provided by the market under certain conditions too technical to discuss
here.
A concept close to public goods is that of externalities. A positive externality
arises when something someone affects positively somebody else who does not pay
for it. That is, a $1000 firework show payed for by a rich die-hard fireworks enthusiast
entails a positive externality for everyone else who enjoys it but does not pay for it.
Die-hard rick fireworks enthusiasts, willing to foot the bill all by themselves, are a rare
species so fireworks are most of time payed by the city government and ultimately
funded by taxes.
Negative externalities can be thought to be linked to public bads, that is non-
rivalrous and non-excludable things everyone dislikes.3 For instance, something
someone does for private profit negatively affecting other people who did not pay
for it. That could be the case, for instance, of driving in a congested road. More to
the point, driving to work produces a private benefit and several negative external-
ities. Pollution and congestion are the two most obvious. We will argue afterwards
that planning rules that encourage or impose car dependency in a large urban area
generates other, perhaps more pervasive, negative externalities in terms of land use
and city form. Also, it is very important to understand that free markets are not a
good way of dealing with externalities. As with public goods, a perfectly competitive
industries will produce too much of a negative externality and too little of a positive
externality.
Finally, note that public goods and externalities need to be considered relative to
location. For instance, CO2 emissions entail a global negative externality in terms
of climate change. On the other extreme, local planners may put limits to low socio-
economic families to settle in their municipality as those would bring a negative
2 For instance, an unregulated, perfectly competitive fishing industry would result in depletion of
the fish stocks, see Nicholson and Snyder (2015).
3 Note that something can be a good for some and a bad for others. Fireworks are a good example.
4 Public Goods, Externalities and the City 13
externality in terms of lowering real estate values, decreasing the quality and increas-
ing the cost of public goods provided locally etc. Similarly, Euclidean zoning4 limits
density and imposes single use zones to ameliorate the negative externality caused
by traffic in residential areas. We will argue that these forms of planning, while being
locally effective have a negative regional or nationwide effect. That is, forcing the
poor to live next to the other poor creates huge negative externalities in terms edu-
cation and crime outcomes that affect the city, region or nation as a whole. Limiting
density and separating zones by use has the effect of increasing overall traffic and
congestion. It just pushes it away from particular, often affluent, residential areas.
We have argued that cities are growing fast because of their increased capacity
to produce wealth. That is now mostly happening in the form of highly valuable
services. Cities, however, entail a huge tangle of non-private goods (public, common
pool and club) and a variety of positive and negative externalities that must be dealt
with by government intervention, provision or regulation.5 For instance, public space
generates several public goods at the same time. Architects and city planners need
to be well aware of how the design of the city affects in a positive or negative way
the provision of those goods.
It is also useful to differentiate between a public good and the public good. The
former is a non-excludable, non-rivalrous good and the latter what is good, in the
sense of positive, for the public in general. It could be said that public goods are
provided for the public good, the benefit of the public. And that should indeed be the
goal of government: nothing else other than the public good.
References
Fluck, T. A. (1986). Euclid v. Ambler: A retrospective. Journal of the American Planning

Association, 52(3), 326–337.
edition. Cengage.
4 Euclidian zoning, Fluck (1986), will be explained in detail in Chap. 8.

5 Some economic thinking suggests that the cost of market failure due to public goods, externalities
etc. is actually lower than the cost of government failure. That is the cost imposed on society in
terms of taxes, lobbying, corruption and so on. Notwithstanding government ought to be less than
perfect, we deeply disagree with this line of thought.
Chapter 5
Governing for the Public Good: The
Problem of City Governance
and Planning
Abstract We discuss the problem of city governance in general and with regards
to urban planning in particular. Although cities exist because of their capacity to
generate wealth, we do not believe that elected public officials should focus solely
on the maximisation of economic growth. Indeed, cities are not only centres of pro-
duction but also residence and consumption of private and public goods. Elected
official should then strive to maximise a social welfare outcome rather than a merely
monetary one. Any planning policy is a form of government intervention or regula-
tion. Given the complexity of interconnected public goods and externalities posed
by agglomeration, the need for regulation is unavoidable.
Keywords City governance · Public good · Urban planning · Regulation
We have argued that specialisation and trade foster agglomeration. Cities grow
because they are a hotbed of economic opportunity. Should city governance be
thus focused on the generation of wealth? Of course not, good governance is to
be focused on the public good, which is what economists call maximising social
welfare. Of course, that does not simply imply maximising the generation of wealth.
Politicians would ideally have some abstract and overarching goals, for instance
equality of opportunity, the provision of certain public goods, a certain degree of
redistribution of income and economic growth. Those goals would together generate
a particular social welfare outcome. Different political platforms would emphasise
different aspects in terms of social welfare. Some would insist on income distribu-
tion while others would support economic growth combined or not with universal
education as a mean to achieve equal opportunity as the ultimate goals of society. In
a democratic system people choose a political platform through voting to organise
society according to a particular set of principles, for a limited time.
A politician likely to become a planning minister should seek advice on how to
reflect their ideals in the planning portfolio. In the best-case scenario, the job of
such politician is to convince a majority of the electorate of the merits of a political
platform on planning. We are not saying that a politician should ignore any ideas
or suggestions coming from the public, but they should see how they fit with expert
advice and the political principles. For instance, if one asks the public about placing
https://doi.org/10.1007/978-981-15-5741-5_5
16 5 Governing for the Public Good: The Problem of City …
strong limitations on street parking, a vast majority would be initially against. A good
politician should be able to convince the public of the merits of such a proposal. This
book aims to provide good reasons for this and other policies concerning public
goods and externalities in the urban environment.
Any planning policy is a form of government intervention or regulation. Given
the complexity of interconnected public goods and externalities posed by agglom-
eration, the need for regulation is unavoidable. It is rather a question of which set
of rules are best suited to achieve a particular outcome that cannot be reached by
market forces alone.1 We will advocate for less, simpler, easier to enforce planning
controls. Curiously enough, planning in jurisdictions generally understood as more
pro-market and utterly neoliberal, such as the US and to a lesser extent the UK and
Australia, usually have more and more inflexible planning rules that require a lot of
micromanagement and generate boring, car-congested cities which may not even be
the best for wealth generation. However, there is nothing essentially pro-market in
the strict zoning regimes characteristic of most of the US. If anything, this planning
approach has more to do with a planned economy than with the free market. We find
that a fascinating and very interesting contradiction. This could be understood by
taking into account that the strict American planning regime tends to generate local
monopolies (and exclude the undesirable poor from high quality local public goods).
Indeed, in a low density, zoned environment there would be just one shop of one kind
in each neighbourhood. That’s even the case by design in shopping centres contrac-
tually limiting the number of shops of the same kind that are admissible under the
same roof. That’s far from a perfectly competitive market, but a regime that enacts
unsurmountable barriers to entry by making land unavailable to competitors. That
is, a free market, perhaps, but only for the incumbent and definitely not perfectly
competitive.2
Reference
edition. Cengage.
1 Market forces could help to achieve some outcomes if they are properly channelled by regulation.
2 Inmicroeconomic theory a perfectly competitive market achieves full efficiency in the absence of
market failures such as public goods or externalities. Perfect competition also needs to assume free
entry and exit of firms, Nicholson and Snyder (2015). That is, a free market may be far from perfectly
competitive. Sometimes governments intervene to push markets closer to perfect competition (i.e.
antitrust laws).
Chapter 6
Growth and Shape of the Pre-industrial
City
Abstract We analyse the growth and shape of the pre-industrial city as a result of
the transportation technology available before the mechanisation of transport. Such
city is constrained in size by walking speed. Because of the need of minimising
transportation time or cost it has, necessarily, one centre and is fairly dense. The
location of pre-industrial cities was also often determined by access to water-based
transportation. We point out to New York and Venice as two examples of cities
already preeminent before the mechanisation of transport. New York adapted to the
new technology, but that is not the case for Venice.
Keywords Pre-industrial growth · Transportation · Technology
We have so far discussed what to do, goals that are based on preferences or, in other
words, culture. What is possible to do is in the realm of technology.
For millennia, the growth and shape of cities has been constrained by the trans-
portation technology available.1 For a long time, nothing could move faster on land
than a horse. Most people run their errands by foot. If we think of commutes of up
to one hour2 as common, we obtain the maximum size of a walking-based city. The
outer suburbs cannot possibly be further than 3 km from the centre. For the same
reasons the old slow speed city would also need to be rather dense. Further than
that, the speed constraint results in a city with only one centre combining as many
functions as possible as travel between different centres would be too onerous in
terms of time.3
Transportation technology helps to explain not only the shape of old cities but
also their geographical location. For instance, prior to railways any sizeable city in
the US was located either on the coast or at a major inland waterway, as water-based
transport was at the time the cheapest and most efficient way to move freight around.
Many of those cities are still important, just think about New York, Philadelphia,
1 And of course, also by the building technologies available.

2 The so-called Marchetti’s constant: the total time spend in commuting is stable along history and
around the world and equal to one hour per day, Marchetti (1994).
3 Although the king may like to live in Versailles.
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18 6 Growth and Shape of the Pre-industrial City
Chicago or Boston. Being large and economically powerful they had the resources
to invest in adapting to new transportation technologies. The initial success of New
York City was based on Manhattan being an island between a river (the Hudson) and
sea channel (the East River). The Hudson offering excellent communication with
the hinterland. A huge amount of resources needed to be spent first on adapting the
city to rail transportation, access to motorways and air transportation. Some very old
cities were somehow easy to adapt to car usage. Rome, for instance, is full of cars,
and one of the most polluted and congested cities in Europe, but it is still a thriving
metropolis and the capital of Italy, the 8th largest economy in the world. In the same
country, we can think of Venice as an extreme case in failing to adapt to changing
technology. The success of the Venice Republic, a leading a trading empire that
dominated the east Mediterranean for centuries, was based on easy access to the sea.
However, the very reasons of Venice’s success were the seeds of decadence. Unlike
Manhattan, Venice is not one island, but a collection of swampy islets separated
by canals. Venice was largely unable to adapt to motorised land transport, not only
automobiles but also trams and railways. Some artists were able to see the problem
with clarity. The Italian Futurists, led by the poet Marinetti, were enraged by the
obsolescence of Venice and the general will to keep it as it was. They proposed to
dry up the canals and fill them up with the rubble taken from crumbling palazzi, the
Canal Grande should be dredged and widened to become a busy commercial port.4
The Futurists eventually got a little bit of what they wanted. The 3.8 km Ponte
Littorio causeway, opened by Mussolini in 1933 links Piazzale Roma to the mainland.
Nowadays Venice’s road and rail connections mostly bring in tourists rather than raw
materials or commuters. The same is true for Venice’s harbour, now dominated by
cruise ships. Venice has all but lost its past importance as a commercial, industrial
and cultural hub.5 Note that other metropolis on the sea faced, to a lesser extent a
similar challenge but were more or less successful to adapt to the new technological
conditions.
References
Marchetti, C. (1994). Anthropological invariants in travel behavior. Technological Forecasting and

Social Change, 47(1).
Rainey, L., Poggi, C., Wittman, L. (Eds.) (2009). Futurism: An anthology. Yale University Press.
4 Marinetti’s Futurist Speech to the Venetians can be found in Rainey et al. (2009).
5 Although Mestre and Marghera, across the Venice lagoon, are thriving industrial centres belonging
to the Venetian metropolitan area, Venice lacks a business centre and depends almost exclusively
on tourism for subsistence.
Chapter 7
The Raise of the Rail-Based Mechanical
City
[…] in New York, we speak within limits when we say that a lady
not unfrequently is compelled to wait half an hour” to cross the
street, “and even then she makes the crossing at any point below
the Park at her peril.
Harper’s New Monthly Magazine, Volume 9, 1854.
Abstract We study the effect of mechanised rail-based transport in the shape and
growth pattern of the city during the early Industrial Revolution. Often the railway
required substantial changes such as the demolition of parts or all the city walls.
However, the most enduring effect on city shape came from the use of railways and
tramways for transportation within the city and its suburbs. Although still having
one centre, this became larger and denser. On the other hand, residential commu-
nities accessible by rail grew around the city proper, London’s Metro Land being a
paradigmatic example. Nevertheless, people still needed to walk the last mile and
goods moved by horse carts determining the location of commerce and industry not
far or mixed with dense residential areas. Increasing congestion, a public bad and a
by-product of strong economic growth, could not be overcome until the adoption of
electric underground city railways.
Keywords Industrial revolution · Rail transportation · Technology · Congestion ·

Public bad
The industrial revolution brought mechanised manufacturing and transportation.

Railways and trams together with industry resulted in strong economic growth affect-
ing mostly the city. Initially railways were built to link inland cities with ports, provin-
cial cities with capitals and mines with factories. The railway station was located as
close as practical to the old administrative and commercial centre. Often the railway
required substantial changes such as the demolition of parts or all the city walls, in
any case rendered unpractical by the development of modern artillery. In any case,
the adoption of the new transport technology changed the shape of the city even in its
initial stages. Very soon it became clear that railways would not only be useful to link
cities with each other but to provide urban transportation. Soon after railways became
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20 7 The Raise of the Rail-Based Mechanical City
practical, short lines using steam trains with locomotives and carriages started to fan
out from inner city terminals in London and Paris.1
The new urban networks were shaped radially, linking the old centre to new areas
of expansion or nearby towns, such as Greenwich and Versailles, soon to be engorged
by the metropolis. Street running light railways known as trams or streetcars added a
cheaper option that could use the existing road system and reach many more places.
Trams and railways made possible a city much larger, both in physical size and
population, than what blood traction ever allowed for. At the same time, and thanks
to the industrial revolution also propelled by steam and the increased productivity of
agriculture2 , strong economic growth and immigration from the countryside made a
bigger city necessary. The city centre grew fast and became denser.3 Note that at this
point in time trams and railways allowed for faster, higher capacity transportation
but they both run on rails that are expensive to lay. Trains and trams run therefore
in a determined route and according to a timetable. The city can therefore expand
around stations and tram routes. Because railways originate near the old centre this
becomes bigger and stronger. The 19th century rail-based city has still one centre,
but outlying rail served residential suburbs are now possible.
In such a city people still need to walk the last mile to their occupations. Often
walking within the city centre may well be more efficient than using public transport.
However, freight has no legs. Goods still needed to be carried from stations to their
final destinations in carts. A central location is good for business, so with the help of
new construction techniques using steel beams city centres just became denser and
roads soon become too clogged with carts, pedestrians and horse or electric trams.
Large scale congestion appeared and came to any successful city to stay. Congestion
is inconvenient and causes delays. Nevertheless, the most important problem posed
by congestion is it does not allow the centre to grow any further and thus hinders
economic growth. It did not take long to find a way to pack more people and business
in the city centres. The solution was found in the extremely congested London: the
underground railways. The London Underground started from railway companies
1 The London and Greenwich Railway reaches the latter as early as 1838. In Paris, a railway between
what is today Gare Montparnasse to Versailles opened in 1840. Both railways were built and run
as short suburban lines. The LGR was eventually prolonged, but what became to be called “Ligne
des Invalides” never went pass Versailles and is today a branch of the commuter railway known as
RER C. Petit Ceinture to Auteuil.
2 See Kriedte (1983).
3 We are focusing on the effects of mechanised transport in the increase of productivity and city
growth. We should, however, acknowledge the great importance of sanitation in allowing for city
growth. The Cloaca Maxima in Rome was a massive underground sewer and one of the most critical
pieces of infrastructure in the antiquity. Similarly, fast growing cities in 19th century western Europe
had to solve the sanitation problem. Victor Considerant, a social reformer, wrote in 1845 “Paris
is an immense workshop of putrefaction, where misery, pestilence and sickness work in concert,
where sunlight and air rarely penetrate. Paris is a terrible place where plants shrivel and perish,
and where, of seven small infants, four die during the course of the year.” He was not the first,
according to Voltaire French cities were “established in narrow streets, showing off their filthiness,
spreading infection and causing continuing disorders.” Sanitation, however, is not a contentious
topic so we will not discuss it much further in this book.
7 The Raise of the Rail-Based Mechanical City 21
willing to connect their inner-city terminals in an efficient way. The concept of an

urban underground railway succeeded, and soon other companies started to build their
own lines. The electrification of those railways, which started again in London, and
in different ways also in Budapest and Boston, made them much more practical and
popular. Electrification also made possible to bore deeper, small diameter tunnels.4
Paris followed suit, but unlike London, from the very beginning the city wanted a
comprehensive network to cover the whole city. That was opposed by the French
government, which wanted an urban railway capable of carrying main line trains, so
a standard track gauge was imposed. The city circumvented this ruling by choosing
small tunnels, unsuitable for main line trains. Curiously a similar dispute took place
in Vienna at pretty much the same time. In that case the government and the military
imposed steam traction in the newly built Stadtbahn network.5
In any case, urban underground railways allowed for higher population and busi-
ness density in the city centres. Around the same time tramlines were also electrified.6
An explosion of tram and rail-based suburbs appeared around the city. They promised
comfortable accommodation in detached or semi-detached houses for the middle and
upper-middle classes. Tram based suburbs were located relatively close to the city
centre and sometimes were absorbed by it. Commuter rail towns where built along
train lines, surrounding older villages and towns. Many examples can be found in
the so-called home counties surrounding London. Some early garden cities started
as rail-based towns in which people would walk to the station to catch a train to
London. Although garden city theoreticians sought to build self-sustaining commu-
nities providing most of the employment locally that did not quite work as planned.
For instance, Letchworth was conveniently placed on the Great Northern Railway at
about 55 km from London King’s Cross station. Sometimes railway companies also
owned and developed the land around railway stations. That is the case of the Lon-
don Metropolitan Railway’s suburban development to the North of London known
as Metro-land. This is an exception rather than the norm in the United Kingdom.
Indeed, unlike other British private railways the Metropolitan Railway was allowed
to retain surplus land, that is, land required for building the rail line but not necessary
for the operation of the railway. This land was managed by the nominally indepen-
dent Metropolitan Railway Country Estates Limited (MRCE), although effectively
controlled by the Met’s directors. Metro-land was the brand with which the MRCE
promoted the dream of a modern home surrounded by beautiful countryside and
linked to London by fast electric trains (see Fig. 7.1). The Metropolitan Railway
morphed into the Metropolitan Line of the London Underground. Metro-land, a
string of suburbs in Buckinghamshire, Hertfordshire and Middlesex, is a desirable
4 To this day the London Underground consists of relatively wide subsurface tunnels built originally
for steam trains (i.e. the Circle, District and Metropolitan lines) and the deep tube lines used by
trains with a distinctively small cross-section (loading gauge in railway lingo).
5 The Wiener Stadtbahn was eventually rebuilt and electrified in the 1920s and evolved to be
integrated either in the Vienna Metro or the commuter rail S-Bahn.

6 The first practical tramway electrification designed and executed by Frank Sprague’s firm for the
Richmond Union Passenger Railway in Richmond, Virginia. Boston, Massachusetts and many other
cities across North America and Europe followed suit.
Fig. 7.1 Metro-land promotional poster. Source Wikipedia

7 The Raise of the Rail-Based Mechanical City 23
Fig. 7.2 Pinner high street, from Wikimedia commons
and expensive place to live that has long shaken off its aspirational hue and grew
some patina. It still takes just 25 min from Pinner (Fig. 7.2) to Baker Street, try to
beat that by car in London. Trains depart every 6 min.
The Pacific Electric system from Los Angeles, the famous Red Cars,7 was built to
serve suburbs along the line. There was even less doubt in this case of the connection
between the owners of the Pacific Electric, Henry Huntington and the Southern Pacific
Railroad, and the real estate business. The Red Cars were indeed run at a loss for
most of the time and used to serve the needs of newly developed suburbs built along
the lines. Unlike London’s Metropolitan Railway, most of the Pacific Electric tracks
were often embedded on roads, so the Red Cars became to be seen as a nuisance
for motorists as soon as car ownership became common in the 1920s. That, together
with the unprofitability of the business rushed its complete closure in the 1950s.
7 The Yellow Cars of the Los Angeles Railway covered the inner city and moved many more people
than the Red Cars, but they are far less famous. Actually, despite all the hype, the Pacific Electric
patronage was rather underwhelming and always below that of the Yellow Cars, see Stargel and
Stargel (2009). The busiest line of the Pacific Electric, the Sawtelle to Santa Monica, moved a bit
over 2.5 million passengers in 1929, its best year.
Development models similar to Metro-land also came to existence in Japan during

the first half of the 20th century, initially by private railways in the Kansai area
comprising Osaka, Kyoto and Kobe. The trunk railway lines in Japan were mostly
built by private companies during the second half of the 19th century. The Japanese
government, in an attempt to speed up railway construction, nationalised the trunk
intercity railways in 1906, Ike (1955). That left private companies almost out of
business. Only local lines, many times little more than modest tram lines8 linking
small towns in the countryside with a city, were not nationalised. Private companies
were also allowed to newly build railways of lesser importance. Among those there
were the Hanshin main line, the very first Japanese interurban line, and the Minoo
Arima Electric Railway which soon became the Hankyu railway. Ichizo Kobayachi,
Hankyu’s owner, had to compete with both the National Railway and the Hanshin
line for the Osaka to Kobe market. Being the newcomer Hankyu could only be built
in the hilly, less populated areas to the north. Land there, however, was relatively
cheap so Kobayachi invested in real estate. Like before in London, the 1920s Kansai
middle class salaryman could now move to a relatively large, for Japanese standards,
comfortable and reasonably priced house near the countryside. Hankyu made money
by selling those houses, which payed for the construction of the railway. Every time
a house was occupied there was a family of new customers using the railway for
commuting and shopping, see Doi and Kawaushi (1995). That payed for the day to
day cost of the railway and allowed, and in a sharp contrast with the long-gone Pacific
Electric still allows to this day, Hankyu to be run at a profit. To keep business up,
Hankyu opened a theatre at one end of a branch line, in Takarazuka, and a department
store near Osaka-Namba terminus.
This model of suburban development was followed by many other private railways
in many Japanese cities, like the Tokyu in the Kanto area or the Meitetsu in Nagoya.
To this day many Japanese department store chains are still own by private railway
companies with their flagship store next to the city terminal. Japanese private railways
are among the largest and most prestigious companies in the country. They usually
lead a group of companies comprising a variety of businesses.
References
Doi, T., & Kawauchi, A. (1995). A historical viewpoints of image formation of the suburb developed
by Hankyu railway. Historical Studies in Civil Engineering, 15, 1–13.
Ike, N. (1955). The pattern of railway development in Japan. The Journal of Asian Studies, 14(2),
217–229.
8 These electric railways were known as “interurbans” in the US. They served not-so-densely pop-
ulated areas around cities or linked rural communities with main line railway lines. Interurbans
used the electrification technology of trams, but interurban cars or trains were heavier and faster.
Interurban cars usually shared tram tracks to reach the city centre. They mostly disappeared in the
US after motorisation. The South Shore Line is one of a few surviving American interurbans. The
already mentioned Pacific Electric railway run an extensive interurban network around Los Angeles
until its demise in the 1950s.
Another random document with
no related content on Scribd:
Vanderbilt told the Hepburn Committee, August 27, 1879, that “if
the thing kept on the oil people would own the roads.”
After the Pennsylvania fought the Standard in 1877 and lost, the
Combine paid 11 cents net freight (after deducting rebate) on each
barrel of oil to New York, while its competitors paid $1.90 per barrel,
[24]
—a discrimination of 1600 percent by means of exclusive tank cars
and rate arrangements. The trunk lines would not furnish
competitors of the Standard with tank cars nor give them rates and
conditions that would allow them to use their own tank cars.
The independents had to sell their tank cars or side-track them,
because the Oil Combine prevented the railroads from giving them
practical terms. At times when oil could have been shipped by the
independents they could not get cars, though hundreds were
standing idle on the switches.
So the independents had to ship their oil in barrels, paying a
higher rate than on tank oil, and paying not only on the oil, but on
eighty lbs. of wood in the barrel, making four hundred lbs. per barrel
instead of three hundred twenty lbs. per barrel by tank.
Josiah Lombard of New York, the largest independent refiner of oil
at the seaboard, testified as follows before the Hepburn Committee
June 23, 1879:
“Tom Scott, President of the Pennsylvania Railroad Co., was
questioned whether we could have, if there was any means by which
we could have, the same rate of freight as other shippers got, and he
said flatly, ‘No.’
“And we asked him then, if we shipped the same amount of oil as
the Standard, and he said, ‘No.’
“We said that ‘if they had not sufficient cars to do the business
with we would put on the cars.’
“Mr. Scott said that they would not allow that, and said that ‘the
Standard Oil Co. were the only parties that could keep peace among
the roads.’”
Cassatt, Vice-President, confirms the above and adds:
“The discrimination would be larger on a high rate of freight than a
low rate of freight;” also admits that the “Standard Oil Co. had some
500 cars full here and at Philadelphia and Baltimore; that he had not
discovered it until recently.”
Mr. Lombard further testified:
“Refineries were thus shut down for want of cars.
“Cassatt threatened, if the independents built the Equitable Pipe
Line or any other lines of pipe [as follows]:
“‘Well, you may lay all the pipe lines you like, and we will buy them
up for old iron.’
“R. C. Vilas, General Freight Agent of the Erie (and brother of Geo.
H. Vilas, Auditor of the Standard Oil Co.), absolutely refused us cars,
saying the Standard Oil Co. had engaged them all.
“J. H. Rutter, General Freight Agent, New York Central, would not
furnish any cars, and also said, ‘We have no terminal facilities now.’”
A. J. Cassatt testified before the New York Committee that in 18
months the Standard Oil had received rebates amounting to
$10,000,000.
In addition to many other advantages enjoyed by the Standard
people the Pennsylvania Railroad in 1878 gave the Combine, through
the “American Transfer Co.,” a “commission” of 20 cents a barrel on
all shipments of petroleum,—not only on their own shipments, but
on shipments made by the independents also. At the same time the
New York Central and the Erie were paying the Standard
“commissions” of 20 to 35 cents a barrel on all the oil shipped over
those roads.
At one time the transcontinental lines charged $105 to return an
empty “cylinder” tank car from the Pacific Coast to the Missouri
River, while making no charge to the Standard for returning their
“box” tank cars, each of which contained a cylinder, which, however,
was set upright instead of being placed longitudinally; a distinction
without a difference, but it served to make a discrimination of over
$100 a car in favor of the Trust.
The railroads allowed the Oil Trust to stop its cars and divide up a
tank load at two or more stations, but denied this privilege to the
competitors of the Trust.
The Hepburn Committee reported (1879) that “the Standard Oil
Co. receives rebates from the trunk lines, ranging from 40 cents to
$3.07 a barrel on all oil shipments: That the trunk lines sell their oil-
tank car equipments to the Standard and agree to build no more:
That the Standard controls the terminal facilities for handling oil of
the four trunk lines by purchase or lease from the railroads: That it
has frozen out and gathered in refineries of oil all over the country:
That it dictates terms and rates to the railroads: That the trunk lines
have hauled its oil 300 miles for nothing to enable it to undersell
seaboard refineries not then under its control: That it has succeeded
in practically monopolizing the oil business: That the transactions of
the Standard are of such character that its officers have been
indicted, and that its members decline under oath to give details lest
their testimony should be used to convict them of crime.”[25]
The oily people were able in one way or another to gain
ascendency over all the railroads. “We made our first contract with
the Standard Oil Company,” said Mr. Cassatt, “for the reason that we
found that they were getting very strong, and they had the backing of
the other roads, and, if we wanted to retain our full share of the
business and get fair rates on it, it would be necessary to make
arrangements to protect ourselves.”
The Combine used the railroads to ruin its rivals, and did it with a
definiteness and vigor of attack never before attempted, and with a
success that would have been impossible without the use of the
railroad power. An example or two will make the matter clear.
Mr. Corrigan, an oil refiner of Cleveland, became so prosperous in
the seventies that he attracted the attention of the Standard Oil, and
in 1877 he began to have trouble. He could not get the crude oil he
bought shipped to Cleveland, nor his product shipped away, with
reasonable promptness. The railroads refused him cars, and delayed
his shipments after they were loaded. And he was driven to lease and
finally sell his works to the Standard, which had no difficulty in
getting cars and securing prompt service.
George Rice became a producer of oil in 1865. A little later he
established a refinery at Marietta, Ohio. In January, 1879, the freight
rates on oil were raised by the railroads leading out of Marietta, and
by their connections. In some cases the rates were doubled, while the
rates from Cleveland, Pittsburg, Wheeling, and other points where
the Combine had refineries, were lowered. The Baltimore & Ohio, the
Pennsylvania, the Lake Shore, and all the other railroads involved,
made the deal in unison, and after a secret conference of railway
officials with the Standard Oil people. The change hurt the railroads,
cut off their business in oil from Marietta entirely, but they obeyed
the orders of the Standard nevertheless.
“What would be the inducement?” the freight agent of the B. & O.
connection was asked.
“That is a matter I am not competent to answer,” he replied.[26]
Rice, finding himself shut off from the West, North, and East,
developed new business in the South, but everywhere he went he was
met with new discriminations, and even refusals in some cases to
give him any rates at all. He could not ship to certain points at any
price. In other cases the oil rates were jumped up for his benefit, and
his cars were delayed or side-tracked by the railroads. Not satisfied
with obstructing and in large part blocking the shipment of refined
oil out of Marietta, the Combine did all it could to cut off Rice’s
supply of crude oil from the wells. It bought up and destroyed the
little pipe line through which he was getting most of his oil. Rice then
turned to the Ohio fields and brought his oil in by rail over the
Cleveland and Marietta Railroad. Under threat of withdrawing its
patronage the Combine then compelled the road to double the rates
to Rice and pay over to the Combine five-sevenths of all the freight
the road collected on oil. Rice had been paying 17 cents a barrel from
the oil fields to his refinery. His rate went up to 35 cents while the
Combine paid only 10 and got 25 cents of each 35 paid by Rice.[27]
“Illegal and inexcusable abuse,” said Judge Baxter when Rice took
the case into court; and the Senate Committee was also emphatic in
its condemnation. The case is in line with the whole history of the
railroads in their relations with the Oil Combine, the remarkable fact
in this instance being that the victim had nerve enough to fight the
Combine. He took the facts to the Ohio Legislature, to the courts, to
investigating committees of New York, and Congress, and rendered a
great public service by bringing the ways of the railroads and the
trust to the light of publicity. If all the victims of the Oil Combine had
manifested equal pluck and public spirit, the evil we are discussing
would long since have ceased to exist.[28]
CHAPTER VI.
THE SENATE INVESTIGATION OF 1885 AND
THE INTERSTATE COMMERCE ACT.
In 1885 the United States Senate appointed a committee to

investigate railway discriminations, etc., and this committee made
one of the ablest reports that has ever been issued in relation to
railway abuses. It threw a flood of light upon the nature and
prevalence of discrimination, and the reasons for it. On page 7 of this
report the committee says that our efficient service and low rates
(low average rates) “have been attained at the cost of the most
unwarranted discriminations, and its effect has been to build up the
strong at the expense of the weak, to give the large dealer an
advantage over the small trader, to make capital count for more than
individual credit and enterprise, to concentrate business at great
commercial centres, to necessitate combinations and aggregations of
capital, to foster monopoly, to encourage the growth and extend the
influence of corporate power, and to throw the control of the
commerce of the country more and more into the hands of the few.”
On page 40 the committee says: “Railroad companies are not
disposed to regard themselves ‘as holding a public office and bound
to the public,’ as expressed in the ancient law. They do not deal with
all citizens alike. They discriminate between persons and between
places, and the States and Congress are consequently called on to in
some way enforce the plain principles of the common law for the
protection of the people against the unlawful conduct of common
carriers in carrying on the commerce of the country.”
On page 188 the following example is given: “One reference to the
testimony must suffice to illustrate the universality of individual
favoritism, the reasons which influence the railroads in favoring one
shipper to the ruin of another, and the injustice of the system. Mr. C.
M. Wicker of Chicago, a former railroad official of many years’
experience, was asked if he knew anything of discrimination upon
the part of the transportation companies as between individuals or
localities, and testified as follows:
“Mr. Wicker. Yes; I do. And this discrimination, by reason of
rebates, is a part of the present railroad system. I do not believe the
present railroad system could be conducted without it. Roads coming
into this field to-day and undertaking to do business on a legitimate
basis of billing the property at the agreed rates would simply result in
getting no business in a short time.
“Senator Harris. Then, regardless of the popularly understood
schedule rates, practically it is a matter of underbidding for business
by way of rebates?
“Mr. Wicker. Yes, sir; worse than that. It is individual favoritism,
the building up of one party to the detriment of the other. I will
illustrate. I have been doing it myself for years and had to do it.
“Senator Harris. Doing it for yourself in your position?
“Mr. Wicker. I am speaking now of when I was a railroad man.
Here is quite a grain point in Iowa, where there are 5 or 6 elevators.
As a railroad man I would try and hold all these dealers on a “level
keel” and give them all the same tariff rate. But suppose there was a
road of 5 or 6 or 8 miles across the country, and these dealers should
begin to drop in on me every day or two and tell me that the road
across the country was reaching within a mile or two of our station
and drawing to itself all the grain. You might say that it would be the
just and right thing to do to give all the 5 or 6 dealers at this station a
special rate to meet that competition through the country. But as a
railroad man I can accomplish the purpose better by picking out one
good, smart, live man, and giving him a concession of 3 or 4 cents a
hundred, let him go there and scoop the business. I would get the
tonnage, and that is what I want. But if I give it to the five, it is
known in a very short time.... When you take in these people at the
station on a private rebate you might as well make it public and lose
what you intend to accomplish. You can take hold of one man and
build him up at the expense of the others, and the railroad will get
the tonnage.
“Senator Harris. The effect is to build the one man up and
destroy the others?
“Mr. Wicker. Yes, sir; but it accomplishes the purposes of the
road better than to build up the 6.
“Senator Harris. And the road, in seeking its own preservation,
has resorted to that method of concentrating the business into the
hands of one or a few, to the destruction of the many?
“Mr. Wicker. Yes, sir; and that is a part and parcel of the system.”
On page 189 the committee says:
“The practice prevails so generally that it has come to be
understood among business men that the published tariffs are made
for the smaller shippers, and those unsophisticated enough to pay
the established rates; that those who can control the largest amounts
of business will be allowed the lowest rates; that those who, even
without this advantage, can get on ‘the inside,’ through the
friendship of the officials or by any other means, can at least secure
valuable concessions; and that the most advantageous rates are to be
obtained only through personal influence or favoritism, or by
persistent ‘bulldozing.’
“It is in evidence that this state of affairs is far from satisfactory,
even to those specially favored, who can never be certain that their
competitors do not, or at any time may not, receive even better terms
than themselves. Not a few large shippers who admitted that they
were receiving favorable concessions testified that they would gladly
surrender the special advantages they enjoyed if only the rates could
be made public and alike to all.”
Again, on page 191:
“Universal complaint has been made to the committee as to the
discriminations commonly practised against places, and as to the
conspicuous discrepancies between what are usually termed ‘local’
rates and what are known as ‘through’ rates.”
In summing up the testimony on pages 180–182 of their report,
the committee presents this tremendous indictment:
“The complaints against the railroad systems of the United States
expressed to the committee are based upon the following charges:
“1. That local rates are unreasonably high, compared with through
rates.
“2. That both local and through rates are unreasonably high at
non-competing points, either from absence of competition or in
consequence of pooling agreements that restrict its operation.
“3. That rates are established without apparent regard to the actual
cost of the service performed, and are based largely on what the
traffic will bear.
“4. That unjustifiable discriminations are constantly made
between individuals, in the rates charged for like service under
similar circumstances.
“5. That improper discriminations are made between articles of
freight and branches of business of a like character, and between
different quantities of the same class of freight.
“6. That unreasonable discriminations are made between localities
similarly situated.
“7. That the effect of the prevailing policy of railroad management
is, by an elaborate system of special secret rates, rebates, drawbacks,
and concessions, to foster monopoly, to enrich favored shippers, and
to prevent free competition in many lines of trade in which the item
of transportation is an important factor.
“8. That such favoritism and secrecy introduce an element of
uncertainty into legitimate business that greatly retards the
development of our industries and commerce.
“9. That the secret cutting of rates and the sudden fluctuations that
constantly take place are demoralizing to all business except that of a
purely speculative character, and frequently occasion great injustice
and heavy losses.
“14. That the differences in the classifications in use in various

parts of the country, and sometimes for shipments over the same
roads in different directions are a fruitful source of
misunderstandings, and are often made a means of extortion.
“15. That a privileged class is created by the granting of passes, and
that the cost of the passenger service is largely increased by the
extent of this abuse.
“16. That the capitalization and bonded indebtedness of the roads
largely exceed the actual cost of their construction or their present
value, and that unreasonable rates are charged in the effort to pay
dividends on watered stock, and interest on bonds improperly
issued.
“18. That the management of the railroad business is extravagant

and wasteful, and that a needless tax is imposed upon the shipping
and travelling public by the unnecessary expenditure of large sums in
the maintenance of a costly force of agents engaged in the reckless
strife for competitive business.”
The result of this investigation and report was the passage of the
Interstate Commerce Act, in 1887, affirming the common law rule
that carriers’ charges must be reasonable and impartial. Common
carriers are forbidden to give “any undue or unreasonable preference
or advantage to any person, locality, or description of traffic in any
respect whatever, or subject any person, locality or description of
traffic to any undue or unreasonable disadvantage in any respect
whatsoever.” “No common carrier” says Section 2, “shall directly or
indirectly, by special rate, rebate, drawback, or other device, charge
or receive from any person greater or less compensation for any
service in the transportation of passengers or property than it
charges or receives from others for a like and contemporaneous
service under substantially similar circumstances and conditions.”
Section 4 makes it “unlawful to receive more for a shorter than for a
longer distance, including the shorter on the same line, in the same
direction, under substantially similar circumstances and conditions,”
except where the Commission created by the Act shall authorize the
carrier to charge less for the longer than for the shorter distance.
Rates must be published and filed with the Commission, and 10 days’
notice must be given of advances. Any deviation from the published
tariff is unlawful. The Act excepted traffic “wholly within one State,”
and provided that property might be handled free or at reduced rates
for the United States, State, or municipal governments, or for
charitable or exhibition purposes; that preachers might have reduced
rates, and that passes might be given to employees of the road or by
exchange to employees of other roads. The penalty for breach of the
law was made a fine not exceeding $5000 for each offence, and
victims of discrimination, etc., could collect damages.
CHAPTER VII.
THE INTERSTATE COMMISSION.
A strong Commission was appointed, the Chairman being Thomas

M. Cooley, one of the ablest jurists in the country, Chief Justice of the
Michigan Supreme Court, author of “Constitutional Limitations” and
other works of the highest authority. The Commission started with a
review of the evils the Interstate Act was intended to abolish, and
entered earnestly upon the great work of enforcing the law.
The Commission’s statement of the arrangements used by the
railways for discrimination is so admirably clear that a part of it
cannot fail to be useful here.
“These arrangements,” says the Commission, “took the form of
special rates, rebates and drawbacks, underbilling, reduced
classification, or whatever might be best adapted to keep the
transaction from the public; but the public very well understood that
private arrangements were to be had if the proper motives were
presented. The memorandum book carried in the pocket of the
general freight agent often contained the only record of the rates
made to the different patrons of the road, and it was in his power to
place a man or a community under an immense obligation by
conceding a special rate on one day, and to nullify the effect of it on
the next by doing even better by a competitor.
“Special favors or rebates to large dealers were not always given
because of any profit which was anticipated from the business
obtained by allowing them; there were other reasons to influence
their allowance. It was early perceived that shares in railroad
corporations were an enticing subject for speculation, and that the
ease with which the hopes and expectations of buyers and holders
could be operated upon pointed out a possible road to speedy wealth
for those who should have the management of the roads. For
speculative purposes an increase in the volume of business might be
as useful as an increase in net returns; for it might easily be made to
look to those who knew nothing of its cause like the beginning of
great and increasing prosperity to the road. But a temporary increase
was sometimes worked up for still other reasons, such as to render
plausible some demand for an extension of line or for some other
great expenditure, or to assist in making terms in a consolidation, or
to strengthen the demand for a larger share in a pool.
“Whatever was the motive, the allowance of the special rate or
rebate was essentially unjust and corrupting; it wronged the smaller
dealer oftentimes to an extent that was ruinous, and it was generally
accompanied by an allowance of free personal transportation to the
larger dealer, which had the effect to emphasize its evils. There was
not the least doubt that had the case been properly brought to a
judicial test these transactions would in many cases have been held
to be illegal at the common law; but the proof was in general difficult,
the remedy doubtful or obscure, and the very resort to a remedy
against the party which fixed the rates of transportation at pleasure
might prove more injurious than the rebate itself. Parties affected by
it, therefore, instead of seeking redress in the courts, were more
likely to direct their efforts to the securing of similar favors on their
own behalf. They acquiesced in the supposition that there must or
would be a privileged class in respect to rates, and they endeavored
to secure for themselves a place in it.
“Local discriminations, though not at first so unjust and offensive,
have nevertheless been exceedingly mischievous, and if some towns
have grown, others have withered away under their influence. In
some sections of the country if rates were maintained as they were at
the time the interstate commerce law took effect, it was practically
impossible for a new town, however great its natural advantages, to
acquire the prosperity and the strength which would make it a rival
of the towns which were specially favored in rates; for the rates
themselves would establish for it indefinitely a condition of
subordination and dependence to ‘trade centres.’ The tendency of
railroad competition has been to press the rates down and still
further down at these trade centres, while the depression at
intermediate points has been rather upon business than upon rates.
“The inevitable result was that this management of the business
had a direct and very decided tendency to strengthen unjustly the
strong among the customers and to depress the weak. These were
very great evils and the indirect consequences were even greater and
more pernicious than the direct, for they tended to fix in the public
mind a belief that injustice and inequality in the employment of
public agencies were not condemned by the law, and that success in
business was to be sought for in favoritism rather than in legitimate
competition and enterprise.
“The evils of free transportation of persons were not less
conspicuous than those which have been mentioned. This, where it
extended beyond persons engaged in railroad service, was actual
favoritism in a most unjust and offensive form. Free transportation
was given not only to secure business, but to gain the favor of
localities and of public bodies; and while it was often demanded by
persons who had, or claimed to have, influence which was capable of
being made use of to the prejudice of the railroads, it was also
accepted by public officers of all grades and of all varieties of service.
In this last case the pass system was particularly obnoxious and
baneful. A ticket entitling one to free passage by rail was even more
effective in enlisting the assistance and support of the holder than its
value in money would have been, and in a great many cases it would
be received and availed of when the offer of money made to
accomplish the same end would have been spurned as a bribe. Much
suspicion of public men resulted, and some deterioration of the
moral sense of the community traceable to this cause was
unavoidable. The parties most frequently and most largely favored
were those possessing large means and having large business
interests.
“The general fact came to be that in proportion to the distance they
were carried those able to pay the most paid the least. One without
means had seldom any ground on which to demand free
transportation, while one with wealth was likely to have many
grounds on which he could make it for the interest of the railroad
company to favor him; and he was oftentimes favored with free
transportation not only for himself and family, but for his business
agents also, and even sometimes for his customers. The demand for
free transportation was often in the nature of blackmail, and was
yielded to unwillingly and through fear of damaging consequences
from a refusal. But the evils were present as much when it was
extorted as when it was freely given.”[29]
The Commission had plenty to do. Complaints of unreasonable
rates and unjust discriminations between shippers, commodities,
and places poured in upon it, and vigorous decisions against
favoritism and excessive rates poured out upon the railroads. During
1887 and 1888 the Commission dealt with cases of passes issued in
contravention of law,[30] preferential fares for drummers,[31]
commissions on the sale of tickets,[32] discounts on freight rates to
large shippers,[33] discrimination by combination rates,[34] by
preference of tank shipments of oil,[35] by unfair distribution of cars,
[36]
by underbilling,[37] false classifications,[38] commissions to
soliciting agents,[39] etc. Underbilling, false classification, false
weighing, and commissions to soliciting agents were investigated by
the Commission in 1888 at New York, Buffalo, Detroit, Chicago,
Omaha, Lincoln, and Washington.[40] All these methods of
discrimination were found widely prevalent, and new legislation was
asked for imposing a penalty on shippers who fraudulently obtained
reduced rates.
When Congress met for the session of 1889 it was believed that the
law had greatly reduced the number of passes issued, straightened
out a part of the long-haul discriminations, and accomplished a good
deal in the way of suppressing rebates, but it was clear that much
remained to be done. In one way or another all over the country
secret discriminations were still being made for the benefit of
favored shippers. Congress therefore in March, 1889, amended the
Interstate Commerce Act by adding to the fine a penalty of two years’
imprisonment in the penitentiary in case of unlawful discrimination,
and pronouncing the same penalties against shippers and their
agents who secure advantage by false billing, false classification, etc.,
or by soliciting or otherwise inducing a railway to discriminate in
their favor, or by aiding or abetting any such discriminations. It was
also provided that 3 days’ notice must be given in case of any
reduction of rates, and that homeless and destitute persons, as well
as preachers, might be favored with low fares.
The stringent provision for imprisonment did not prove any more
effective than the milder law that preceded it, less so apparently, for
the following years were flooded with unfair discriminations.[41]
CHAPTER VIII.
EFFECTS OF THE INTERSTATE ACT.
An investigation by the Commission in May, 1889, concerning

passes, and covering 27 railroads, showed that passes were issued
freely to expressmen, telegraph men, press men, managers of
excursions, attorneys, persons contracting with the railroads in
consideration of advertising, shippers, members of legislative bodies,
United States, State, and municipal officers, officials of steamship
and steamboat lines, etc. These passes were chiefly limited to a State,
but to some extent were good for interstate journeys. Of State passes
the larger numbers were issued to members of legislatures and
drovers; “complimentaries” came next, with United States and
municipal officers, newspapermen, and shippers, in the order
named.
The Commission said: “The Interstate Commerce Act was intended
to end all the abuses attending free transportation of persons, and to
a considerable extent it has done so. But very largely the carriers,
especially the strong systems, where the abuse has been greatest,
have tried to avoid the law by falling back on State protection, and
issuing passes within the limits of each State. Three of the large
railroad systems, when called on by the Commission to make an
exhibit of the passes issued by them, declined to do so on the ground
that the passes were limited to the bounds of the State, and therefore
not within the jurisdiction of the Commission. If the New York
Central and Pennsylvania railroads can thus issue passes at
discretion it is impracticable to enforce the laws against their
competitors.”[42] By issuing to a favored individual a pass good in
Pennsylvania, another good in Ohio, another for Indiana, another for
Illinois, etc., the Pennsylvania Railroad can give the beneficiary as
full freedom of its lines as any interstate pass could give.
Pass making went merrily on all over the country, with a complaint
now and then to let in the light, but no effective crusade against the
disease. The Boston and Maine, for example, issued passes in Maine,
New Hampshire, Vermont, and Massachusetts, to public officers of
the States and the United States, members of legislatures, and
railroad commissions, agents of ice companies, milk contractors,
newspaper men, etc.[43] The Commission recorded its protest and
declared that the “similar circumstances” of the Interstate Act do not
relate to the social or official position of the passenger;[44] but the
pestilence is beyond the reach of the national board, and after
eighteen years of Federal prohibition our railroad business is still
honeycombed with political and commercial passes, as we have
already seen in the second chapter of this book.
Ticket scalping, “an obvious evasion of the law,” and the payment
of commissions on the sale of tickets in addition to salaries, so that
the brokers were tempted to cut rates dividing their commissions
with their customers, continued in full bloom in spite of the Federal
law. The commissions were $1 from New England points to Chicago;
$1 from Chicago to the Missouri River; and $1 from the river to
Denver. In addition to such definite amounts some roads paid 10
percent on their receipts for the passage, making a total commission
of $4 or $5 or more in some cases for the sale of a single ticket.[45] “In
cases of commissions of only $1 for short distances there may be
little or no inducement for the agent to divide with the passenger, but
in cases of cumulative commissions for long distances the temptation
to divide is stronger, and the probability of abuse is so great that the
impropriety of putting the opportunity before the agent is manifest.
It is not unusual for a single company to pay a sum of $100,000 or
even more in a year, and the aggregate entailed reaches millions of
dollars. This money is illegitimately spent; it is paid in excess of
salaries to agents for the purpose of taking business from
competitors, and when competitors all do it, it is difficult to see how
any benefit can accrue from it to any company.”[46]
In 1890 the Commission reported that scalpers were supported by
the railroads. They found 15 scalping offices in Chicago, 9 in
Cincinnati, 13 in New York, 7 in Kansas City, etc. In 1895 they found
that scalping “was steadily enlarging in scope and volume.”[47] In
1897 the “vicious practice” was still in full swing, though New York,
New Jersey, and eight other States had passed stringent laws against
it.[48] But it has now been largely reduced, though by no means
abolished, and the diminution has come, not because the law
acquired sufficient vigor to get itself enforced, but because the
railroad presidents combined to stop the practice, which was
recognized to be injurious to railroad interests.[49]
In respect to other forms of discrimination between passengers the
Commission ordered that rates for groups or parties must not be
lower than the regular fare for one passenger multiplied by the
number of persons in the party,[50] and that although separate cars
might be provided for colored persons, they must have equal
accommodations with white people who pay the same fare.[51]
Turning to freight discriminations, we find that a bewildering
mass of questions and complaints has pressed upon the Commission.
It has shown an earnest desire for justice, and for the most part good
judgment, but it has accomplished comparatively little in the way of
stopping unjust discriminations. Witnesses refused to testify, on the
ground that testimony in respect to rebates and other forms of
discrimination might be used to convict them of crime.
In the Counselman case (142 U. S. 547), Jan., 1892, the U. S.
Supreme Court decided that a witness could not be compelled to
testify in regard to discrimination in which he was involved, since the
Federal law made it a criminal offence to make or benefit by
discrimination. Unless the law exempts the witness from prosecution
in consequence of his answers or in relation to the subject of them,
he is not obliged to answer a question when the answer might tend to
incriminate him.[52] Refusal to answer on such a plea is of course
equivalent to confession of guilt. In this case Counselman, a large
grain shipper, had been given rates on corn some 5 cents less per
hundred than the rates paid by others from Kansas and Nebraska
points to Chicago, over the Rock Island, Burlington, and other
railroads. Five cents a hundred is an enormous profit on corn which
the farmer had sold at 18 to 22 cents per hundred, and such a margin
would enable the favored shipper to drive every one else out of the
trade; and on many western roads it has been practically the case
that only the railway officials and their secret partners can do
business. Counselman refused to tell a United States grand jury
whether or no he had had any rebates from the railroads in 1890. He
said he had received none from Stickney’s road, nor from the Santa
Fe, had had no business with the latter, he thought, but as to the
Rock Island, C. B. & Q., etc., he declined to answer on the plea that to
do so might incriminate him.
Some railroad officials testified freely, but neglected to tell the
truth.[53] Discriminations as a rule were secret. Even when it was
clearly known that favoritism was being shown, shippers were
generally afraid to complain, and in the small percent of cases where
complaint and investigation took place it seemed impossible to get at
the truth in any large way, because the railroad men for the most
part would not “cough up” the facts. Still, something was done by the
Interstate Commission, the courts, and the Industrial Commission.
Some progress was made and some light secured. The jets of flame
that here and there came up through the cracks from the under-
world showed very clearly what was going on beneath the surface of
railway affairs.
Direct Rebates.
Direct rebates on interstate traffic appear to have been checked for
a few months after the passage of the Commerce Act, but the
railroads admitted that they still gave rebates on traffic within a
State[54] just as they continued to give passes, making them good
within one State, insisting in respect to both rebates and passes that
they had a right to give them because the law did not reach State
traffic. Nevertheless, as the Commission remarked, such rebates
inevitably affect the rates upon interstate traffic, and a competing
road whose traffic is taken a little further, crossing the state line, may
be compelled to give rebates or surrender important business.
As a matter of fact, discriminating rates and rebates on interstate
as well as State business were soon as much in fashion as ever.[55]
In one small town in the Middle West judgments for nearly
$40,000 were recovered against a railroad for illegal discriminations
in that one town. In some cases the discriminations amount to $40 a
car. These cases were all subsequent to the Interstate Act.
Some years ago the Chief Justice of Kansas declared that the Santa
Fe management preceding the present one was notorious for giving
secret rebates. The president of the road was asked to resign because
the railroad funds were some millions short, due, it is said, to the
secret rebates the company had paid. An expert went over the books
and discovered that some $7,000,000 had been paid in rebates by
the Santa Fe in a few years.
Shippers who would not or could not get rebates or concessions
were in danger of serious loss and perhaps ruin. Mr. H. F.
Douseman, for many years a grain shipper in Chicago, and chairman
of the board of trade of that city, had to go out of business because he
would not take the rebates he might have had. Before 1887 he took
rebates of 10 or 15 percent (2 or 3 cents on the cwt.), but after that he
refused them. “Virtue is its own reward,” and Mr. Houseman got his
pay in that form. “I feel that I have been driven out of business
because I would not accept a rebate,” he told the Industrial
Commission. “I have never taken a rebate since the Interstate Law

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Appendix A: Public Transport Deﬁnitions . . . . . . . . . . . . . . . . . . . . . . . . 79

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Keywords Division of labour · Specialisation · Trade · Agglomeration

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Marchetti, C. (1994). Anthropological invariants in travel behavior. Technological Forecasting and

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