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The Early Business History of Four Massachusetts Railroads — IV
Published online by Cambridge University Press: 24 July 2012
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At first, the early Massachusetts railroads did not fix the passenger and freight rates on the basis of any theoretical rate-making formula. Instead, they met the competition of wagons and stages and, where necessary and possible, the steamboats. The railroad directors wanted to assure the stockholders reasonable and regular dividends, but I have seen no evidence that the directors expected to maximize the profits, even within the limits of the charters. Only an occasional director was willing to risk the possibility of greater profits by experimenting with extremely low rates on the theory that really cheap, improved transportation sufficiently increases the demand for transportation to justify the lower fares.
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- Copyright © The President and Fellows of Harvard College 1951
References
81 When circumstances such as competition rather than studies of cost differen-tials are the basis, one may say that there is no consideration of any rate-making theory. E.g., see IATA Agreement Providing for North Atlanlic Passenger Fares, 10 C. A. B. 330, 334 (1949).
The cost computations of the early railroads generally were lump sum figures. The locomotive or train mile was frequently used as the basis for comparing costs of operating expenses. For example, the Directors' minutes of the Eastern Rail Road, May 13, 1839, gives the following as the expenses of “running the trains” per locomotive mile:
Boston & Worcester R. R. $0.79
Boston & Providence R. R. 1.00
Boston & Lowell R. R. 1.00
Eastern R. R. 0.896
Schenectady & Utica 0.814
The Directors' minutes of the Eastern Rail Road of January 22, 1841, give $0.691 as the locomotive mile cost and allocate the following items as factors: maintenance of way and road repair; repairs of engines and cars; fuel; office establishment, salaries, etc; train expenses, except oil, and certain wages; oil, packing, etc; brakeman and engineman wages; and a merchandise-train factor to adjust the fact that merchandise cars usually were carried on passenger trains.
The records of the Boston & Lowell, Eastern, and Andover & Wilmington railroads are deposited at the headquarters of the Boston & Maine Railroad in Boston. The records of the Western and of the Boston & Worcester are deposited in Baker Library, Harvard University.
82 Report of the Directors of the Boston and Worcester Rail Road to the Stockholders … 1840 (Boston, 1840), pp. 5–6.
83 Document 25, August 6, 1839, in Clerk's File of Western Rail Road.
84 Directors' Minutes of Boston & Lowell Rail Road, January 14, 1836.
85 Cf. Report of the Directors of the Boston and Worcester Rail Road … January 18, 1883 … (Boston, 1833), pp. 21–23.
86 A prospectus dated July 4, 1831, and filed in the Corporation Records Division of Baker Library, Harvard University.
87 Report of the Diredors of the Boston and Worcester Rail Road Corporation to the Stockholders … (Boston, 1832), pp. 19–20.
88 See Report of the Directors of the Boston and Worcester Rail Road to the Stock-holders at their Ninth Annual Meeting, June 1, 1840 (Boston, 1840), p. 6.
89 Directors' Minutes of Boston & Worcester Rail Road, March 10, 1835.
90 Ibid., June 20, 1837.
91 Directors' Minutes of Eastern Rail Road, April 5, 1839; June 11, 1841. At first, Eastern set a single price for a nontransferable annual season ticket. In 1841, Eastern offered a second type of ticket, being a package of 100 to 600 tickets, nontransferable, at prices varying with the number of passages purchased. A package of 600 tickets was sold at a discount of 50 per cent of the single ticket. Elias H. Derby in the Boston Atlas, August, 1839, and reprinted in the Proceedings of the Annual Meeting of the Western Rail-Road Corporation, March 12, 1840, pp. 41–56, stated that the Eastern's passenger fares were very low. He had in mind the season tickets for commuters to Boston. His statement that Eastern earned 10 per cent dividends, at the sam time, is erroneous. Eastern's dividends were 5½ per cent in 1839, 2 or 2½ per cent in 1840, 6 per cent in 1841, and 6 per cent in 1842. See Martin, Joseph G., Twenty-One Years in the Boston Stock Market (Boston, 1856), pp. 44–45Google Scholar; and the Directors' Minutes of the Eastern Rail Road.
92 Directors' Minutes of the Eastern Rail Road, April 5, 1839; June 11, 1841.
93 Directors' Minutes of Boston & Lowell Rail Road, June 24, 1843; Boston & Worcester (broadside) tariff, April 1, 1845, filed in Baker Library, Harvard University.
94 Directors' Minutes of Boston & Worcester Rail Road, September 22, 29, 1834; October 27, 1834.
95 Ibid., March 10, 1835.
96 Ibid., November 7, 1837.
97 Document 25, August 6, 1839, in Clerk's File of Western Rail Road.
98 Directors' Minutes of Boston & Worcester Rail Road, November 28, 1837.
99 Ibid., March 20, April 17, 1838. The rates were flour at 30 cents a barrel, lime at 35 cents a cask, and plaster at $3.00 a ton.
100 Ibid., December 12, 26, 1838; January 23, March 13, May 1, 1839.
101 Ibid., May 1, September 9, 1839; May 4, 1840.
102 Directors' Minutes of the Eastern Rail Road, January 18, March 5, May 13, July 1, September 28, October 9, 1839; March 27, December 9, 1841; January 16, 1843.
103 Directors' Minutes of the Boston & Worcester Rail Road, August 8, 1838.
104 Ibid., January 18, 1836, August 7, 1838. Cf. Boston & Worcester tariffs of November 7, 1837, and October 1, 1839, in the broadside collection at Baker Library, Harvard University.
105 Directors' Minutes of Boston & Worcester Rail Road, February 27, July 31, August 14, September 25, October 2, 1838.
106 Ibid., August 7, September 9, 1839.
107 Harnden's contract is in the office of the Railway & Locomotive Historical Society, Baker Library, Harvard University.
108 Documents 25 (August 6, 1839) and 32 (September 27, 1839), in Clerk's File of the Western Rail Road.
109 Document 25 (August 6, 1839) in Clerk's Pile of the Western Rail Road.
110 Reprinted in the Proceedings of the Annual Meeting of the Western Rail-Road Corporation, March 12, 1840, pp. 41–56.
111 Knorst, William, Transportation and Traffic Management (Chicago, , 1947), vol. i, p. 260.Google Scholar
112 See Table II.
113 Idem.
114 Document 25 (August 6, 1839), in Clerk's File of Western Rail Road.
115 The treasurer of the Eastern Rail Road in 1855 admitted speculating with the company's money. See Bradlee, F. B. C., The Eastern Railroad (Salem, Mass., 1917), p. 55.Google Scholar
116 “Boards of Directors,” Fortune, May, 1950, p. 107.