Abstract The fallacy of the argument in favor of a rate base measured not by original cost but by subsequent purchase price should be apparent to anyone who understands the basic philosophy of the "prudent investment" standard. Under this standard, consumers of public utility service compensate investors for building the plants, not just for buying them from other persons who have already built them and who have already devoted them to the public service. Once these utility properties have been built and have been put into public service, investors who buy them later from their original owners are simply taking over these former owners' claims to a return on the capital devoted to the public service. The very nature of rate regulation precludes the adoption of the transfer price of a utility property, presented under the guise of actual cost to the present accounting company, as a proper measure of the rate base. This is so because public utility properties are necessarily bought and sold at prices reflecting the expectations of the buyers and sellers as to what the properties can be made to earn in the future.

I. Introductory: The problem of depreciation, 185. — II. The case against accrued depreciation, 189. — III. Current criticisms of Allison's argument, 191. — IV. Depreciation where the rates are based on the strict investment principle, 195. — V. Depreciation where the rates are based on cost of reproduction as a measure of “present value,” 198. — VII. Depreciation where the rates are based on actual cost of the present property. The “historical-cost” basis, 207. — Conclusions, 211.

The publications reviewed: Bauer, Lyndon, Maltbie, Nash, Raymond. — I. Retrospective and prospective regulation as affecting the basis of valuation, 297. — II. Valuation as a means of controlling profits and as a means of controlling charges, 302. — III. The market value fallacy in the determination of "fair value, " 307. — IV. Consistency in the development of a valuation theory, 314. — V. Conclusions, 325.

Significance of par value, 441. — Difficulties arising from its use, 444. — Removal of par value as a solution of the difficulties, 446. — First objection to the use of shares without par: effect on stockholders' liability, 451. — Their liability under present no-par stock laws, 452. — Can effective liability be secured without par value? 460. — Second objection: that no-par shares may be issued at too low prices, 462. — Conclusions, 464.

The problem of depreciation in retroactive regulation, 546. — Principle of replacement cost discussed, 547. — Absurdity of using replacement cost new, 549. — Objections to deduction of depreciation answered, 552. — Depreciation under the principle of original cost, 555.