20/30 Hindsight: Unscrambling an Egg

Several years ago I was asked by a consortium of railroads to help them in a rate case. The problem was inspection of freight cars loaded with grain. The carload of grain is put on a siding (or, sometimes, a grain train is held at a station), a representative from the Department of Agriculture comes down and takes a sample from the car (they have their own methods of ensuring a simple random sample), and this sample is then tested and graded by them. The ultimate price of the grain depends upon the grade which the Agriculture Department assigns. In the opinion of the railroads, the shippers were abusing this procedure. They would typically ship a carload of grain from an elevator somewhere out west to Chicago, without having sold it, hoping to get an order on the way. If such an order were not received, they would order an inspection, which would hold up the carload for a few days. The railroads were asking for a charge for each in-transit inspection, and the grain exchanges and commission merchants were objecting. For reasons which can't be gone into here, the charge was going to be either about $15, or exactly nothing. My task was to help justify the former number. There were to be hearings before the Interstate Commerce Commission (ICC), and we had a year.