The third form of competition in transportation is dependent upon the competition of markets; and is not in reality direct competition between carriers at all. This is the most difficult of all forms to understand.[82] It is certainly in many cases more than a "euphemism for railway policy."[83] Yet although indirect and often obscure, it is of fundamental and conclusive importance in the determination of freight rates. Commercial competition deals not with a mere choice of routes, but with alternative markets. The carriers act, not independently and of their own volition, but only as agents or representatives for their constituents, the shippers. They may become tools or weapons in the hands of merchants or manufacturers who are the real contestants. It is largely in this sense that it is so often alleged, and rightfully, that railway traffic managers oftentimes do not _make_ rates at all. Their energies are bent to the analysis of those circumstances by which their rates are made for them.
The production or preparation of commodities for final consumption falls naturally into two distinct parts; the creation of form value, succeeded by the conferring of place value. Transportation is concerned alone with the latter process. Of these two operations, the latter, the creation of place values, is by far the more elastic and adaptable process. The grower, the miner or the manufacturer has his first costs more or less rigidly fixed by natural or human conditions; such as the fertility of the soil, the grade of ore, the prevailing scale of wages, and so on. His proximity to the status of a marginal producer depends upon his relative position in these respects. With the carrier, matters are more contingent. Including within its reach, as it does, many grades of producers and consumers, each more or less rigidly held bound by his own circumstances and conditions, as above said, the carrier is able to exercise a wide range of choice in fixing that margin of value created which it reserves for itself. And at all times, by reason of the factors set forth elsewhere, primarily its subjection to the law of increasing returns, this intermediate share of the carrier tends to adjust or accommodate itself to the end that it may discover or produce a wider margin between values in the hands of producer and consumer, respectively. This may be best accomplished by a progressive widening of its field of activities, that is to say, by an enlargement of its physical reach and scope. It is always striving to lower the cost of production made by the marginal producer. Its motto must ever be, to get more business, if not right at home by search for it abroad--and this always with the chance that the greater the distance between the producer and the consumer, the greater the possible margin of place value remaining as its individual share.