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THE CENSUS OF PRODUCTION AND THE

NATIONAL DIVIDEND.

THE Report of the First Census of Production of the United Kingdom (1907)1 affords an opportunity of considering the statistics of production and of income with reference to each other, and with reference to the economic conceptions of production, distribution, value, and income.

In the General Report by Mr. A. W. Flux, which precedes the detailed tables, we find not only a descriptive summary of the new statistical results obtained, but also an attempt by means of sweeping and bold estimates to obtain a complete valuation of all goods and services produced or rendered in the United Kingdom, and a comparison of this total with current estimates of income. In the following summary table, which is re-arranged from the very involved analysis in the report, the only values that were obtained directly by statistical inquiry are those of net outputs, customs and excise, and excess of imports ; the rest are estimated from rough and imperfect data. The merchanting and carriage of goods from the ports and (in various stages of manufacture) from factory to factory is estimated as costing from 10 to 15 per cent. of the value of imported materials; and the transport of goods from the ports or factories to the retailers appears to be taken as about 25 per cent. of their value, while 35 per cent. more is added for retailers' profits and expenses. From comparison with the population census of 1901, it is supposed that about one million workers employed in small workshops or on their own account were omitted from the census, and it is suggested that their net product averages about £50 per person per annum. The increase of investments abroad is from Sir G. Paish’s estimate read to the Royal Statistical Society. The cost of maintenance of capital is bivsed on a rough estimate of the value of buildings and plant combined with a sketchy inquiry as to the percentage to be allowed. The remaining item, as to services not productive industrially, is discussed below. Though the estimates have so slight an apparent basis, it seems

i Cd. 6,320.

probable that a good deal of care has been spent in considering them, and wide margins of error (expressed as # in the following table) are assigned in the report, so that it is believed confidently by the compilers that "gross inaccuracy is excluded."

TABLE I. Net output of industries and £ mining

690,000,000 Certain raw materials pro

duced and used at home 18,000,000 Net output of agriculture 180,000,000 Net output of fisheries

12,000,000 Result of direct inquiry

900,000,000 Estimated omissions

50,000,000 Duties on home goods

48,000,000 Merchanting and carriage

before completion 35,000,000 = 8,000,000 Merchanting and carriage exports to ports ...

45,000,000 + 10,000,000 Merchanting and carriage and retailers' expenses :

of home goods 365,000,000+50,000,000

of imports 127,000,000+17,000,000 Occupation of houses, per

sonal services, &c. 375,000,000+ 25,000,000 Total of estimates and duties

1,045,000,000+110,000,000 Value of net output of goods

and services produced or rendered in the United Kingdom

1,945,000,000+ 110,000,000 Value at port of imports less

value of exports... 145,000,000 Duties on imports

15,000,000 Increase in value of invest. ments abroad 100,000,000

260,000,000 Value of goods and services

available for consumption or saving by the people of the United Kingdom ..

2,205,000, +110,000,000 Loss cost of maintenance of home capital

175,000.000+ 5,000,000 Net income of the United Kingdom ...

£2,030,000,000+115,000,000 1 The total thus obtained on the productive side may be compared with total income as hitherto measured.

TABLE II.

1907. Estimated income above income tax limit

wages
intermediate income

£ 880,000,000 740,000,000 325,000,000

Total income

£1,945,000.000 1 Of course the various errors may tend to balance one another, and the probable error of the sum is less than the total of the probable errors of the parts; but it hardly seems worth while to apply the theory of probability to such rough estimates, especially as no error is assigned to omissions or to investments. The total given in the report, where the items are grouped differently, is £1,918,000,000 to £2,158,000,000.

In this table Income (above £160) and Wages are estimated on the method used in THE ECONOMIC JOURNAL, 1904, p. 459, brought up to date; while Intermediate Income, that received as small salaries or profits, or small pensions, interests, &c., is estimated from the Report 1 on Incomes to the British Association, printed in the Statistical Journal, December, 1910, modified for application to 1907. If we may suppose that the various statements in Table I. were not influenced by knowledge of aggregate income as generally estimated, the agreement is very remarkable, for no one can hope to get such a total correct within 5 per cent. It certainly appears that “gross inaccuracy is excluded” so far as the total is concerned, if we may regard an error of 5 per cent. as venial.

The total may be exhibited in another form :

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Total goods for home consumption or saving... £1,745,000,000+80,000,000 2

Net output, as used in Table I., “expresses completely and without reduplication the total amount by which the value (at works) of the products of ... the group, taken as a whole, exceeded the cost (at works) of the materials purchased from outside.” Gross output in Table III. includes the value of raw materials, and of goods imported and manufactured or finished at home; but goods passing through more than one factory are only counted once. The value of material goods ready for use was then £1,745,000,000.

It was found possible to separate capital goods, “such as, by

1 Before this report (September, 1910) intermediate income had been estimated by me at £100,000,000 less.

2 Then the former total, £2,030,000,000, is thus obtained :-subtract £175,000,000 as above and also £15,000,000 imports for maintenance of capital or stock, add £100,000,000 invested abroad, and £375,000,000 houses, services, &c.

their nature, must be employed in making or repairing machinery, plant, or buildings,” from consumption goods “such as are adapted for the personal use of consumers " both in the Census of Production and in the Imports. The value of capital goods so found, with an estimate for transport, is added to the (net) value of new buildings and other works of construction, maintenance or repair, as shown in the Census, and the total £355,000,000 is obtained. Of this about one-half is allotted to the maintenance of capital values in their condition, and the other half remains for re-investment. A further relatively small sum of imports, £65,000,000, is regarded as maintaining or increasing the value of personal goods (furniture, jewellery, &c.), say £15,000,000 for maintenance and £50,000,000 for increase.

We may then compile the following tables :

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The tables now given arise directly from the estimates in Mr. Flux's report, with alterations in arrangement and wording. It is not proposed to criticise here the individual figures. Whatever alteration might be made in detail if fuller information were available, it is not likely that the general relations of the parts would be much affected.

"Everything that is produced in the course of a year, every service rendered, every fresh utility brought about, is a part of the national income. We must be careful not to count the same thing twice.” 2 Very great care has been taken in the Census of

1 Cf Professor Pigou, Wealth and Welfare, p. 354. ... Mr. Bowley's estimate, that one-sixth or one-seventh of the national dividend is converted into capital annually.” For estimate, read guess. I cannot find now where I published it.

2 Marshall, Principles.

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Production not to duplicate entries. The governing method was to reckon the net output of each unit, by subtracting the value of all things delivered to the unit from that of all things delivered by it. In the case of industry, allowance is finally made for the maintenance of capital ; in agriculture it had to be assumed that the condition of the soil was on the whole the same at the end as at the beginning. In the case of mines and quarries, no allowance is made for depletion of value; royalties are thus treated as income. In those cases such as the postal service, shipbuilding in dockyards, and other undertakings by the central or local governments, the product is valued, in one category or another, at the net cost of production; thus, if profits are made they are nowhere included as income, and, if there is no question of profits, it is assumed that there is no excess of value of the finished product over the cost. Thus a substantial part of the national income is ignored.

No serious attempt is made, or can be made, to separate goods from services. In Table I. we pass from the net output of material goods to a composite item including transport and merchants' services, and then to direct services of persons and direct services of capital, such as house accommodation. We are left with the familiar difficulties that furniture provides satisfaction of the same nature as houses, and that there is no line that separates paid from unpaid domestic services. In any case, the total value of production, like the total income, is a matter of arbitrary delimitation.

Some people attach importance to the aggregate of material goods ready for consumption that are available for a nation. They will find it very difficult to obtain any estimate from the report, even if they can frame a definition. The material goods for personal consumption of Table V. (£1,325,000,000) are called in the report "goods and services consumed or exchanged for services by classes engaged in production and distribution," and are intended to be reckoned at the prices paid by the consumer as they reach his hands. The next item, abbreviated into “services and houses," £375,000,000 ("goods consumed or exchanged for services by classes engaged in supplying services” in the Report), is composed of several roughly estimated items : (i) Income from ownership of buildings not used for production, assumed to be the value of the services rendered; (ii) railway and tramway revenue from passenger service, less value of coal consumed and destruction of capital goods, and less receipts from commercial travellers; this is assumed to equal the value of services rendered to non-business travellers; it involves the distinction between travelling on

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