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business and of necessity or on pleasure, and assumes that the value of a railway ticket is equal to the price paid for it; (iii) the part of postal service which is not for business; (iv) the services of domestic servants, taken as equal in value to the aggregate of wages and the value of board and lodging; (v) the services of the central and local government, so far as not already reckoned in production, whether as duties or as goods produced by the governments; (vi) the services of the professional and artistic classes and of the business groups not already reckoned in (v) or in the Census; (vii) some other persons rendering direct service.

Two points arise out of this category : first, that there is no universal means of valuing services rendered in production apart from services rendered directly; second, that such services can only be valued by estimating the income of those performing them, while material goods and a great part of transport services can be valued by their selling price in the open market. The distinction, if there be one, between the value on the productive side and the income of occupied persons on the receipt side, can only be preserved over an undefined part of national income. In fact, we get only a very partially new estimate of national income from the Census. The “net product” is exhausted (after maintenance of capital) by rents, interests, profits, salaries and wages, and these all appear or are estimated in income tax returns, “intermediate” income and wages.

Unfortunately, the Report does not provide material for checking any of the former estimates of income, owing to the classification by industries as a whole, which is necessarily adopted. Thus, the agricultural total would only enable us to get at the unknown total of farmer's profits," if we could isolate agricultural rent and interest and wages by other reckonings, and the estimates are so hazardous as to make the remainder doubtful to a prohibitory degree; and other cases are similar.

It will have been noticed that duties are included in the value of goods to the consumers, and therefore as part of the national income, while the governmental services for which the duties pay are not included. Now a man receiving a professional income of £500 in return for services, may pay £15 in direct taxation, corresponding to £15 worth of governmental services, and have so much less with which to purchase other services; whereas, if he spent £10 on spirits and tobacco, he receives the £10 worth of goods himself, and also pays for (say) £7 worth of government

1 Practically farmers' incomes are only included in the income tax net assess. ments if their rents are over £480, and they are then assumed to be one-third of rent

services, as when a purchaser buys a pound of tea and receives a handsome picture into the bargain. This specious argument, that in indirect taxation you get government services for nothing, has, I think, not been noticed by Tariff Reformers !

In the method of the Report the government services paid for by indirect taxation are not counted as of any further value. This seems an unnecessarily complicated method; it would have been simpler to leave out the addition to net product, and value the services in full. But perhaps the writer wished to force readers to consider interesting problems relating to consumers' surplus. Goods in general are worth to all but the marginal purchasers more than they pay for them.

In the case of goods whose price is raised by taxation, so much is cut off from the consumers' surplus and so much is spent on public services; the report assumes that the value of the services equals the amount of taxation, but of course it does not follow that this value equals the detriment to the consumer.

In the case of direct taxation the taxed individual is the poorer by precisely the amount of the tax. Hence, whatever way we make our measurements, we are involved in difficult questions of theory and practice. The difficulty originally arises from the fact that value in exchange, which affords the only possible method of valuing production, depends on other factors as well as on the cost of production.

A shifting of taxation from direct collection to indirect would involve (by the method adopted), if the prices rose, an increase in the value of goods and a decrease in the value of services; but official services are equally valuable whether paid for by duties or from income tax, and we can only harmonise the calculation by supposing that lost consumers' surplus is turned into official services behind the back of the accountant. But when part of the incidence of taxation is on the manufacturer (and, of course, in the case of monopoly a great part of it may be), the net product of manufacture, as valued, would fall to the extent of part of the yield of the duty. Taking the extreme case where the manufacturer paid the whole of the duty and did not raise the price of his goods, it appears that the corresponding amount of official services would completely disappear from the aggregate income, whereas in fact there would only be a transference of outgoings to the government from the income-tax payer to the manufac

1 So that, e.g. the first and sixth items in Table I. become £680,000,000 and £58,000,000 instead of £690,000,000 and £48,000,000. Then the eleventh item would be reduced from £375,000,000 to £365,000,000 by the subtraction of an additional £10,000,000 from item (v.), p. 58.

turer. On the other hand, in the same case the net assessments to income tax would be reduced, since the manufacturer is only assessed on his profits, and Table II. and Table I. would remain comparable. It appears, then, that the aggregate national income may depend on the method of taxation, by whatever method the aggregate is estimated, even if we suppose that taxation has no effect on the amount of various classes of goods produced. The more successfully taxation is transferred to monopolists, the less the apparent income.

These, and other considerations not arising from the report (such as the difference of marginal utility of money to persons of various incomes, and the continual changes in purchasing power of money), tend to show that Aggregate Income, however measured, is of the nature of a numerical total, whose contents depends on arbitrary definition, and has no very close relation to welfare. Nevertheless, as is generally the case with statistical totals, it can be used for observing changes so great as to render unimportant the probably minor changes in the nature of its content, or changes over a short period when there is strong reason to believe that “other things” are not only “supposed equal” but are, in fact, nearly “equal.'

Apart from the analysis of the National Dividend the results of the Census are mainly of statistical, rather than pure economic, interest. Summary excerpts from the tables are likely to give rise to misleading ideas. Thus, one is tempted to say that the net output per wage-earner employed in mining and industry was £110, that (from other data) annual average earnings per wageearner (man, woman and child) was probably about £50, and that consequently about £60 is produced per wage-earner beyond his wages; while in agriculture the net output per person occupied (including farmers) was £83 in Great Britain, where the average wage was perlu £45. But these figures are subject to so many qualifications as to be nearly valueless. The net output has to provide for salaries, depreciation of capital, and wear and tear of machinery, interest and advertising, as well as rents, profits, earnings of working employers, and wages, and all these factors differ enormously from industry to industry. In some cases the wage-earner receives the great part of the value of the output, in other cases less than a quarter. The detailed figures are, on the other hand, very useful, for it is possible to tell within limits in the case of separate industries, what is the proportion of wages to the value of net or gross output. Thus, in the cotton industry about 73 per cent. of the gross output or selling value of the goods

goes for materials (including coal), about 17 per cent. to wages, and about 10 per cent. to the other factors just enumerated; or, put otherwise, the wage-earners receive 63 per cent. of the net output. This suggests that after depreciation is met, and advertising, selling expenses and salaries are paid, there is no great margin for increase of wages at the expense of profit.

Other very useful lines of analysis arising from the figures concern the relative importance of different industries as sources of production, and of the relation of home production to imported raw materials and imported manufactured goods; but here, again, so much depends on classification, and there is such enormous variety, that summary quotation is useless.

A. L. BOWLEY

REVIEWS

Wealth and Welfare. By A. C. PIGOU, Professor of Political

Economy in the University of Cambridge. (London:
Macmillan and Co. 1912.)

ORIGINALITY has set its unmistakable mark on Professor Pigou's work. But this distinction is not inconsistent with some resemblance to great predecessors. The author appears to have drawn inspiration from two very high authorities on wealth and welfare. The good which philanthropy and statesmanship should seek to realise is defined by him in accordance with Sidgwick's utilitarian philosophy; to investigate the means conducive to that end he employs the methods perfected by Dr. Marshall. Like Sidgwick, Professor Pigou is not open to the imputation of materialism which is sometimes brought against economists. He lays down two propositions : "first, that welfare includes states of consciousness only, and not material things or conditions ; secondly, that welfare can be brought under the category of greater and less” (Wealth and Welfare, p. 1). These propositions (with their context) do not postulate a psychology (like that of J. S. Mill) specially favourable to utilitarianism ; but they do postulate the absence of a metaphysic (like that of T. H. Green) which denies practical significance to a conception such as aggregate welfare ” or "satisfaction.” Much of our author's philosophy recalls Sidgwick's utilitarianism. For example, the following sentiment is not often met with outside the pages of Sidgwick : “If the life of an average workman contains, on the whole, more satisfaction than dissatisfaction, an increase in numbers, even though it leave economic welfare per head the same, involves an addition to economic welfare in the aggregate(loc. cit. p. 29). Like Sidgwick, Professor Pigou is prepared to admit that, in Sidgwick's phrase (Politics, p. 583), “One person may be more capable of happiness than another.” According to Professor Pigou, “We may sometimes be able to say that the more cultured Class A, has a keener appreciation of, and derives more satisfac

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