Public Expenditure in the National Income

THE calculations of the National Income provided in recent years by British and American authorities and scientific institutions are such valuable achievements that I do not feel happy in exposing certain serious mistakes committed in both sets of calculations. In the National Income calculations both of the U.K. and U.S.A. national Income is conceived as the aggregate money value-at current pricesof all goods produced and services rendered less the goods and services required for the maintenance of the earning power of the nation, the latter for simplicity's sake being identified mainly with the maintenance of the durable tangible assets, whether these are for productive or consumptive purposes. The National Income of this concept is equivalent and, provided the statistics are accurate, equal to the aggregate of individual incomes derived from any form of economic activity, private or public, plus undistributed business profits (or minus losses), i.e. to the total of personal incomes, other than mere transfer incomes, and of the surplus of enterprises, private or public, that are available for comfort and saving, comfort being the consumption of food, shelter etc., clothing, services of health, education and recreation. Because the statistics of personal and business incomes received are more readily available than those of the net aggregate money value of goods and services.produced and sold, the method of adding up the incomes and making allowances for the maintenance requirements have hitherto been applied all over the world for the calculation of the National Income. However, the application of this method has been subject to a significant error in both the calculations of the U.K. and U.S.A. For brevity's sake, this article deals only with the British calculations in the White Paper Cmd. 6347/1942 on An Analysis of the Sources of War Finance and an Estimate of the National Income and Expenditure, etc. ' The broad principles of method followed in the White Paper have been described by J. E. Meade and Richard Stone in their article in the Economic Yournal on The Construction of Tables of National Income, Expenditure, Savings and Investments .2 The authors of

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