THE NATIONAL INCOME

Evening Post, Volume CXVI, Issue 102, 27 October 1933, Page 14

THE NATIONAL INCOME

(To the Editor.)

Sir,—l have always been inclined to ngree with letters written by Mr. Maddison on subjects of economic interest, but am afraid I do not agree with his views of national income as stated in Tuesday s "Post." ■He evidently visuftliscs income as » series of monetary elements, one mounted upon another in such a manner that there would be apparently no limit to the total value that could be obtained. According to his view, as I see it, national income is made up of the total of monetary transactions taking place throughout the community in a given time. It would appear from this that money passed at horse-racing and at other forms of gambling adds to the national income. This interpretation I take from his summingup in the words, "Our national income may be stated as the resultant of the total aggregate value of the mutual exchange of our services, no matter what their character." That such a wide definition of income will not bear investigation is seen from the results arrived at by extending it to all services, no matter •vrhat their character, as stated by Mr. "Maddison. Some services might be hopelessly inefficient, and although their monetary value may be high, they may add less to the national income than services performed with greater efficiency; and, if detrimental to the well-being of the community, may, in my opinion, even subtract from that income. A lot depends on what one means by national income. It it is monetary income based on exchanges it is conceivable that it might differ ■widely from income based on consumable goods. Nevertheless there is a close relation between income determined by monetary payments of wages, interest, rent and pet profit, and income determined by Value of production. ' All income must eventually express itself in the price of goods. The State employee, taken as an example by Mr.. lUaddison, derives Mb income from tax money, and to pay this tax money those engaged in industry or trade must increase the price of goods by the required amount. The employee who also contributes must have his wages increased, and this again is reflected in the price of goods. The doctor, or the errand boy, who render service but do not produce jtuaterial goods, must similarly be provided for in prices of goods to con.sumers. Goods, therefore, constitute the base of national income, and the channel •through which increases \ are made for other services is the distribution and transportation system. If total production be taken at cost along with added values of distribution and transportation one" should, come out very close to the figure obtained from the summation of individual monetary incomes. This primary system of net production plus distribution is the pool from which all other incomes are paid. These others are secondary incomes derived from expenditure of the first, in the manner described, correctly, in my view, by Mr. Maddison. I believe there might be a difference between the two methods due to credit facilities based on anticipation. We have in New Zealand, however, a striking example of the close resemblance between production income and monetary income jir the estimate made by the Government Statistician from unemployment tax rcfords, this estimate being given in the issue of the Abstract. It confiring very closely previous estimates based loth on production and on the 1926 census of private incomes. That this close_ resemblance is recognised by authorities *-ho have studied the subject deeply is seen in the fact that the two combined ire used to obtain by subtraction what is frpent in distribution and transportation. (See Colin Clark, M.A., "The National Income"—of United Kingdom.) • It is a safe proposition for New Zealand, therefore, that her income is based CD national production, as stated by Sir yrdliam Hunt.—l am, etc.,

JAS. M. ABBRNETHY.