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Some 1921 remarks about National Income

Summary:
In 1921 King, Macaulay and Mitchell published their milestone ‘Income in the United States: Its Amount and Distribution, 1909-1919’ which estimated time series of nominal and real income in the USA. Why did they measure this? The last sentence of their introduction reads: “Last but most interesting of all, we shall consider the way in which the National Income is distributed among individuals”. Distribution was paramount. The authors were also well aware of the limited nature of their estimates of monetary income: it was not a measure of welfare or prosperity. To quote them again: “Following common practice once more, we do not count as part of the National Income anything for which a price is commonly not paid. On this score we omit several of the most important factors in social

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In 1921 King, Macaulay and Mitchell published their milestone Income in the United States: Its Amount and Distribution, 1909-1919’ which estimated time series of nominal and real income in the USA. Why did they measure this? The last sentence of their introduction reads: “Last but most interesting of all, we shall consider the way in which the National Income is distributed among individuals”. Distribution was paramount. The authors were also well aware of the limited nature of their estimates of monetary income: it was not a measure of welfare or prosperity. To quote them again: “Following common practice once more, we do not count as part of the National Income anything for which a price is commonly not paid. On this score we omit several of the most important factors in social well-being, above all the services of housewives to their families” (they go on to present a very rough monetary estimate of the value of these services). Even the depletion of national resources is already discussed: “No systematic deduction from the National Income is made in our estimates to cover depletion of natural resources. Doubtless this item is of considerable size as well as of peculiar interest.”. Still, if we want to measure the distribution of income or sectoral differences the monetary estimates are the way to go. Nowadays, GDP contains many non-monetary imputations. interestingly, the UK Office for National Statistics is publishing estimates of nominal income without these imputations. Look here for a very recent ONS study. The reason: ‘the national accounts measure of RHDI can differ from the perceived experience of households’. These monetary accounts are among other things a better gauge of the distribution of monetary income (wages, profits) than the normal national accounts: back to 1921. It makes one wonder why, later, these imputations were introduced and our focus changed from distribution to growth.

Merijn T. Knibbe
Economisch historicus en statisticus, wadloopgids, docent, vader en blogger

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