Chapter III: Section CXLVI

NATIONAL INCOME.--ITS STATISTICAL IMPORTANCE.

Among the most important[146-1] but also the most difficult objects of statistics, that book-keeping of nations, is national income. In estimating it, we may take our starting point from the goods which are elements of income, or from the persons who receive them as income.[146-2]

In the former case the gross national income consists:

A. Of the raw material newly obtained in the country.

B. Of imports from foreign countries, including that which is secured by piracy, as war-booty, contributions, etc.

C. The increase of values which industry[146-3] and commerce add to the first two classes up to the time of their final consumption.

D. Services in the narrower sense and the produce (_Nutzungen_) of capital in use.

All these several elements, estimated at their average price in money, which supposes that all purchases, especially those under the head D, are made voluntarily[146-4] and at their natural price.

To find the national net income, we must deduct the following items:

A. All the material employed in production which yields no immediate satisfaction to any personal want.[146-5]

B. The exports which pay for the imports.

C. The wear and tear of productive capital and capital in use.

In the second case the net national income is to be calculated from the following items:

A. From the net income of all independent private businesses etc.[146-6]

B. From the net income of the state, of municipalities, corporations and institutions, derived from their own resources.

C. Under the former heads must be taken into the account such parts of property as have been immediately consumed and enjoyed.[146-7]

D. Interest on debt must be added only on the side of the creditor, and deducted from the income of the debtor; otherwise, _error dupli_. This does not apply to taxes or church dues because the subjects of a good state and members of a good church purchase thereby things which are really new and of at least equal value to the outlay. Besides, in both instances, it is necessary to calculate the number of men who live from the national income, the average amount of their indispensable wants, and the average price in money of the same, in order to determine the _free_ national income by deducting the sum total of these average wants, estimated at this average price.[146-8] [146-9]

[Footnote 146-1: Not only to compare the happiness and power
of different nations with one another, but also for purposes
of taxation, the profitableness and innocuousness of which
suppose the most perfect adaptation to the income of the
whole people.]

[Footnote 146-2: The former, in _Rau_, Lehrbuch, I, § 247;
the latter in _Hermann_, 308 ff. The former mode of
calculation gives us a means of judging of the comfort of
the people, their control of natural forces, etc.; the
second, of the relation of classes among the people. (_v.
Mangoldt_, Grundriss, 99. V. W. L., 316 ff.) Each member of
the nation produces his income only in the whole of the
nation's economy. Hence _Held_, Die Einkommensteuer, 1872,
70, 77, would, but indeed only under very abstract fictions,
construct private income from the national, and not _vice
versa_.]

[Footnote 146-3: On the average degree of this increase of
values in different industries, see _Chaptal_, De
l'Industrie française, II, passim. _Bolz_, Gewerbekalender
für, 1833, 111. No such scale can be lastingly valid,
because, for instance, almost all technic progress decreases
the appreciation of values through industry, and every
advance made by luxury raises the claims to refined quality
etc. See _Hildebrand_, Jahrbücher für Nat-Oek., 1863, 248
ff.]

[Footnote 146-4: Many items in Class D evade all
calculation. Thus, for instance, the numberless cases of
personal services which are enjoyed only by the doer
himself; also the greater number of products
(_Nutzungen_=usufruct) of capital in use for the consumption
of the owner himself. (Latent income.) Only, it may be, in
the case of dwelling houses, equipages, etc., that the
consumption by use can be estimated in accordance with the
analogy of similarly rented goods.]

[Footnote 146-5: The principal materials consumed in
manufactures are of course not to be deducted here, because
the increase in their value was taken into account above.]

[Footnote 146-6: When an artist who earns $10,000 per annum
appears in a country, the gross national income increases in
a way similar to that in which it increases when a new
commodity is found which would have a yearly increase of
value equal to $10,000 over and above that of the raw
material. Cost of production in the case of such a virtuoso
is scarcely to be alluded to. Nearly his entire income, with
the exception of his traveling expenses, etc., is net, and
the greater portion of it _free_. An income tax would affect
his hearers after as it did before, and in his income, find
a completely new object. _Per contra_, see Saggi economici,
I, 176 f.]

[Footnote 146-7: For purposes of taxation, where a relative
valuation is more the question than an absolute one, it
would be sufficient to assume that every household consumed
clothing, utensils, etc., in proportion to the rest of their
income. Hence, these items might, unhesitatingly, be omitted
altogether.]

[Footnote 146-8: Mathematically demonstrated by _Fuoco_,
Saggi economici, II, 102 ff.]

[Footnote 146-9: The gross income of British Europe is
estimated by _Pebrer_, Histoire financière et statistique
générale de l'Empire Br., 1834, II, 90, at £514,823,059,
viz.: agriculture, £246,600,000; mining, 21,400,000;
manufactures, after deduction made of the raw material,
£148,050,000; internal and coast trade, £51,975,060; foreign
commerce and navigation, £34,398,059; banking, £4,500,000;
interest from foreign countries, £4,500,000. By _Moreau de
Jonnés_, Statist de la Gr. Br., 1837, I, 312, it is
estimated at 18,000,000,000 francs, from which, however, the
raw material used in industry is not deducted. The net
income of Great Britain was estimated by Pitt, in 1799, at
£135,000,000, of which £25,000,000 were received by
landowners for rent, £25,000,000 by farmers, £5,000,000 were
tithes, £3,000,000 from forests, canals, and mines,
£6,000,000 from houses, £15,000,000 from state funds,
£12,000,000 from foreign commerce, £28,000,000 from inland
commerce and manufactures, £3,000,000 from fine arts,
£80,000,000 from Scotland, £5,000,000 from foreign
countries. (_Gentz_, Histor. Journ., 1799, I, 183 ff.)
_Lowe_, England in its present Situation, 1822, p. 246,
speaks of 255,000,000. About 1860, the incomes subject to
taxation alone, that is, all above £100, amounted to
335,000,000. The remainder was certainly worth one-half of
this. (Statist. Journ., 1864, 121.) _Baxter_, in 1867,
assumed it to be £825,000,000. Compare _L. Levi_, on
Taxation, 6.

In France, about forty years ago, according to Chaptal,
Doudeauville, Balbi and others, about 6,500,000,000 francs
gross national income could be counted on. _Schnitzler_
speaks of 7,000,000,000 francs (Creation de la Richesse en
France, 1842, I, 392), after deduction made of the raw
material of manufacture. According to _Wolowski_,
Statistique de la Fr., 1847, it was more than 12,000,000,000
francs. _M. Chevalier_, Revue des deux Mondes, March 15,
1848, has it 10,000,000,000 at most. In these four
estimates, only material products are taken into account.
_Ch. Dupin_ thinks the income per capita was, in 1730, = 108
francs; in 1780, = 169; in 1830, = 269. _Cazeaux_, Eléments,
163, estimated the net national income, in 1825, at
5,000,000,000 francs; _Cochut_, in 1861, at 16,000,000,000.
(Revue des deux Mondes, XXXVII, 703.)

In Spain, _Borrego_, Nationalreichthum, etc. Spaniens, 1834,
33, estimated the income from agriculture at 2,284,000,000
francs; from industry, etc., 361,000,000; commerce,
124,000,000; from houses, 186,000,000; canals, streets etc.,
8,500,000; personal services, 75,000,000; money in
circulation (probably loaned capital), 85,000,000.

In the United States, in 1840, the national income was
estimated at over $1,063,000,000; from agriculture, over
$654,000,000; from manufactures, nearly $240,000,000;
commerce, almost $80,000,000; mining, over $42,000,000; from
lumber (_Wäldern_), almost $17,000,000; and from the
fisheries, almost $12,000,000. The per capita amount of
income was $62. It was largest in Rhode Island--$110; in
Massachusetts it was $103; in Louisiana, $99; and in Iowa,
smallest, $27; in Michigan, it was $33. Compare _Tucker_,
Progress of the United States, 195 ff. The census of 1860
assumes the national wealth, slaves not included, at
$14,183,000,000, that is $451 per capita, with a per capita
annual income of $112. According to _Czörnig_, the gross
income of Austria, from agriculture, the chase and
fisheries, in 1861, was 2,119,000,000 florins; from mining,
41,000,000; from the industries, 1,200,000,000. In Prussia,
the net national income, not including the revenue from
state property, nor the income of the royal household,
seems, from the returns of the income and _class_ tax, to
have been about 2,458,000,000 thalers, in 1874. _Engel_,
Preuss. Statist. Ztschr., 1875, 133. The majority of the
above estimates are obviously unreliable.]