The Valuation of the Social Income

THE Social Income consists of a collection of goods and services valued in terms of money. Its precise definition thus involves two problems: one of the correct enumeration of the real goods and services to be included, and one of the money values by which this heterogeneous collection is to be reduced to a common denominator. I am concerned in this paper with the second of these problems. The practical statistician has generally been content to take it for granted that every commodity entering into the aggregate should be valued at its market price. I want to ask: what is the basis for this valuation ? Does it hold without exception or are there exceptions ? Are the prices we use for valuation prices in their own rights or do they stand for something else (say marginal utilities or marginal costs) to which market prices are taken as approximations ? These questions ought to be answered before we can have a clear idea of what National Income calculations mean. And they need to be answered before we can settle some of the disputed points about actual computation. I have myself been led to think about these questions as a result of the discussions on one of these disputed points. As is well known, Mr. Colin Clark adds the proceeds of indirect taxation to the total of declared incomes before arriving at his aggregate; Professor Bowley has held that such an addition ought not to be made. In an earlier paper to which I myself contributed' an attempt was made to deal with this difficulty by the usual method of enumeration --by considering what real goods and services ought to be included in the aggregate, and working out the way in which these goods and services will be reflected in the sum of incomes. At the time this treatment seemed to me sufficient, but I have been brought to realise that it did not go deep enough. Professor Bowley has himself