There is, however, an important qualification to this mode of reckoning the net real income of the nation which needs mention.While the portion of the current product which goes to replace this wear and tear of land and capital is not included in the goods and services represented by the £2,000,000,000 and classed as real net income, the wear and tear or maintenance fund of labour is included in it.When consideration is taken of the distribution of what is often termed the national dividend between the respective owners of the factors of production, this anomaly is seldom borne in mind.In estimating the income of labour the replacement fund is counted; in estimating the income of land and capital it is not counted.But, illogical as this discrimination is, usage has so universally accepted it that it will be best for us in a work not chiefly concerned with the problems of objective distribution to give a provisional acceptance to it.
The real net income, or national dividend, corresponding to the £2,000,000,000, consists of the goods and services at the disposal of the recipients of this money income.By applying each sovereign as they received it in rent, wages, interest, profit, fees, etc., to purchase consumable goods or services, they might consume the whole of it during the current year.In that event, though provision would have been made for the bare upkeep of capital, no provision would have been made for its enlargement or improvement with a view to the future increase of production.In point of fact, that provision is made by applying a considerable portion of the net money income, say £300,000,000, to demand, not consumable goods or services, but more instruments and materials of production.As this process goes on continuously, it implies that some 3/20 of the total industrial activity of the nation is engaged in making not consumable but new capital goods.3 This saving process has an important psychology of its own to which we shall give some attention later on.At present it need only be considered as a reduction in the net income of consumable goods and services at the disposal of a progressive community for current use and enjoyment.This wealth, actually available for current use, the food, clothing, shelter and other domestic necessaries and conveniences, the travel, information, education, recreation, professional, official and domestic services, the various sorts of material and non-material comforts and luxuries, constituting the current net real income of consumer's goods, is the primary object of our valuation.The new machines, tools, buildings, materials and other forms of capital, expressing the £300,000,000 of savings, though entering our analysis upon the costs side equally with goods used for immediate consumption, do not figure directly on the consumption side, but only indirectly in the future consumables which they assist to produce.
§3.But as regards the application of our analysis, it makes no real difference whether we take the narrower connotation of the national dividend which includes only consumable goods, or the broader one which includes savings.It will no doubt easily be admitted that a merely pecuniary statement of the 'value' of this dividend conveys no reliable information as to the human or vital welfare it involves.Making due allowance for all temporal or local variations of price, the statement that the national income has doubled in the last century, or even that the income per head of the population has doubled, affords no positive proof that any increase has been made in the national welfare, much less how much increase.Unless, however, we adopt an attitude of general scepticism towards the economic structure of 'civilisation', we may admit, with Professor Pigou,4 a presumption that a growth of the national dividend faster than the growth of population implies some increase of welfare.But even that presumption must be qualified by the reflection that it really rests upon a view of marketable wealth which has exclusive regard to its supposed utility in consumption without any corresponding consideration of the cost of its production.A pecuniary statement of the national dividend which contained no information as to the nature of the goods and services comprising it, may be repudiated out of hand as useless for our purpose.For upon such a statement £1'worth' of 'trade gin' has precisely the same value as £1 'worth'
of 'best books' or of wholesome bread, £1 worth of handmade lace sweated out of peasant women at the cost of their eyesight has precisely the same weight in the money income of the nation as £1 worth of carpentry or of medical attendance.
