Home > Uncategorized > Some 1921 remarks about National Income

Some 1921 remarks about National Income

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.

  1. January 9, 2018 at 10:24 pm

    What’s really interesting for me on this is that I’m currently working on parallels between 1919 and 2007. Thanks for this

    • January 10, 2018 at 9:40 pm

      Why 1919 and not 1928? The policies of 1921-1927 should look very familiar to those who have lived through 2001-2007, and the tax cut at the beginning of both helped create the inequality that led into both potential implosions.

      • January 11, 2018 at 1:02 am

        I see more similarities between 1919 and 2007 than 1929 and 2007 (e.g. output) and also the emergency policy response to GFC and the asset price and real economic impact is very reminiscent of some aspects of ‘the roaring 20s’ IMO. I’m exploring this further but keen to hear any views pro or con

    • merijntknibbe
      January 11, 2018 at 1:57 pm

      In 1930 Keynes published A Treatise on Money. In this, one can find a somewhat embryonic balance sheet analysis of inflation during and shortly after the war and the remarkable large and fast deflation of 1920/1921. According to Keynes people depleted their savings accounts during the war (fuelling price increases) and tried to restore their accounts after the war (contributing to the deflation). Nowadays, more much more sophisticated data on balance sheets are available and as is well known Koo made a convincing argument that slow recovery after 2008 was at least to a large extent due to a ‘balance sheet recession’. https://rwer.wordpress.com/2011/12/12/rwer-issue-58-richard-koo/

      You might want to try to extend Koo’s analysis to this period (he himself already uses balance sheet analysis to analyse the thirties)

      I’m mentioning Keynes because he uses this explanation, it might be that there are also other authors of who I’m not aware have mentioned this earlier than Keynes.

      • January 12, 2018 at 9:47 am

        Very kind and very helpful.


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