An Interpretation of the Kuznets and Department of Commerce Income Concepts

Abstract

THE purpose of this paper is to examine two of the major issues at stake between Professor Kuznets and the Department of Commerce: (i) the way of netting the income totals when governmental output is included, and (2) the significance of distinguishing between a national income total valued at market prices and the same composite valued at factor cost. The nature of these issues may best be revealed, we believe, if the same data are used to illustrate the various concepts. Hence we shall employ Department of Commerce data to estimate the Kuznets concept presented in National Income and Its Composition, I9I9-I938. This concept has subsequently been revised, but to derive the wartime revisions from Department of Commerce data would necessitate arbitrary assumptions without any further clarification of the issues at stake,' while the specific quantitative form of Kuznets' most recent revision has not yet been indicated.2 In section I we compare, on the basis of Department of Commerce data for I939, Kuznets' concept of national income with that of the Department of Commercefirst at the final products level, then at the factor costs level. Section II presents our conclusions on the basic issues involved.