38 THE GENERAL THEORY OF EMPLOYMENT BK . II

and Professor Pigou,1 measures the volume of currentoutput or real income and not the value of output ormoney-income.2 Furthermore, it depends, in somesense, on net output;—on the net addition, that is tosay, to the resources of the community available forconsumption or for retention as capital stock, due tothe economic activities and sacrifices of the currentperiod, after allowing for the wastage of the stock ofreal capital existing at the commencement of the period.On this basis an attempt is made to erect a quantita-tive science. But it is a grave objection to this defini-tion for such a purpose that the community’s outputof goods and services is a non-homogeneous complexwhich cannot be measured, strictly speaking, exceptin certain special cases, as for example when all theitems of one output are included in the same propor-tions in another output.

(ii) The difficulty is even greater when, in order tocalculate net output, we try to measure the net additionto capital equipment; for we have to find some basis fora quantitative comparison between the new items ofequipment produced during the period and the olditems which have perished by wastage. In order toarrive at the net National Dividend, Professor Pigou 3deducts such obsolescence, etc., “as may fairly be called‘normal’; and the practical test of normality is that thedepletion is sufficiently regular to be foreseen, if notin detail, at least in the large.’’ But, since this de-duction is not a deduction in terms of money, he isinvolved in assuming that there can be a change inphysical quantity, although there has been no physical

1 Vide Pigou, Economics of Welfare, passim, and particularly Part I.chap. iii.

2 Though, as a convenient compromise, the real income, which is takento constitute the National Dividend, is usually limited to those goods andservices which can be bought for money.

3 Economics of Welfare, Part I. chap, v., on “What is meant by main-taining Capital intact”; as amended by a recent article in the EconomicJournal, June 1935, p. 225.