National Product: War and Prewar

National Product: War and Prewar

National Product: War and Prewar

National Product: War and Prewar

Excerpt

National income or net national product measures the contribution of the productive system to the basic purpose economic activity is assumed to satisfy. In peacetime this purpose is to provide for the population's needs; and the contribution of economic activity is represented by: (a) flow of goods to ultimate consumers (consumers' outlay); (b) net additions to stocks of goods that have not yet reached consumers but are intended to be used, directly or indirectly, to satisfy ultimate wants (net capital formation). National income totals, however derived, equal the sum of these two components.

For short term changes it is often preferable to study gross rather than net additions to fixed equipment and construction. To estimate the current consumption of these durable capital goods, as we must in order to pass from gross to net additions, is difficult and the results are subject to a wide margin of error. In business judgments the line between net addition to durable equipment or construction and replacement is tenuous. Hence, many studies of the national product, especially those related to capital formation, use also a total that differs from national income in that it includes gross rather than net additions to durable equipment and construction. Designated gross national product, it exceeds net national product or national income by the amount of current consumption (depreciation and depletion) of durable capital goods.

In a major war, economic activity has a second basic purpose: to provide commodities and services for the armed conflict. It is not realistic to treat this conflict as a production or consumption process subordinate to that of satisfying needs of ultimate consumers; nor is it valid to assume that even in an all-out war, civilian needs become completely subordinate to military (so that, for example, population groups that cannot contribute to the war are deprived of all economic goods). Both basic purposes must be met and decisions concerning the allocation of resources between the two depend chiefly upon factors outside the ordinary economic processes of the market place. In a nonmilitaristic country the emergence of the armed conflict as a new channel of final use, affecting a large proportion of resources, calls for a concept of national product that in essence is noncomparable with that of peacetime.1

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.