National Income
by The concept of national income NI was introduced by Cambridge Economists like Robertson, Pigou, Marshall etc.
Definition of NI
Prof. Marshall in his book “Principles of Economics defines NI as “Sum of all the physical goods produced and services provided by utilizing the natural resources of the country with the help of labor and capital. In addition to this the net income from abroad is also included. Accordingly, the NI is the summation of all the goods produced and services provided and the net income from abroad”. Apparently, Marshallian definition seems to be very simple and comprehensive, bu it has some practical shortcomings.
(1) Statistically it is difficult to estimate accurately about the produced goods and services;
(2) there may be the possibility of double and multiple counting.
(3) a certain portion of produced goods is kept for personal consumption. Because of such shortcomings, Pigou defined NI as “Only those goods and services will be included in NI which are sold against money”. But Pigou’s definition will not be acceptable for those countries where there is limited use of money and many a goods are traded under barter system.
Keynes has used three methods or approaches to define NI
- Expenditure Method
- Product Method
- Income Method
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