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Published online by Cambridge University Press: 07 November 2014
This study aims to measure the net investment or savings of individuals and enterprises in Canada. Two methods are available, the inventory or change of stocks method and the production or flow of goods method. The first compares the capital value of all durable goods at the beginning and end of the period in question, at constant prices, the difference being net saving or dissaving (inventories excepted). The sources for this approach consist of balance sheets and other data of the type used in making an estimate of national wealth. The second, the production or flow of goods method, utilizes records of retail sales of durable goods and, where sales data do not exist, figures of production, imports and exports, etc. From these sources the selling value of all durable goods sold or available to be sold, i.e. gross investment, is estimated. From gross investment is subtracted an estimate of the value of durable goods required to maintain existing capital intact. The remainder, which we shall call net investment or net saving (the additional adjective aggregate being taken for granted in both cases), represents the value of the net addition to the stock of durable goods.
To the layman, net investment appears remote from net saving. It can be demonstrated, however, that it does not differ significantly from saving, at any rate for statistical purposes. By saving is meant excess of current income over current outgo. Current outgo is taken to include appropriate charges for depreciation but excludes repayment of debts. Saving or non-current outgo is defined to include many consumers' expenditures for capital goods, as indicated in Table I.
1 Owing to the difficulty of interpreting statistics of working capital, investment in working capital is not covered by this paper. The terms investment and saving are used with reference to durable goods only, except in adjustments for capital imports as described below.
2 Kuznets, Simon, Commodity Flow and Capital Formation (National Bureau of Economic Research, 1938).Google Scholar
3 That is, domestic production at factory prices minus exports, plus imports and inward freight and duty thereon; to the result of which are added sales tax, freight charges paid in Canada, and distributors' margins.
4 Ibid., p. 7.
5 Cf. Commodity Flow and Capital Formation, pp. 17-19.
6 Seventh Census of Canada, 1931, vol. X, p. 132.Google Scholar
7 It is recognized that, from the standpoint of physical efficiency, government assistance may merely cover up financial losses from obsolescence and hence be prejudicial to real income. Losses to real income may, of course, be avoided if the benefits of government aid are used by enterprises to overcome obsolescence, as might be expected under competition.
8 Only a small fraction of maintenance and repair outlays is covered in Table I; the costs of labour and of building and painting materials, which are the major items in maintenance, are excluded. Efforts were made to avoid including output of parts and repair work but the statistics do not always yield the required breakdown. Particular difficulty was encountered in foreign trade statistics which almost always include parts and finished articles in the same group. On the importance of maintenance and repairs, see Fabricant, S., Capital Consumption and Adjustment (National Bureau of Economic Research, 1938), p. 47.Google Scholar
9 Ibid.
10 See the discussion of item (4) in Appendix II, pp. 57-8.
