NA TURE 



553 



i 



THURSDAY, APRIL 17, 1890. 



THE GROWTH OF CAPITAL. 

 The Growth of Capital. By Robert Gififen. (London : 

 G. Bell and Sons, 1889.) 



THE popular conception of what statistics are is 

 happily caricatured by a contemporary novelist, 

 who describes an adept in that science stationing himself 

 early in the morning at the entrance to a bridge, 

 and, after scrutinizing the passengers for several hours, 

 triumphantly reporting that exactly 2371 widows have 

 crossed during the day. This arithmetic of the street is 

 not the type of Mr. Giffen's calculations. His purpose is 

 more philosophical, his method more elaborate. 



The object which he seeks to measure is nothing less 

 than the whole property, the accumulated exchangeable 

 wealth, of the United Kindom. In this problem, to appre- 

 hend even the question requires an effort of intelligence. 

 " Imagination shrinks from the task of framing a cata- 

 logue or inventory of a nation's property, as a valuator 

 would make it." Reason points out that the grand total 

 is not so much the value of the whole, which in its 

 entirety cannot be considered saleable, as the sum of 

 the values of all the parts, any one of which may be sold 

 by its proprietor. The attribute of accumulation, as well 

 as that of exchange, requires careful definition. Mr. 

 Giffen, differing from some of his predecessors and con- 

 temporaries, does not regard the labourer himself as a 

 species of capital. He does not, with Petty, attempt to 

 determine the " value of the people," nor, with De Foville, 

 to effect "the evaluation of human capital." However, 

 some items which are of an incorporeal nature seem to 

 enter into his account. Presumably, that part of the 

 national capital which he reckons by capitalizing the 

 income of public companies — multiplying it by a certain 

 number of years' purchase — represents the value, not only 

 of land and plant, but also of an immaterial something, 

 which, in a broad sense, may be described as '*' custom " 

 or "good will." Mr. Gififen doubts whether public debt 

 should be admitted as an item of capital. He is certain 

 that tenant-right should be excluded. 



The uses of such a valuation are manifold. Mr. Gififen 

 devotes a chapter to their enumeration. In the first 

 place, it is desirable to compare our resources with our 

 liabilities. It is satisfactory to find that the national 

 debt compared with the national fortune is but a " baga- 

 telle." The amount of a country's accumulations, and 

 the rate of their increase, afford some measure of its 

 capacity to endure the burdens of taxation, and, we may 

 add, other kinds of pecuniary strain. It is observed by 

 Newmarch, one of Mr. Giffen's predecessors in this 

 department of statistics, that the investment in railways, 

 which produced such convulsions in 1847-48, would have 

 been in 1863 almost unfelt and insignificant in com- 

 parison with the yearly savings which were being made 

 at the later epoch. 



One use to which Mr. Giffen gives prominence may be 

 thus described. The comparative growth of capitalat 

 different epochs serves as a sort of barometer of national 

 prosperity. Of course those who use a barometer must 

 remember that its indications of fair weather are but 

 Vol. xli.— No. 1068. 



indirect and inferential. He who trusts the rising of the 

 mercury when the north-east wind is blowing may get a 

 wetting. So also with the metaphorical weather-glass. 

 " The property test is useful as far as it goes, but it is not 

 the only test," says Mr. Gififen. Elsewhere, in his address 

 to the British Association, he has acted the part of a 

 Fitzroy in considering together and interpreting in their 

 connection the various tests and signs which economic 

 meteorology affords. His object here is rather to perfect 

 one particular instrument. 



This barometrical use of capital may involve the ne. 

 cessity of correcting the estimates so as to take account 

 of changes in the value of money. It may happen, it has 

 happened, that in the last decade, as compared with the 

 preceding period, the growth of capital estimated in 

 money shows a falling off, while the increase of money's 

 worth, of things, has not declined proportionately. To 

 complete our measurement we must correct the measur- 

 ing-rod. This is no easy or straightforward task. In 

 the case of a real barometer we can mark the inches by 

 reference to the standard yard measure, which is kept in 

 the Tower. But a similarly perfect measure of value is, 

 in the phrase of an eminent living economist, " unthink- 

 able." The present generation finds itself, with respect 

 to the variations in the value of money, in the sort of 

 difficulty which must have occurred to the primaeval man 

 when first he may have noticed that a perfect measure of 

 time was not afforded by the length of day and night, 

 and before there had been constructed a more scientific 

 chronometer. Even Mr. Giffen has to content himself 

 with such rough and rather arbitrary corrections as the 

 present state of monetary science affords. 



As the object sought, the measure of accumulation, is 

 somewhat hazy and difficult to envisage, so the method 

 by which it is approached is indirect and slippery 

 The business man must not suppose that the estimates 

 of a nation's capital can be totted up with the precision 

 of a commercial account. The physicist is better pre- 

 pared to appreciate the character of the computation, 

 conversant as he is with observations which individually 

 are liable to a certain error, while, put together, they 

 afford certainty. But even physical observations, liable 

 to a considerable yet calculable extent of error, hardly 

 parallel the fallibility of these economic or, if we might 

 coin a required word, metastatistical computations. In 

 estimating that fallibility, we may usefully employ the 

 analogy suggested by the theory of errors ; but we must 

 bear in mind the criticism to which this theory, even in 

 its application to physics, was subjected by a witty mathe- 

 matician : " After having calculated the probable error, 

 it is necessary to calculate the probability that your 

 calculation is erroneous." 



The characteristic to which we draw attention is fully 

 recognized by Mr. Giffen. Again and again he dwells on 

 the rough and approximative character of his method, 

 " the wide margin of error," and the " limit of informa- 

 tion available." His cautions against reasoning too finely 

 might have seemed superflous in their iteration, but that 

 he doubtless anticipated the irrelevant criticism which 

 each departmental statistician might direct against details 

 — like the specialist in sculpture who, according to Horace, 

 represents with peculiar accuracy the hair or nails, but 

 nescit componere totiwi. 



B B 



