Household income survey: Clarity must beat confusion

The National Statistics Office (NSO) has announced plans to conduct a survey to measure household income (shorturl.at/fYy5w), succinctly summarizing past efforts and announcing the creation of a Technical Expert Group to guide this new survey.

- T.C.A. ANANT

In this context, let us review some of the challenges underlying income measurement in a developing country like India. To grasp the nuances, we need to understand that the economist's conception of terms like 'income' and 'profit' differs markedly from what is in common use. When I asked ChatGPT to provide an economist's understanding of these two terms, it gave me this:

"Income is defined as the total flow of resources or command over goods and services received by an individual, household, or entity over a specified period of time. It includes all forms of compensation, returns on assets, and unearned transfers that enhance economic well-being and can be used for consumption or saving." And:

"Profit is the residual income that remains after all explicit and implicit costs of production have been deducted from total revenue. It represents the reward for entrepreneurship and risk-taking in the production process."

In contrast, when asked to define these terms in common usage, the definitions it offered were:

"Income is money they receive or earn regularly which they can use to pay for things they need or want." And: "Profit is the money left over after paying all the costs."