tics is to cite "investments at about $100 billion in the last three years as compared with $16 billion in 1929" as proof that "profits are too high" be- cause they "provide part of the funds for an investment boom of dangerous proportions." This conclusion might have been modified had he observed that, while investment was rising 100 January 6, 1949 per cent between 1929 and the 1946- 1948 average, personal consumption was rising 106 per cent-so that, after allowing for the still greater increases in net exports and Government ex- penditures, investment shrank from Letters to 15.2 to 13.7 per cent of gross national product (Federal Reserve Bulletin, December, 1948, page 1523). The rise High Corporate Profits in investment has been mainly due, presumably, to the very fact that con- Use of Statistics in Recent Lette sumers were demanding more goods Queried by Economist and services-housing, electricity and transportation, gasoline and fuel oil, To THE EDITOR OF THE NEW YORK Times: etc. THE TIMES printed a letter from His final use of statistics is to dis- Professor Seymour E. Harris of Har prove "that business is dependent al- vard, replying to its Dec. 9 editoria most exclusively on their profits to fi- relative to his testimony before Sena nance their capital needs." He argues tor Flanders' subcommittee investigati that business still has "about one half ing profits. On checking his statistic of the funds accumulated and not used I find that they give a one-sided pic during the war," that new security ture. issues in 1948 were only $3 billion less He rests his argument that profit than in 1929, and that bank loans since are historically too high on the follow the end of 1945 have risen by $12 bil- ing sentence: "The rise for corporate lion more than from 1927 to 1929. I profits before taxation and incomes o have not been able to figure out just unincorporated businesses was fron what the "funds accumulated and not 19.4 per cent of consolidated sales is used" are; but the rest of the picture 1929 to 26.1 per cent in 1947." Fror seems to tell us that, with investment the Department of Commerce's Sur needs far higher than in 1929 and the vey of Current Business, July, 1947 security markets unable to supply even Supplement, page 21, and July, 1948 as much money as then, business has issue, page 17, I have calculated th had to borrow from the banks and in following percentages: addition hold back from dividends 1929. 1947. about 60 per cent of earnings, as Business income 19.1% 25.8 against only 30 per cent in 1929 (Fed- Farm income 6.1 7.5 eral Reserve Bulletin, December, 1948, Employe compensation 47.2 51.1 page 1522). Indirect business taxes 7.6 8.9 I should add that, in checking the rise in bank loans since 1945, I found Subtotal 80.0 93.3 that more than half has been in loans Rentals, and interest. 11.0 4.9 to farmers, to consumers, or on real Depreciation allow- estate (same, page 1492). ances 9.3 6.3 Professor Harris' letter contains Inventory revaluation. .7 -3.0 some debatable points of theory-such Minor adjustments 1.0 -1.5 as his arguments that profits ought to be measured before payment of income Consolidated net sales. 100.0 100.0 taxes and that depreciation allowances From this table the reader will per today can be considered adequate ceive that Proféssor Harris' conclusio partly because prices are likely to go regarding the "rise in profits" must b down to their pre-war level again. I qualified by three considerations: (1 am, however, confining my reply to farmers, employes, and sales taxe his statistics. SIMON N. WHITNEY. also showed increases; (2) the mai New York, Jan. 1, 1949. losers were those receiving rents an interest-that is, two groups of in vestors: and (3) the 6.7 point gain i business income was, as it happened just equal to the decline in busines own depreciation allowances, plus th change in its inventory values whic the Government statisticians dedu before reaching their own estimate profits.