culties would be to have such
a capital valuation of these enterprises as has just been completed for
the United States railways. And thereafter standard methods of recording
new capital investment should be enforced.

Such an evaluation would appear to be an unwelcome but inevitable
preliminary to any attempt to measure and record business earnings.
Experience has shown the vast labor and large margin of error involved
in formal evaluations. Under the proposals made in this chapter,
however, errors made in the evaluation of particular enterprises would
be of no great consequence to these enterprises. Only the combined or
general profits figure would be used in the course of wage adjustment.

Second among the difficulties of a practical nature is that which comes
from the necessity of defining clearly what is to be considered
profits.[150] Clearly the earnings put back into the depreciation
account should not be counted as profits. Loss or gain from the change
in the value of the stock held should not be taken into account. Nor
should taxes paid before the distribution of dividends be so counted.
Bonus stock dividends, representing reinvestment out of current earnings
should be counted as profits, as well as being recorded as additions to
invested capital. Capital borrowed from banks should not be considered
as capital--and the interest paid on such borrowings should be
considered as a business expense. The question of the treatment to be
accorded salaries of direction could be settled by reference to
arbitrary rules drawn up upon the subject--some allowance being made in
the case of partnerships or of businesses operating under private
direction to compensate for the salaries of direction that are paid in
large incorporated enterprises.

Thirdly, provision would have to be made for the reconsideration, at
stated intervals, of the profits return that is set as the mark of just
and sound distribution. Thus heed could be taken of any significant
changes in the price level, in the conditions of supply and demand for
capital, or in any of the other relevant considerations. Likewise,
provision would have to be made for the periodical revision of the list
of enterprises and industries used in the computation of the profits
return for industry as a whole. These matters, though vital, must be
left without detailed consideration.

Nevertheless, it is idle to overlook the amount of labor that would be
involved in any attempt