ABSTRACT
It is a commonplace observation for an economic historian that the reliability of a statistical series is generally in inverse ratio to its antiquity. Of few statistics is this more true than of business profits, and of the associated concept of capital formation. Such figures as exist before 1900 are necessarily derived from the revenue accounts, and balance sheets of individual firms, or from official returns based thereon. Historians of the British economy at large, or of major sectors of it, since the industrial revolution are usually well aware of the limitations and defects of their raw numerical data, but, working as they do with large aggregates, they are able to assume that errors in individual sets of accounts will, to a certain extent, cancel out in the mass. Thus it is normally true to say that the total profit of a large number of firms in the same industry for approximately the same year is more trustworthy than the reported profit of any one firm. At the level of specific enterprises, however, there can be no such compensation in the short run; only over a long series of years can a bias in the accounts be expected to neutralise itself, and only over the whole life of the business will it do so completely.
