A man's present labour yields him income directly, when devoted to his own use; and he looks to be paid for it in some form or another if he devotes it as a matter of business to the service of others.Similarly any useful thing which he has made or acquired in the past, or which has been handed down to him, under the existing institutions of property, by others who have so made or acquired it, is generally a source of material benefit to him directly or indirectly.If he applies it in business, this income generally appears in the form of money.But a broader use of this term is occasionally needed, which embraces the whole income of benefits of every sort which a person derives from the ownership of property however applied: it includes for instance the benefits which he gets from the use of his own piano, equally with those which a piano dealer would win by letting out a piano on hire.The language of common life while averse to so broad a use of the term Income as this even when discussing social problems, yet habitually includes a certain number of forms of income, other than money income.
The Income Tax Commissioners count a dwelling-house inhabited by its owner as a source of taxable income, though it yields its income of comfort directly.They do this, not on any abstract principle; but partly because of the practical importance of house-room, partly because the ownership of a house is commonly treated in a business fashion, and partly because the real income accruing from it can easily be separated off and estimated.They do not claim to establish any absolute distinction in kind between the things which their rule includes, and those which it excludes.
Jevons, regarding the problem from a purely mathematical point of view, was justified in classing all commodities in the hands of consumers as capital.But some writers, while developing this suggestion with great ingenuity, have treated it as a great principle; and that appears to be an error in judgment.A true sense of proportion requires us not to burden our work with the incessant enumeration of details of secondary importance, of which no account is taken in customary discourse, and which cannot even be described without offending against popular conventions.
5.This brings us to consider the use of the term capital from the point of view of inquiries into the material wellbeing of society as a whole.Adam Smith said that a person's capital is that part of his stock from which he expects to derive an income.
And almost every use of the term capital, which is known to history, has corresponded more or less closely to a parallel use of the term Income: in almost every use, capital has been that part of a man's stock from which he expects to derive an income.
By far the most important use of the term Capital in general, i.e.from the social point of view, is in the inquiry how the three agents of production, land (that is, natural agents), labour and capital, contribute to producing the national income (or the national dividend, as it will be called later on); and how that income is distributed among the three agents.And this is an additional reason for making the terms Capital and Income correlative from the social, as we did from the individual point of view.
Accordingly it is proposed in this treatise to count as part of capital from the social point of view all things other than land, which yield income that is generally reckoned as such in common discourse; together with similar things in public ownership, such as government factories: the term Land being taken to include all free gifts of nature, such as mines, fisheries, etc., which yield income.
Thus it will include all things held for trade purposes, whether machinery, raw material or finished goods; theatres and hotels; home farms and houses: but not furniture or clothes owned by those who use them.For the former are and the latter are not commonly regarded as yielding income by the world at large, as is shown by the practice of the income tax commissioners.
This usage of the term is in harmony with the common practice of economists of treating social problems in broad outline to start with, and reserving minor details for later consideration:
it is in harmony also with their common practice of taking Labour to include those activities, and those only, which are regarded as the source of income in this broader use of the term.Labour together with capital and land thus defined are the sources of all that income of which account is commonly taken in reckoning up the National Income.(*7)6.Social income may be estimated by adding together the incomes of the individuals in the society in question, whether it be a nation or any other group of persons.
We must however not count the same thing twice.If we have counted a carpet at its full value, we have already counted the values of the yarn and the labour that were used in making it;and these must not be counted again.And further, if the carpet was made of wool that was in stock at the beginning of the year, the value of that wool must be deducted from the value of the carpet before the net income of the year is reached; while similar deduction must be made for the wear and tear of machinery and other plant used in making it.This is required by the general rule, with which we started, that true or net income is found by deducting from gross income the outgoings that belong to its production.
