Capital Gains in Economic Theory and National Accounting

Steindl, Josef

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Document type:: Works

Collection:: Josef Steindl Collection

Title:: Capital Gains in Economic Theory and National Accounting: Alte Version

Author:: Steindl, Josef

Scope:: Typoskript, 15 Blätter, mit Anstreichungen und Anmerkungen

Year of publication:: ohne Datum

Language:: English

Description:: The national accounts do not know capital gains as they do not deal with assets and consider only the relations of flows in one year. Steindl states that modern economics manages practically to ignore the theoretical relevance of capital gains. Steindl argues that a rise in land or share values creates savings just like real investment and that the exclusion of capital gains from national accounts has led to glaring misinterpretations of the data (distortion of the savings rate). He suggests to introduce separate accounts for capital gains, consumer's credit and investment. Furthermore he explains the macroeconomic implications of creating capital gains.

Note:: Eine längere Version des vorliegenden Textes wurde post mortem (1998) publiziert. Die in diesem Typoskript vorhandenen Texteile sind im Wesentlichen identisch mit dem publizierten Text (es fehlen Kapitel 9 und Teile von Kapitel 10).

Related work:: Steindl, Josef: Capital Gains in Economic Theory and National Accounting. In: Banca Nazionale del Lavoro Quarterly Review, Vol. 51, Issue 207, December 1998, S. 435-449

Topic:: Economic history,economic theory,current developments

JEL Classification:: E22 [Investment, Capital, Intangible Capital, Capacity] E01 [Measurement and Data on National Income and Product Accounts and Wealth, Environmental Accounts]

Shelfmark:: S/M.22.6

Access:: Free access

3 produce savings to finance the appreciation of these assets. A hausse in land or share values would then create effective demand just like real investment. How does it work? Let us assume, to start with, that all transactions in land are financed by bank credit. The buyer of land who is motivated by expectation of hausse will pay a higher than the usual price for it. He finances his purchase with bank credit. The seller of the land will use the proceeds of his sale in order to pay back the credit he had taken when he in turn bought the land. But since he had paid less than he has now received he has got a surplus, his realised capital gain. And the banking system is left with an addition to its credits outstanding, so there is clearly an expansion of credit. Even though there is nothing of substance behind this additional credit it will create effective demand just as if there were. The seller of the land may be assumed to hold his gain in the first place in form of short term assets. In this way the saving created is evident. He may then use his gain for consumption (or if it is a corporation, for paying out dividends ) or for real investment or he may buy bonds. In so far as he consumes this will create a multiplier effect leading to the creation of an equal amount of saving. This is analogous to the effect of consumers'credit. In both cases the consumption does not arise from the circulation of income but rather like an exogenous influence comes from outside ( analogous to investment ). The situation ought not to be different in principle if the transactions are not carried out by means of bank credit but with the purchasers own funds. The vendor receives a sum which is more than sufficient to replace the funds which he in his turn used up

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