Full text: Capital Gains in Economic Theory and National Accounting

It is one of the peculiarities of our very peculiar subject that 
it takes very little notice of capital gains. The national 
accounts do not know them at all and economic theory has very 
little if anything to say about them. The reason? Well, the 
national accounts have two limitations which together prevent any 
consideration of the matter: They do not deal with assets, and 
they consider only the relations of flows taking place in one and 
the same year, not relations of flows in different years. ( This 
is inevitable because the system of identities refers to one given 
period ). If they did we should find that the gains of estate 
(yf-•tvw-!./ f *./ 1 
speculators are paid out of the rents of home dwellers in later 
years, and it might then be possible to regard realised capital 
gains as a special kind of transfer incomes ( the rent or interest 
paid by the home dweller services a loan which bought the land and 
from which the speculator's gain was paid ).As it is, all the 
accounting identities must refer to one and the same period. On 
the other hand, as far as theory is concerned the prevalence of 
equilibrium ideas somehow deflects the interest from facts which 
from this point of view may appear abnormal or unessential. 
But if you consider how vastly the value of the urban land has 
increased in the course of modern capitalist history and is still 
increasing all the time you wonder at the oddness of our modern 
economics which manages practically to ignore the theoretical 
relevance of capital gains for the distribution of income in the 
long run and for the accumulation of credit instruments which 
finance them in the short run. The astonishment gets even greater 
if we think of the casino society in which we live and the hausse

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