Full text: Capital Gains in Economic Theory and National Accounting

They are not income as far as their origin is concerned, and yet 
they are able to fulfill the functions of income: They can be used 
for consumption or for real investment or failing that for 
investment in financial instruments. In this ambiguous position 
they ressemble consumer's credit which also comes from outside the 
circulation and can fulfill all the functions of income: 
Consumption and investment. This position is truthfully reflected 
if we introduce separate accounts for both capital gains and 
consumer's credit. We have then a CONSUMPTION - INCOME ACCOUNT 
which shows the various ways in which consumption is financed: 
From incomes, from consumer's credit and from realised capital 
gains of households. The balance of these items is saving gross of 
consumer's credit and realised capital gains; we do not consider 
depreciation of dwelling houses in view of the criticism which can 
be justly levied against it (Scitovsky 1986 ) so that the/ saving 
is in any case gross of depreciation. 
The consumer's credit is charged against an account CONSUMERS 
■h 'V ^ 1 
CREDIT, while the capital gains used for consumption are charged 
against an account REALISED CAPITAL GAINS. This last mentioned 
account absorbs capital gains both from corporations and those 
from households which are derived from the respective separate 
accounts.In analogy to the INCOME AND CONSUMPTION ACCOUNT which 
refers to households we have an INCOME AND INVESTMENT ACCOUNT for 
corporations.This shows on the one hand the sources of corporation 
income, that is ordinary commercial profit, and realised capital 
gains; and on the other side the uses, that is investment, 
dividends and, as the balance, the retained profits ( corporate 
saving ).

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