CAPITAL GAINS IN ECONOMIC THEORY AND NATIONAL ACCOUNTING.
/ifez.
I. STRANGE OMMISSIONS.
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 speculators are paid out of the rents or interest on the
mortgage 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 and capital gains it has produced
in the 80s. The shares are not as difficult to reproduce as land and works of
art but are not as promptly reproduced as manufactures, so that they are liable
to great price fluctuations and also to a long time trend increase in value
reflecting the accumulation within the firm. Again very unlike manufactures are
raw materials and agricultural produce which therefore give rise to price
movements and speculative gains.
II. CAPITAL GAINS AND THE KEYNES- KALECKI PARADIGM.