Full text: Capital Gains in Economic Theory and National Accounting

lost in importance since his time, the decrease in importance of agricultural 
rent having been compensated by an increased importance of urban rent. Marx and 
other economists denied the importance of rent since, they argued, rent and 
profit, capital and land, could in practice not easily be distinguished. But the 
above analysis shows that there is a conceptual difference between them which is 
quite important. 
The exclusion of the capital gains from the national accounts has led to glaring 
misinterpretations of the data. If households finance consumption by means of 
realised capital gains this appears in the accounts as a reduction of personal 
saving. If corporations use such gains to pay more dividends then the accounts 
show a reduction in retained profits. The distortion of the savings rate which 
has been caused by the stock exchange boom in the middle of the 80s in 
connection with the pension funds has been dealt with in an earlier paper ( 
Steindl 1990 ). 
The capital gains do not arise in the circular flow of production and incomes, 
they occupy a special position in the accounts. 
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 forO 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 personal saving is in any case gross of depreciation. 
The consumer's credit is charged against an account CONSUMERS CREDIT, while the 
capital gains of households are charged against an account REALISED CAPITAL 
GAINS. This last mentioned account absorbs capital gains both from corporations 
and from households; they are derived from the respective separate accounts.In

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