Full text: Capital Gains in Economic Theory and National Accounting

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 ). 
We have further an INVESTMENT - SAVING ACCOUNT which shows the uses to 
which gross savings are put: the finance of gross investment, consumer's credit, 
capital gains creating spending on assets, and the budget deficit. Consumer's 
credit and the budget deficit are more often regarded as dissaving, but the 
practical effect of this is to reduce the amount of information. I prefer to 
make it explicit that the consumer's credit of some people must be financed by 
the saving of others, no less so than the budget deficit. In the same way the 
spending on assets, in so far as it increases prices, must be financed by the 
capital gains realised by the vendour of the asset. Against these "investments" 
there stand the various types of savings: The personal saving (household saving 
), gross of consumers'credit and realised capital gains, the corporate savings 
gross of realised capitalOOOO gains and finally ( if we think of American 
conditions ) the foreign balance deficit. Thus by introducing two exogenously 
determined accounts for consumers credit and for realised capital gains we can 
enrich the information given by the accounts in such a way that the 
misconceptions mentioned earlier on can be avoided. What then is the practical 
consequence of all this? It is, quite simply, that the publication of one single 
and unique saving ratio, which pretends to be self explanatory and simple, 
should be stopped, and it should be made clear to the public ( which 
unfortunately includes many economists ) that there are various saving ratios 
with different meanings and that it will not do to refer to any of them without 
proper specification. I can already hear the objection that this will confuse 
people. No, they are confused already now, only they don't know it. If they 
realise that they are confused they will at least refrain from spreading their 
confusion to others. 
The above proposals have still to be supplemented by a number of details. This 
concerns first of all the treatment of owner-occupied houses in the accounts. 
According to the NIPA philosophy they are treated in strict analogy to tenant- 
occupied houses that is as a business selling a service against rent. The owner- 
occupier is supposed to sell the service to himself, the fictitious rent he pays 
to himself is imagined to be equal to the rents actually paid for similar houses

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