The nature of capital and income

Bibliographic data

Monograph

Identifikator:: 102659555X

URN:: urn:nbn:de:zbw-retromon-82920

Document type:: Monograph

Author:: Fisher, Irving http://d-nb.info/gnd/118533541

Title:: The nature of capital and income

Place of publication:: New York

Publisher:: The Macmillan Company

Year of publication:: 1923

Scope:: XXI, 427 Seiten

Digitisation:: 2019

Collection:: Economics Books

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Document type:: Monograph

Structure type:: Chapter

Title:: Part III. Capital and income

Collection:: Economics Books

238 NATURE OF CAPITAL AND INCOME [Cmae. XIV the income earned (and hence equal to the rate of interest), the value of the capital will remain at a uniform level. (2) If realized income exceeds earned income, the value of the capital will be decreased by the amount of the excess. (3) If realized income is less than earned income, the value of the capital will be increased by the deficiency. These principles hold true whether the period for reckon- ing or compounding interest is a year, half year, quarter, or any other period, or shrinks to the vanishing point in the case of continuous interest. A slight modification or qualification in the statement of these principles is, how- ever, necessary when, instead of there being a rate of in- terest which remains the same year after year, there is a succession of different rates.' Expressed in a single sentence, the general principle connecting realized and earned income is that they differ by the appreciation or depreciation of capital. It is thus possible to describe earned income as realized income less depreciation of capital, or else as realized income plus appreciation of capital. We may therefore state anew the fallacy of confusing realized income with earned income: the fallacy consists in reckoning depreciation of capital as a part of outgo, or appreciation of capital as a part of income. This usage is difficult to combat, for with many it has become habitual. To expose the fallacy completely will be our object during the remainder of this chapter. §6 We may at the outset emphasize a fact already mentioned in Chapter VII; namely, that this popular and erroneous usage is not consistently adhered to. A pension is an income the capital-value of which is continually diminish- 1 The case is discussed in the Appendix to Chap. XIV, § 1. Fer practical purposes, however, this is a refinement into which we sel- dom need to enter.

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