126 NATURE OF CAPITAL AND INCOME [Cmar. VIL

who has had the foresight to set aside annually throughout
the period of existence of the house a small deposit in a
savings bank, may derive therefrom, when the time for
rebuilding arrives, a large sum of money, the receipt of
which is just as properly an element of income as its
expenditure for rebuilding is an element of outgo. The
great oulgo for rebuilding is then offset by a great income
from the savings bank account, so that the combined net
income from the two sources — depreciation fund and
house — will be approximately zero and the total net income
 of the individual will be affected little or not at all.
The depreciation fund, therefore, does not prevent, but
merely offsets the large negative balance in the income
account from the “house and lot” considered by itself.
The combined income from the two sources taken together
will be negligible, but that from the one source, the “house
and lot,” will fluctuate. In figures, from this single source,
the net income is evidently + $1000 a year for each of fortynine
 years, and — $9500 for the fiftieth year. It is misleading
 to say that the $1000 is “gross” income from which must
be deducted the depreciation fund or “amortization” supposed
 to be laid aside each year against the cost of rebuilding.
 Merely to suppose a depreciation fund is not to have
one. It is quite true that the $1000 income which the house
yields during each of forty-nine years is more than theincome
which would have been left after an annual payment into
a depreciation fund had actually been made; but an income
which simply might have been is only an ideal standard.
Confusing the actual and the ideal is one of the commonest
fallacies in this field. The actual net income of the house
and lot is alone the object of our present study, and this
actual income, in the example we are supposing, is $1000
each year for forty-nine years. While this sum is in excess
of the ideal standard income during each of these fortynine
 years, this overplus is atoned for by the sudden and
large deficiency every fiftieth year.