Sec. 6] PSYCHIC INCOME 173

§ 6

We have reached a convenient place in which to emphasize
 a point of great importance, but one which is seldom
understood. This is, that most of what is called “cost of
production” is, in the last analysis, not cost at all. We
have found, in using the method of couples, that every
objective item of cost is also an item of income, and that in
the final total, no objective items of outgo survive cancellation.
This principle holds true whether we stop our accounts at
the bodily threshold, confining them to a record of objective
 income, or extend them to include the body, thus
yielding a record of psychic income. Those who have
been accustomed to construct their theories of political
economy on the assumption that “cost of production” is
an essential and ultimate item, may do well to reflect carefully
 on this proposition. It means that in a comprehensive
 view of production there is mo cost of production m ts
objective sense at all. All of what is ordinarily called cost
is really cost only with respect to certain accounts; it is
always also income with respect to other accounts. This
is true, for instance, of the cost of raw materials. It costs
flour to produce bread; but all that the flour costs to the
baker is income to the miller. The same is true of wages.
The employer counts his pay roll as cost of production,
but the laborer counts it as earnings.
Glimpses of the fact that all objective costs are always also
objective income, and therefore disappear in the final summation,
 are occasionally found in the books, especially
those on land and interest, although the points of view have
been variable and uncertain. There have been long discussions
 as to whether rent enters into cost of production.
The question has by many been negatively answered.'
Bohm-Bawerk has also maintained that interest was not

1 See the interesting remarks of Jevons in the preface to his Theory
of Political Economy, 3d ed., 1888, p. xvii.