152 NATURE OF CAPITAL AND INCOME [Crar. IX 
outgoes are incomes for other people. The wages are the 
earnings of labor; the payment for raw material is re- 
ceived by some other manufacturer; the rent by the land- 
lord; the interest charges by the creditor. 
§ 6 
Not only do exchange transactions completely cancel 
themselves out in reckoning total income, but the great 
majority of the natural services of capital do so also. 
Even these natural uses of capital consist, for the 
most part, of “interactions,” — they are transformations 
or transportations of wealth. These intermediate stages 
are merely preparatory to the final use or so-called “con- 
sumption’ of wealth, and, after the interactions have been 
canceled out, do not enter as items either on the income 
or outgo side of the social balance sheet. 
In order to show the effect of canceling out the equal 
and opposite items entering into every interaction 
throughout the productive processes, let us observe the 
various stages of production which begin with the forest 
above referred to. The product of the forest, its gross in- 
come, is the series of events called the turning out of logs. 
This log-production is a mere preparatory service, a credit 
item to the forest and a debit item to the stock of logs of 
the saw mill, to which they next pass. As the sawmill 
turns its logs into lumber, the lumber yard is debited with 
the production of lumber, and the sawmill is credited with 
its share in this transformation. 
Intermediate categories may, of course, be created, and 
we may follow, in like manner, the further transformation, 
transportation, and exchange to the end of the stages of 
production, or rather, to the ends; for these stages split up 
and form several streams flowing in different directions. 
To indicate merely one of these streams, let us suppose that 
the lumber which goes out from the yard is used in repairing 
a certain warehouse. The warehouse is used for storing