CH. 6 THE DEFINITION OF INCOME 57

In reckoning, therefore, the net income and the netprofit of the entrepreneur it is usual to deduct theestimated amount of the supplementary cost from hisincome and gross profit as defined above. For thepsychological effect on the entrepreneur, when he isconsidering what he is free to spend and to save, ofthe supplementary cost is virtually the same as thoughit came off his gross profit. In his capacity as a pro-ducer deciding whether or not to use the equipment,prime cost and gross profit, as defined above, are thesignificant concepts. But in his capacity as a consumerthe amount of the supplementary cost works on his mindin the same way as if it were a part of the prime cost.Hence we shall not only come nearest to common usagebut will also arrive at a concept which is relevant tothe amount of consumption, if, in defining aggregatenet income, we deduct the supplementary cost as wellas the user cost, so that aggregate met income is equal to A- U -V.

There remains the change in the value of the equip-ment, due to unforeseen changes in market values,exceptional obsolescence or destruction by catastrophe,which is both involuntary and—in a broad sense—unforeseen.‘The actual loss under this head, whichwe disregard even in reckoning net income and chargeto capital account, may be called the windfall loss.

The causal significance of net income lies in thepsychological influence of the magnitude of V on theamount of current consumption, since wet income iswhat we suppose the ordinary man to reckon his avail-able income to be when he is deciding how much tospend on current consumption. This is not, of course,the only factor of which he takes account when he isdeciding how much to spend. It makes a considerabledifference, for example, how much windfall gain orloss he is making on capital account. But there is adifference between the supplementary cost and a wind-fall loss in that changes in the former are apt to affect