58 THE GENERAL THEORY OF EMPLOYMENT BK. II

him in just the same way as changes in his gross profit.It is the excess of the proceeds of the current outputover the sum of the prime cost and the supplementarycost which is relevant to the entrepreneur’s consump-tion; whereas, although the windfall loss (or gain)enters into his decisions, it does not enter into them onthe same scale—a given windfall loss does not havethe same effect as an equal supplementary cost.

We must now recur, however, to the point that theline between supplementary costs and windfall losses,i.e. between those unavoidable losses which we thinkit proper to debit to income account and those whichit is reasonable to reckon as a windfall loss (or gain) oncapital account, is partly a conventional or psycho-logical one, depending on what are the commonlyaccepted criteria for estimating the former. For nounique principle can be established for the estimationof supplementary cost, and its amount will depend onour choice of an accounting method. The expectedvalue of the supplementary cost, when the equipmentwas originally produced, is a definite quantity. Butif it is re-estimated subsequently, its amount over theremainder of the life of the equipment may havechanged as a result of a change in the meantime in ourexpectations; the windfall capital loss being the dis-counted value of the difference between the formerand the revised expectation of the prospective seriesof U + V. It is a widely approved principle of busi-ness accounting, endorsed by the Inland Revenueauthorities, to establish a figure for the sum of thesupplementary cost and the user cost when the equip-ment is acquired and to maintain this unaltered duringthe life of the equipment, irrespective of subsequentchanges in expectation. In this case the supple-mentary cost over any period must be taken as theexcess of this predetermined figure over the actual usercost. This has the advantage of ensuring that thewindfall gain or loss shall be zero over the life of the