CH. 6 THE DEFINITION OF INCOME 63

equipment as a result of the productive activities of the

eriod and is, therefore, the investment of the period.Similarly A1- U -V, which is the wet addition tocapital equipment, after allowing for normal impair-ment in the value of capital apart from its being usedand apart from windfall changes in the value of theequipment chargeable to capital account, is the netinvestment of the period.

Whilst, therefore, the amount of saving is an out-come of the collective behaviour of individual con-sumers and the amount of investment of the collectivebehaviour of individual entrepreneurs, these twoamounts are necessarily equal, since each of them isequal to the excess of income over consumption.Moreover, this conclusion in no way depends on anysubtleties or peculiarities in the definition of incomegiven above. Provided it is agreed that income isequal to the value of current output, that current invest-ment is equal to the value of that part of current outputwhich is not consumed, and that saving is equal to theexcess of income over consumption—all of which is con-formable both to common sense and to the traditionalusage of the great majority of economists—the equality ofsaving and investment necessarily follows. In short—

Income= value of output= consumption+ in-vestment.

Saving= income- consumption.

Therefore saving= investment.

Thus any set of definitions which satisfy the aboveconditions leads to the same conclusion. It is onlyby denying the validity of one or other of them thatthe conclusion can be avoided.

The equivalence between the quantity of savingand the quantity of investment emerges from thebilateral character of the transactions between theproducer on the one hand and, on the other hand,the consumer or the purchaser of capital equipment.