CH. 6 APPENDIX ON USER COST 67

user cost is simply the equivalent of the current disinvestmentinvolved in using the equipment; but we are still left with theadvantage that we do not require at any stage of the analysisto allocate the factor cost between the goods which are soldand the equipment which is retained. Thus we can regard theemployment given by a firm, whether integrated or individual,as depending on a single consolidated decision—a procedurewhich corresponds to the actual interlocking character of theproduction of what is currently sold with total production.

The concept of user cost enables us, moreover, to give aclearer definition than that usually adopted of the short-periodsupply price of a unit of a firm’s saleable output. For the short-period supply price is the sum of the marginal factor cost andthe marginal user cost.

Now in the modern theory of value it has been a usualpractice to equate the short-period supply price to the marginalfactor cost alone. It is obvious, however, that this is onlylegitimate if marginal user cost is zero or if supply price isspecially defined so as to be net of marginal user cost, just as Ihave defined(p. 24 above)“proceeds” and“aggregate supplyprice” as being net of aggregate user cost. But, whereas it maybe occasionally convenient in dealing with output as a whole todeduct user cost, this procedure deprives our analysis of allreality if it is habitually(and tacitly) applied to the output of asingle industry or firm, since it divorces the“supply price” of anarticle from any ordinary sense of its“price”; and some con-fusion may have resulted from the practice of doing so. Itseems to have been assumed that“supply price” has an obviousmeaning as applied to a unit of the saleable output of an in-dividual firm, and the matter has not been deemed to requirediscussion. Yet the treatment both of what is purchased fromother firms and of the wastage of the firm’s own equipment asa consequence of producing the marginal output involves thewhole pack of perplexities which attend the definition of income.For, even if we assume that the marginal cost of purchases fromother firms involyed in selling an additional unit of output hasto be deducted from the sale-proceeds per unit in order to giveus what we mean by our firm’s supply price, we still have toallow for the marginal disinvestment in the firm’s own equip-ment involved in producing the marginal output. Even if allproduction is carried on by a completely integrated firm, it isstill illegitimate to suppose that the marginal user cost is zero,i.e. that the marginal disinvestment in equipment due to theproduction of the marginal output can generally be neglected.