INCOME AND CAPITAL

to the employer of labor, whether or not they be so re-garded by the laborer. 7

If we exclude labor pain and further exclude from thelaborer’s bookkeeping the income items, positive andnegative, flowing from his household effects—the use offurniture, clothing, food, and so on—the total incomethen turns out to be not his real income but his money in-come —assuming that, as is ordinarily true, all his incomeflows in through money payments and none in kind.

§14. Capital Gain not Income

The most interesting and valuable result of applyingthese bookkeeping principles is that thereby we automat-ically separate capital from income, two things whichare so often confused and in so many ways. It is notuncommon for economic students to make the mistakeof including capital gains as income. Capital gains, asalready implied, are merely capitalization of future in-come. They are never present income. Therefore a truemeticulous accounting, item by item, of the income, or ofthe services and disservices, rendered by any specifiedgroup of capital items will infallibly grind out this truth.It will never confuse capital gain in that capital groupwith income realized from that group. This is truewhether our capital group and its income are so extendedas to include enjoyment income (positive and negative)as the final net income, or whether our specific group is sorestricted as to leave plowing or money payments asthe uncancelled fringe. 8 We shall always find that onlythe income actually detached from, or given off for en-

7 They may be so regarded in cases where labor is paid by the pieceand the laborer is free to stop work at any point.

* See The Nature of Capital and Income, Chapters VII-X.

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