THE THEORY OF INTEREST

miscellany of income items we could never avoid confu-sion and double counting and that the sum total wouldfar exceed the true psychic or enjoyment income. But thefact is that almost as many negative items as positiveitems are included here and that, in fact, except for en-joyment income and labor pain, every positive item isalso negative, according to its relation to the capitalsource. Thus when Smith pays Jones $100 (no matterwhere it came from), Jones receives an item of incomeof $100 while Smith suffers an item of outgo of the sameamount; and when a coupon of $100 is cut from a bondand deposited, the bond is credited with yielding $100and the bank account is debited with the same sum. Thesame principle is applicable to the final big coupon calledthe principal of the bond. The same item is thus enteredtwice, once on one side of somebody’s books and theother time on the other side of somebody’s books.

The bookkeeping implications of such couples of itemswere discovered by accountants long ago and are thebasis of their double entry bookkeeping, though its econ-omic significance has been largely overlooked. One im-portant significance is that this double entry preventsdouble counting; when we take the sum total of all in-come items for society, including psychic as well as physi-cal items, this double entry results in cancelling outeverything except the psychic items of enjoyment andlabor pain.

Every operation of production, transportation, ex-change, or consumption—every process, in fact, exceptfinal enjoyment—is double faced, or two items in one. Ihave called such an operation an “interaction” becauseit is income to be credited to the capital which yields it,while it is outgo to be debited to the capital which receives

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