<h2>CHAPTER 6</h2>
<h3>PSYCHIC INCOME</h3>
<h4>§ I. INCOME AS A FLOW OF GOODS</h4>
<div class="sidenote">The recurrence of wants</div>
<p>1. <i>Satisfaction and gratification being only temporary conditions,
economic wants appear in more or less regularly recurring series.</i>
Impressions are short lived, sensations are temporary, wants that have
been satisfied recur. Wants recur for the same reason that they first
arose. No impression on the nerves or on the senses is lasting. Man's
senses were developed for the purpose of bringing him into relation with
the outer world, of enabling him to survive in his struggle with the
forces of nature. So, when a good has been enjoyed, the utility to that
person of that thing or service for that particular moment, falls, it
may be even to zero. To keep wants satisfied is impossible; we cannot do
next year's reading or next week's eating now; we cannot live the life
of to-morrow. The best results in reading or eating come from taking the
right amount day by day. But it is a need in the life of men that wants
should recur after a time, otherwise there would be no motive for
action.</p>
<div class="sidenote">Series of wants and series of goods</div>
<p>2. <i>The economic ideal is that this series of recurring wants should be
met by a corresponding series of goods.</i> It is evident that if a series
or succession of goods varies, at different times, moments, and
conditions, in its power to gratify wants, the closer the correspondence
between the two series, that of wants and that of goods, the greater
will be the total of gratification. We may liken man's life to a journey
in which the supplies of food are gotten at the stations.<span class="pagenum"><SPAN name="Page_40" id="Page_40">[Pg 40]</SPAN></span> If any one of
these supplies fails, the traveler suffers the pangs of hunger, and if
two or three supplies are at one point, they do not serve the needs of
man so well as if distributed along the way. This constant inflow of
goods is one of the fundamental needs of life. The savage dimly
understands this need. Even the birds and the beasts adjust their lives
to it either by travel or by toil. The spring and autumn migrations to
new feeding grounds are the attempts of the bird to gratify this series
of wants as they arise. The ant, the bee, and the squirrel anticipate,
and work to fill their storehouses against the days of need.</p>
<div class="sidenote">Social and private incomes</div>
<p>3. <i>Objective income consists of the additional sums of goods acquired
by individuals or by society during the income period.</i> The term
national or social income may be contrasted with individual or private
income in the objective sense. The nature of the acquisition of
objective incomes may, in some cases, be different if viewed from the
social and individual standpoints. Society, as a whole, may be said to
acquire income only when goods are produced; individuals may acquire
income by gift, bequest, theft, or other modes of transfer from other
individuals. In many cases the two kinds of income, however, agree, the
objective income of society being the algebraic sum of the goods
acquired or parted with by all the individuals.</p>
<p>We should not understand that either social or private objective incomes
include only material goods, for many utilities and labor services that
never take on a material or money expression are included in either
case. Indeed, we are close here to the conception of psychic income
which is to be developed more fully.</p>
<div class="sidenote">Money income</div>
<p>Income of money is not often the same as income of things. Usually many
of these subtler utilities are overlooked and omitted from the
recognized money income. In this day the use of money is so common that
we are sometimes led to ignore the value of things to which the money
expression is not given. The money income is merely the money
expression<span class="pagenum"><SPAN name="Page_41" id="Page_41">[Pg 41]</SPAN></span> of the value of currently acquired goods, and it is the only
medium through which such varied sources of gratification can be
compared.</p>
<div class="sidenote">Gross and net income</div>
<p>4. <i>Income in the logical sense must be a net addition, but the term
gross income is not without popular and practical meaning.</i> Gross income
is sometimes spoken of in the sense of total receipts, as the total of
goods secured; net income is the remainder after deducting expenditures
and after replacing the goods employed to secure the income. In order to
produce some goods technically, men make use of other goods. While they
are storing up a supply of wood or coal it may be looked upon as the
income, but they may burn it to help grow hothouse plants. While they
gather flowers with one hand, they destroy fuel with the other. Only the
net increase in value can be accounted income in the second period. The
goods that come into a man's possession in any period are of many sorts:
to get some he has destroyed many previously existing goods; while to
get others he has not needed to use up the accumulations of the past or
to mortgage the future. The one kind is gross, the other net income.</p>
<div class="sidenote">Wealth and income</div>
<p>5. <i>An income of consumption goods is a part of wealth, but not the
whole of it.</i> The consumption goods, the "present goods" at the moment
available, are the essential part of wealth for the moment's enjoyment.
The only essential and immediate conditions of a series of
gratifications is a regular series of consumption goods. But many things
existing which could be used to secure a gratification are not in fact
treated as consumption goods. A crop of corn is not all income. In a
time of famine it could be used, but seed-corn was saved from last year,
and some must be kept for next year. This is a part of wealth, but not
of "present goods" as we understand the term.</p>
<div class="sidenote">Some goods never can become enjoyable goods</div>
<p>Further, in the economic world there is much wealth that never can
gratify any want directly; many forms of wealth never can be consumption
goods. It is true that everything called wealth is expected to
contribute sooner or later in some<span class="pagenum"><SPAN name="Page_42" id="Page_42">[Pg 42]</SPAN></span> way to the sum of gratifications. It
is for that reason it is called wealth. It is, however, a mere figure of
speech to say indirect want-gratifiers become want-gratifying goods. For
example, the engine transporting a load of coal is indirectly gratifying
wants; if it is transporting a train-load of passengers, the
gratification is direct. A machine making cloth for next year is
gratifying wants only in a metaphorical sense. A field used to produce
food is not a direct want-gratifier until it is transformed into a
residence site, a playground, or a tennis-court.</p>
<p>It is necessary therefore to recognize the distinction between present
and future incomes. The value of the mass of wealth in possession and
yielding income, rests in large part upon its power of contributing to
income in some future period. Thus, any durable good may be looked upon
as embodying a series of incomes ranging from present to future in
varying degrees. This will be fully considered under the subject of
capital.</p>
<div class="sidenote">Income from wealth and from labor</div>
<p>6. <i>Incomes are called funded or unfunded according to the sources from
which they are derived.</i> Funded income arises from the possession of
wealth or of claims on wealth, such as lands, railroad stocks,
government bonds, etc. The income is "funded" because it corresponds to
an abiding fund of wealth. The income arising from current labor is
unfunded, because there is no permanent fund of accumulated wealth
corresponding to it.</p>
<p>The idea of regularity connected with funded income is not essential to
the idea of income in general, <i>i.e.</i>, we cannot refuse to call a thing
income because it occurs only this year. If it is part of the sum of
goods that flows in, that is newly available for the man's use, it is
income. But funded income is the more abiding, for income from wages
stops when the man dies or fails to perform his work, while the income
from wealth continues after he ceases to be active. Thus, families with
equal incomes may differ greatly in wealth, the one depending entirely
on salaries, the other on rents.</p>
<p><span class="pagenum"><SPAN name="Page_43" id="Page_43">[Pg 43]</SPAN></span></p>
<h4>§ II. INCOME AS A SERIES OF GRATIFICATIONS</h4>
<div class="sidenote">Gratification the test of psychic income</div>
<div class="sidenote">All sources of income are productive</div>
<p>1. <i>The value of consumption goods is derived from the pleasurable
psychic impressions which they aid to produce, and these psychic effects
constitute the psychic income.</i> The objective income is sometimes called
the "real" income, but certainly it is not income in the most essential
sense. Things outside of men cannot be feelings, they can only call out
or occasion feeling, and it is the attainment of pleasurable conditions
in mind or soul that is the aim of all economic activity. Material
income and immaterial income are both related to and reducible to
psychic income. Some portions at least of the objective incomes of goods
are continually by use becoming subjective incomes of enjoyment. Men
talk of material income as consisting of bushels of wheat, head of
cattle, etc., and of immaterial income as the uses that durable goods
yield directly or that men perform for each other, <i>e.g.</i>, those of the
singer, physician, teacher, judge—all services that do not take on
material form. There was a long-standing dispute in economic literature
regarding the difference between productive and unproductive labor.
Productive labor was said to be that which embodied itself in abiding
material form. The distinction led to some peculiar puzzles and
paradoxes. The bartender mixing drinks, adds to the value of those
ingredients; in a minute that value is dissipated. According to the
distinction in question, he is a productive laborer because his services
are embodied in material form, whereas the lecturer is regarded as an
unproductive laborer because the results of his labor are not embodied
in material form. But whether or not the service has for a moment
embodied itself in material form is of no essential economic import. The
presence of the waiter is as essential to the well-served dinner as are
the polished silver and china, or as the well-cooked food. The
distinction in question is not now made by economists, all labor that
contributes to<span class="pagenum"><SPAN name="Page_44" id="Page_44">[Pg 44]</SPAN></span> value being regarded as productive. But a similar
distinction is inconsistently preserved by many writers in the case of
material things. A building used as a factory is called productive, but
used by the owner as a dwelling it is called unproductive because the
service it renders does not appear in material form. But the use of the
house, or that of land for a school ground or campus, secures a certain
gratification, an immaterial good. Consistency requires that the
services of men and the use of material things be judged by their
psychic results, the question whether the service takes on a material or
an immaterial form being disregarded.</p>
<div class="sidenote">All wealth is logically related to psychic income</div>
<p>2. <i>Only those things and actions that are in some causal relation to
gratifications can have value to man.</i> This proposition of theory is
demonstrated every hour in practical life. The business man always is
trying to trace a causal relation between things that do not and cannot
themselves directly satisfy wants, and things that do. The vineyard has
no value to Tantalus, unable to reach its fruit. A captive, chained to a
rock, attaches value only to the things within his reach. Men living in
savagery and ignorance starve amid the possibilities of plenty. Chained
by their ignorance and improvidence to a little spot of earth, they do
not see clearly, either in time or space, the economic relations about
them.</p>
<div class="sidenote">Values of things distant in time</div>
<p>3. <i>Man's foresight and knowledge enable him to think of many periods at
once, and thus his felt dependence on goods extends over a series of
future productive agents.</i> In order to simplify the problem, we have
spoken of the economic man as living only in and for the moment. If he
had no more knowledge, memory, or imagination than is necessary to
compare goods here, only present goods could have value to him. Even the
higher animals, and much more the savages, rise above that level of
improvidence. With increased intelligence the economic life of man
expands, and he attaches importance to things which at the present
moment have not, and cannot have, the slightest influence on his
immediate<span class="pagenum"><SPAN name="Page_45" id="Page_45">[Pg 45]</SPAN></span> gratification. The extension of man's view works a momentous
change in his economic estimates. Of the thousands of forms of matter in
the world, only a comparatively few ever will make an immediate
gratifying impression on man's senses. But many of them are so connected
in his thought by chains of association with pleasures or uses, that
almost instinctively and most intensely he attaches an importance to
them. In most cases it would require close thought to see that the
service attributed directly to them was but a reflection of that
performed by some other good. Thus, more and more, the estimates placed
by men on goods come to depend on knowledge and foresight, and not on
immediate impressions and feelings.</p>
<div class="sidenote">Goods related in varying degrees to psychic income</div>
<p>4. <i>Things are causally related in varying degrees to the psychic
income, and have value only as their relation is known and felt.</i> The
explanation of value is not complete till value has been traced back to
its source in gratification. Often the complex nature of the problem is
ignored. If one discusses the trading of a bushel of grain, to be used
by a hungry man for food, for a sheep to be kept for breeding, or for
wool to be made into cloth next year, he may overlook the difference in
the grade of wants compared. In this case, a gratification of the
present moment is compared with a gratification of a very different kind
at a future time. The problem involved is complex because of differences
in time, in place, and in the nature of the want-gratifiers. The student
should endeavor to reduce the problem of value to its simplest form by
considering first the exchange, at the present moment, of immediately
enjoyable goods. The logical starting-point in the theory of value is in
those goods that are in closest touch with feeling, and on this basis
may be built up an explanation of values in which reason and forethought
have a greater part. Starting from the proposition that psychic income
is the foundation of all values, we shall go on, however, to trace
causes that give value to all the physical agents, and to the most
indirect of want-gratifiers.</p>
<hr class="chap" />
<p><span class="pagenum"><SPAN name="Page_46" id="Page_46">[Pg 46]</SPAN></span></p>
<h2>DIVISION B—WEALTH AND RENT</h2>
<hr class="chap" />
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