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Concept
Income
Summary
Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. For example, a person's income in an economic sense may be different from their income as defined by law.
An extremely important definition of income is Haig–Simons income, which defines income as Consumption + Change in net worth and is widely used in economics.
For households and individuals in the United States, income is defined by tax law as a sum that includes any wage, salary, profit, interest payment, rent, or other form of earnings received in a calendar year. Discretionary income is often defined as gross income minus taxes and other deductions (e.g., mandatory pension contributions), and is widely used as a basis to compare the welfare of taxpayers.
In the field of public economics, the concept may comprise the accumulation of both monetary and non-monetary consumption ability, with the former (monetary) being used as a proxy for total income.
For a firm, gross income can be defined as sum of all revenue minus the cost of goods sold. Net income nets out expenses: net income equals revenue minus cost of goods sold, expenses, depreciation, interest, and taxes.
Haig–Simons income
"Full income" refers to the accumulation of both the monetary and the non-monetary consumption-ability of any given entity, such as a person or a household. According to what the economist Nicholas Barr describes as the "classical definition of income" (the 1938 Haig–Simons definition): "income may be defined as the... sum of (1) the market value of rights exercised in consumption and (2) the change in the value of the store of property rights..." Since the consumption potential of non-monetary goods, such as leisure, cannot be measured, monetary income may be thought of as a proxy for full income. As such, however, it is criticized for being unreliable, i.e.
Official source
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