Fisherian income, on the other hand, is the amount of output that can be consumed in the current period while allowing as much consumption in each successive period-it is the consumption annuity provided by command over resources. Saving thus defined excludes capital gains unless the gain reflects an increase in consumption possibilities. For an economy, revaluation of assets does not reflect such an increase, except in the case of claims on foreigners. However, capital gains that reflect revisions in expected future productivity do affect Fisherian income and, to the extent this income is not consumed, Fisherian saving. At the household level, capital gains that reflect revaluations of claims on others do count as income, just as national claims on foreigners do at the aggregate level.
Fisherian income is thus the natural measure for explaining individual consumption behavior.
The authors note that which definition of saving is most appropriate depends on the question being asked, and that measuring saving by either definition poses problems. For example, to understand how well households are preparing for retirement, it would be logical to focus on personal wealth measures, including claims on social security and medicare benefits. In contrast, when examining government policies that encourage saving for retirement, it would be logical to include the effects on government saving as well as on private saving, since a policy that raised private saving but reduced government saving by more would reduce rather than add to capital accumulation. Another issue is how broad a definition of consumption or of capital to use. Capital can be defined narrowly as the physical stock of plant and equipment used in production, or it can include tangible and intangible investments in technology and investments in human, public, natural, and environmental capital.