Haig-Simons equation

The Haig-Simons equation was developed by American economists Robert M. Haig and Henry C. Simons in the 1920s and 1930s. It defines economic income as

C + ΔW

where C = consumption and ΔW = change in wealth.

Here, broadly speaking, consumption refers to the purchase or acquisition of goods and services of any kind. However, consumption does not include business expenses.

Note that the difference between business expenses and consumption may sometimes be unclear. For example, if someone buys a car for use in conjunction with a business but also uses it for personal uses, how much should count as business expense and how much as consumption?