Jim asked about how the government handles moral depreciation. They ignore it. Long ago, not long after he graduated, I have a long discussion with Stephen Oliner about this subject. His work was not yet widely known and we spoke about collaboration, but nothing came of it.
What he does, and he does it well, is to look at depreciation patterns based on secondhand goods. From there, he tries to create a mathematical formula a few replicate resale market values. In terms of moral depreciation, these historical patterns are broken. Also, the empirical work looks a few secondhand markets, which are thick enough to have reliable prices. For example, automobiles are resold frequently than secondhand markets give fairly good information, so long as things do not change much. The spike in gasoline prices changes the depreciation of Hummers, so historical data will be misleading. Also, even for fairly similar goods, depreciation patterns will be different. That will go for software too. The introduction of Vista did not make XP obsolete as fast as earlier generations of Microsoft software did. Different categories of software would also have different depreciation patterns. On Fri, Apr 25, 2008 at 04:25:26PM -0400, Doug Henwood wrote: > > On Apr 25, 2008, at 4:06 PM, Jim Devine wrote: > >> how does the NIPA count "moral depreciation"? (I don't mean the kind >> that happens on the Upper Left Side of Manhattan.) > > There's this great thing called Google - which in PEN-L land operates > largely without capital assets - that, if you enter "software depreciation > site:bea.gov" into its query box, returns this cite: > > <http://www.bea.gov/scb/account_articles/national/0400niw1/maintext.htm> > >> Recognition of software as investment.--In the NIPA's, business and >> government expenditures for software are now recognized as fixed >> investment.7 The investment flows are now capitalized and included in the >> net stocks of private and government fixed assets. Software investment has >> three components--prepackaged software, custom software, and own-account >> software. Prepackaged software has an average service life of 3 years and >> is depreciated geometrically at a rate of 0.55 per year; custom and >> own-account software have average service lives of 5 years and are >> depreciated geometrically at a rate of 0.33 per year. In tables 1 and 2, >> software is included in all the components except private nonresidential >> structures and residential. For 1996, the inclusion of software as a fixed >> asset added about $174 billion to the net stock of private fixed assets >> and about $56 billion to the net stock of government fixed assets. >> >> Depreciation pattern for personal computers.--The method for estimating >> the net stock of personal computers (PC's) has been changed. The >> depreciation of PC's is now based on a California study of fair-market >> values of personal property including PC's.8 The new estimates are based >> on a geometric pattern of depreciation that by the fifth year, results in >> a residual value for a PC of less than 10 percent of its original value. >> In the previously published estimates, the depreciation pattern for PC's >> was based on work by Stephen Oliner of the Federal Reserve Board that >> included a general depreciation schedule for computers, but not for PC's.9 > > Reading PEN-L sometimes you'd think that the BEA and BLS are staffed by a > bunch of dolts. > > Doug > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu michaelperelman.wordpress.com _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
