On Jun 14, 2006, at 12:49 PM, Michael Perelman wrote:
The NIPA method has the serious problem of lumping together diverse types of capital, for example, office equipment, which I assume includes both staplers and computers.
You know, I don't think they're stupid. Their depreciation methodology paper, by Barbara Fraumeni, is at <http://www.bea.gov/bea/articles/NATIONAL/NIPAREL/1997/0797fr.pdf>.
Now they're talking about including software. I would really like to know your opinion on the software question.
They've included software since the 1997 revisions - the methodology paper is at <http://www.bea.gov/bea/papers/software.pdf>. An excerpt: "In determining the depreciation pattern, a 3-year service life is used for prepackaged software, and a 5-year service life is used for both custom software and own-account software; the 3-year service life is the same as that used in current tax law. (These service lives roughly correspond to annual geometric depreciation rates of 55 percent and 33 percent.) The service lives are based on some indirect quantitative estimates of the relationships between computers expenditures and software expenditures, anecdotal evidence (including an informal survey of business use of software previously conducted by BEA) about how long software is used before it is replaced, and tax-law-based lives of software." Those lives don't seem wacky to me. Doug
