US capital equipment getting younger

Discussion in 'Economy' started by Widdekind, Jul 8, 2012.

  1. Widdekind

    Widdekind Member

    Mar 26, 2012
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    From "gross capital formation" and "fixed capital consumption", for the US, since 1929, i calculated net accumulated capital, in real (inflation-adjusted) terms. In 2005 dollars, i calculate that the US has fixed capital assets (surviving houses, buildings, factories; bases, warships, supercomputers) of $32T, representing the balance, of $78T installed over the past century, reduced by $46T of accumulated wear-and-tear. Logically, depreciation "destroys" the oldest capital. So, you can compute an estimated average age of capital, in any given year, by summing backwards in time, over annual gross capital formations (new capital), until the total adds up, to the current capital accumulation. (Summing further back in time, over all the capital installed decades ago, offsets accumulated depreciation to date.)

    WWII, and the War on Terror, modernized US capital, reducing the overall average age of the same, by about 4 years (green squares). Purely private-sector capital (houses, buildings, factories) has also been steadily modernizing since 1960 (blue diamonds, pre-1960 data is guesswork). On average, US capital is over a decade old; US private capital is over two decades old. US capital assets are not "aging into decrepitude", as some seem to say (according to this analysis, of these statistics); US capital is modernizing.


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