DEPRECIATION, OBSOLESCENCE, AND THE MEASUREMENT OF THE AGGREGATE CAPITAL STOCK OF THE UNITED STATES 1900–1962

Abstract

This paper is concerned with the sensitivity of estimates of the aggregate capital stock of the United States to the statistician's choice of depreciation method. The usual depreciation charge can be shown to include allowances both for physical deterioration and for obsolescence. If one interprets the gross stock as the stock of surviving assets, then the various net stocks defined by depreciation accounting may be interpreted as a revaluation of these assets by means of an index of embodied technical change. Estimates of the United States capital stock were generated under eight sets of assumptions. These estimates are compared with respect to level, trend, and implications for other aggregate statistical indicators. The conclusion is reached that the assumptions which define a country's stock of tangible capital are of considerably greater importance than has often been supposed.