 Measurement of diverse, irreversible capitalRobert D. Cairns Review of Income and Wealth, 2023, vol. 69, issue 4, 931-951 Abstract: This paper revisits capital measurement through a microeconomic analysis of a simple project consisting of diverse types of irreversibly invested capital. Capital is aggregated using the numeraire. Thus, the proposed method of measurement is a form of accounting. It associates all types of capital in a common framework. Under certainty, user cost and depreciation take internal accounting values that obey three axioms that comprise five conditions. The accounting values proliferate, but they have only a limited relation to market prices or shadow prices. Each type of capital earns the market rate of interest. In practice, under uncertainty, calculation of the accounting values would require projections of basic data, and would be hard to comprehend, especially for outsiders, and would leave room for moral hazard. Because of these obstacles, accounting practice departs from the ideal based on cash flows and strictly limits choice by using prescribed schedules of depreciation. These schedules are interpreted from an economic perspective. Date: 2023 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bla:revinw:v:69:y:2023:i:4:p:931-951 Ordering information: This journal article can be ordered from Access Statistics for this article Review of Income and Wealth is currently edited by Conchita D'Ambrosio and Robert J. Hill More articles in Review of Income and Wealth from International Association for Research in Income and Wealth Contact information at EDIRC. |
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