Investment Or Durable Good? #3

There are some business expenses that are clearly investment expenses, e.g. all the parts and labor that go into an auto-maker producing a car or truck. When the car or truck is sold, there will be revenues. Some other expenses aren’t so clearly linked to revenues, so they might be regarded as for durable goods or services or even non-durable goods or services. Consider accounting. Paying for an accountant is an ordinary, necessary business expense, except perhaps for very small ones, but it is not a revenue maker for the firm. (It is a revenue maker for the accountant who is paid.)

A similar sort of analysis holds for claim adjusters for insurance companies and lawyers hired by many businesses. They typically don’t get the company revenues, but using them may indirectly boost the company’s profit (or reduce losses).

What about education? If somebody pays the expenses to attend a technical school or college for an education tailored for a particular kind of job after graduating, that is investment spending. If the parents of such person, the student, pays the expenses instead, I think it is still investment spending.

When parents pay for the education of their children for grades K-12, that is paying for a durable good. The same seems to apply in some other cases, e.g. pursuing a college liberal arts degree with a very unspecific career goal. That would especially be the case of a trust fund child who wants to go into the Peace Corps and do even more volunteer work after that. In other cases it could be a mix.

What about labor? If I rake all the leaves in my yard, that is a consumer good. Most people with an opinion would probably say it was non-durable, since it will need to be done again in about 12 months. That doesn’t change if a pay somebody else to rake all my leaves. However, if I hire somebody to do it, there is income to the yard guy. Most of his income for doing so is for labor, but he does a little investment spending or recouping prior investment spending – the cost of the gasoline he uses in his leaf blower and a little of the cost of the tools he uses.