Monday, December 5, 2016

Investment Or Durable Good? #2

In this post I will apply the concepts in #1 to some other examples where their application isn’t as clear or is mixed.

What about airports? “The vast majority of airport revenues come from fees paid by passengers using the airport, landing fees and space rental fees paid by airlines, parking charges and sales of food and goods at the airport. Though not well understood by many Americans, commercial airports receive almost no taxpayer-funded support from state or local sources. Federal grants that help pay for airport construction projects come from a portion of the travel taxes paid when you buy an airline ticket or ship a package and fuel taxes paid by general aviation” (link).

So to the extent there is no taxpayer-funded support, building an airport is investment spending. Ditto to federal grant money which is recouped via the taxes as described.

What about housing? Next consider somebody who buys a duplex, half to live in and half to rent out. It is half durable consumer good and half investment by the meanings in #1.

The reader may have thought by now that my meanings are confusing, since it can make the identical entity a consumer good or investment good. That is true, since the focus is not on the physical nature of the entity, but on the purchaser’s intention or use. For example, a car dealer buys a car in order to sell it at the dealership. The car is an investment good. For the person who buys the car from the dealer, it is probably a durable consumer good. On the other hand, if the person buys it to use it half the time as an Uber driver, it’s half investment good and half durable consumer good. It’s similar for food. Food purchased by a restaurant to prepare and fix for its customers is an investment good. The same food purchased to take home to eat is a consumer good.

No comments:

Post a Comment