How do economic models account for destroyed value?
I was watching this video over at r/dataisbeautiful, and the narrator said the following:
The average citizen only produced $6 a day
Regarding people in the 1800's. Which makes sense - basically everything productivity-wise was way slower and more expensive. I'm assuming this means a mixture of three things:
- Individuals consume fewer goods (e.g. no smart phones)
- More individuals produce non-luxury items (e.g. many fewer poets/web designers/game designers/authors)
- The items those people produce last longer (individual books are treated as significant possessions, clothes are repaired for as long as possible before being tossed, exactly zero furniture items are made of particle board)
So if any of those assumptions are wrong, or if that list is incomplete, please correct me.
Otherwise, assuming that's all true, regarding the the third point: How does economics account for how quickly items lose value, if at all? If I produce two cars, both of which sell for $10k, but one of which lasts for 10 months and the other which lasts for 10 years, is there any difference in how various economic models or indicators work out? Is the longer-lasting car count as more productive/valuable since it provides value for longer, does the shorter-lasting car count as more productive/valuable since it causes someone to go out and buy a new car 10x more often, or is neither statement accurate?
Posted Apr 17, 2019, 6:28 AM UTC
It's standard to account for this in economic models. Durable goods depreciate over time at a rate. This rate can be higher or lower for different goods.