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DUAL LABOR MARKET: A proposition that our economy has two classes of workers -- (1) adult white males and (2) other. The other includes, but isn't limited to, women, blacks, hispanics, and teenagers. Based on the political and economic clout of whites and the traditional notion of men as the "bread winners" of a family, white males constitute the primary labor supply and thus get the best, highest paying jobs, with the greatest chance of advancement--like executive, physician, shop foreman, or U. S. Senator. The other groups, however, are left with secondary jobs--such as secretary, janitor, nurse, or convenience store clerk--that have very low pay and limited prospects to move up. Moreover, there tends to be little movement between these two labor markets.
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                           CAPITAL DEPRECIATION: The wearing out, breaking down, or technological obsolescence of physical capital that results from use in the production of goods and services. To paraphrase an old saying, "You can't make a car without breaking a few socket wrenches." In other words, when capital is used over and over again to produce goods and services, it wears down from such use. Depreciation is formally entered into the National Income and Product Accounts under the term capital consumption adjustment, (also occasionally termed capital consumption allowance). The capital consumption adjustment (CCA) is subtracted from gross domestic product (GDP) to derive net domestic product (NDP). It is also subtracted from gross private domestic investment (GPDI) to derive net private domestic investment (NPDI).The reasoning behind both adjustments is much the same. A portion of capital investment each year is used to replace depreciated capital. Deducting depreciation from either the total production of all goods (GDP) or just the production of capital goods (GPDI), leaves the "net" addition to production that can be used to move the economy forward. Three Sources of DepreciationCapital depreciation can occur for three reasons:- First, capital simply wears out through use. As the wheels of industry roll on, metal grinds against metal, wood becomes weathered, and the forces of nature take their toll. The tread on a delivery truck tires wears down. The cutting edge of a carpenter's saw wears off. The hard drive in an accountant's computer wears out. The fact of life is that capital wears out. It happens.
- Second, capital breaks down through constant use, accidents, or natural disasters. Today the capital works fine, tomorrow it does not. A carpenter's saw breaks when it encounters an undetected nail in a two-by-four. The tire of an delivery truck blows out when the tread is thin and the pavement is rough. An accountant's computer malfunctions after being tossed from a thirty-seventh-floor window (something about an undecipherable change in the IRS tax code).
- Third, capital becomes less productive through technological obsolescence. As technology marches forward, capital becomes less valuable and less productive even though it is in perfect physical condition. An accountant's computer might function flawlessly, but it lacks the memory and speed to run the latest software. A delivery truck works okay, but it just is not as big enough or as fast enough to make the needed deliveries. A carpenter's saw still works, but the newer ones with tungsten steel blades cut the wood even better. In some cases, technology advances make it more expensive to operate old capital than to purchase new capital.
Currency DepreciationA related use of the term depreciation applies to currency. This tends to pop up regularly in the analysis of international finance and foreign exchange markets. Currency depreciation means that the value of one currency, in terms of the ability to purchase goods and services, declines. In comparison, capital depreciation means the value of capital, in terms of the ability to produce goods and services, declines. In both cases, depreciation means the item (currency or capital) is less valuable.
Recommended Citation:CAPITAL DEPRECIATION, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2023. [Accessed: April 2, 2023].
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BLACK DISMALAPOD
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Today, you are likely to spend a great deal of time wandering around the downtown area seeking to buy either several magazines on fashion design or a package of 3 by 5 index cards, the ones without lines. Be on the lookout for slightly overweight pizza delivery guys.
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Parker Brothers, the folks who produce the Monopoly board game, prints more Monopoly money each year than real currency printed by the U.S. government.
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"Before you can inspire with emotion, you must be swamped with it yourself. Before you can move their tears, your own must flow. To convince them, you must yourself believe." -- Sir Winston Churchill
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BCUA
Business Computers Users Association
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