Notes On The Measurement Of Real Capital In Relation To Economic Planning Models1

Economic planning can in principle be seen as consisting of two phases: first a description of all possible development paths, and second a choice of “the best one” from among these possibilities. In the present paper the measurement of real capital is discussed in relation to the needs of the first of these two phases. In section 2 of the paper it is argued that the most relevant measure of capital for this purpose is the gross value of the existing capital stock, i.e. the total value without accounting for depreciation. In section 3 of the paper different ways of estimating this gross capital stock are discussed. In sections 4, 5 and 6 there follows a discussion of how one can correct the capital measures for changes in efficiency with age, for “embodied technical progress” and for different durabilities. The latter correction leads to concepts which are equivalent to measuring “capital services” as a factor of production. The treatment of maintenance and repair will be important for the interpretations of some of these “corrections.” The final section of the paper suggests a model which requires data on vintages of capital.