Sunday, January 20, 2008

How to Turn about $600 into $60 - First of A Series?

by Ken Houghton

Following the tradition of Patri Friedman, I have been attempting to downsize my (large majority) portion of our home library. And sorting meant that Round One was several dozen Scientific American and New York Academy of Sciences volumes.

The standard question of economics is "Is that a consumption or an investment" purchase?

The problem is that even things originally believed to be investments eventually turn into consumption in an environment where storage costs != 0. And I have gradually come to allow that, while several of the NYAS volumes are still relevant (and not likely to be readily available, even in a large library), maintaining them in a reasonable state is beyond our current ability.

So I have to view the outcome as a gain: at least $600 (in 198x-199x US$) has become about $60 in 2008 dollars. But the question remains: was an Investment that (by any economic reasoning) has a large, negative NPV really "investment"? And if it was not at the time, what would have made it so?

(Yes, I'm going somewhere with this, but—unlike the democracy posts—I'm not yet certain where.)

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