The Tyranny of Concepts : CUDIE (Cumulated, Depreciated Investment Effort) is NOT capital
The cost of public investment is not the value of public capital. Unlike for private investors, there is no remotely plausible behavioral model of the government as investor that suggests that every dollar the public sector spends as "investme...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2000/05/437638/tyranny-concepts-cudie-cumulated-depreciated-investment-effort-not-capital http://hdl.handle.net/10986/18846 |
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okr-10986-188462021-04-23T14:03:46Z The Tyranny of Concepts : CUDIE (Cumulated, Depreciated Investment Effort) is NOT capital Pritchett, Lant ACCOUNTING ACTUAL COSTS AGENCY PROBLEMS ASSETS CAPACITY UTILIZATION CAPITAL EMPLOYED CAPITAL GOODS COMMODITY PRICES COST MINIMIZATION COST OF CAPITAL DEFLATION DEPRECIATION OF ASSETS DEVELOPED COUNTRIES DISCLOSURE DISCOUNT RATES ECONOMIC GROWTH ECONOMIC PERFORMANCE EMPIRICAL STUDIES EXCHANGE RATE EXPECTED VALUE GDP INCOME INFLATION INVENTORY INVESTMENT SPENDING MARGINAL PRODUCT MINES MONOPOLIES NATIONAL ACCOUNTING PRICE DIFFERENCES PRIVATE GOODS PRIVATIZATION PRODUCTION FUNCTION PRODUCTIVITY PROFITABILITY PUBLIC ENTERPRISES PUBLIC GOODS TAX COLLECTION TELECOMMUNICATIONS TERMS OF TRADE TIME SERIES TOTALITARIAN REGIMES VALUATION VOTERS WEALTH The cost of public investment is not the value of public capital. Unlike for private investors, there is no remotely plausible behavioral model of the government as investor that suggests that every dollar the public sector spends as "investment" creates capital in an economic sense. This seemingly obvious point has so far been uniformly ignored in the voluminous empirical literature on economic growth, which uses, at best, "cumulated, depreciated investment effort" (CUDIE), to estimate capital stocks. But in developing countries especially, the difference between investment cumulated at cost and capital value is of primary empirical importance: government investment is half or more of total investment. And perhaps as much as half, or more of government investment spending has not created equivalent "capital." This suggests that nearly everything empirical written in three broad areas is misguided. First, none of the estimates of the impact of public spending identify the productivity of public capital. Even where public capital could be very productive, regressions and evaluations, may suggest that public investment spending has little impact. Second, everything currently said about "total factor productivity" in developing countries is deeply suspect, as there is no way empirically to distinguish between low output (or growth) attributable to investments that created no "factors" and low output (or growth) attributable to low (or slow growth in) productivity in using accumulated "factors." Third, multivariate growth regressions to date have not, in fact, "controlled" for the growth of capital stock, so spurious interpretations have emerged. 2014-06-30T18:59:23Z 2014-06-30T18:59:23Z 2000-05 http://documents.worldbank.org/curated/en/2000/05/437638/tyranny-concepts-cudie-cumulated-depreciated-investment-effort-not-capital http://hdl.handle.net/10986/18846 English en_US Policy Research Working Paper;No. 2341 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
ACCOUNTING ACTUAL COSTS AGENCY PROBLEMS ASSETS CAPACITY UTILIZATION CAPITAL EMPLOYED CAPITAL GOODS COMMODITY PRICES COST MINIMIZATION COST OF CAPITAL DEFLATION DEPRECIATION OF ASSETS DEVELOPED COUNTRIES DISCLOSURE DISCOUNT RATES ECONOMIC GROWTH ECONOMIC PERFORMANCE EMPIRICAL STUDIES EXCHANGE RATE EXPECTED VALUE GDP INCOME INFLATION INVENTORY INVESTMENT SPENDING MARGINAL PRODUCT MINES MONOPOLIES NATIONAL ACCOUNTING PRICE DIFFERENCES PRIVATE GOODS PRIVATIZATION PRODUCTION FUNCTION PRODUCTIVITY PROFITABILITY PUBLIC ENTERPRISES PUBLIC GOODS TAX COLLECTION TELECOMMUNICATIONS TERMS OF TRADE TIME SERIES TOTALITARIAN REGIMES VALUATION VOTERS WEALTH |
| spellingShingle |
ACCOUNTING ACTUAL COSTS AGENCY PROBLEMS ASSETS CAPACITY UTILIZATION CAPITAL EMPLOYED CAPITAL GOODS COMMODITY PRICES COST MINIMIZATION COST OF CAPITAL DEFLATION DEPRECIATION OF ASSETS DEVELOPED COUNTRIES DISCLOSURE DISCOUNT RATES ECONOMIC GROWTH ECONOMIC PERFORMANCE EMPIRICAL STUDIES EXCHANGE RATE EXPECTED VALUE GDP INCOME INFLATION INVENTORY INVESTMENT SPENDING MARGINAL PRODUCT MINES MONOPOLIES NATIONAL ACCOUNTING PRICE DIFFERENCES PRIVATE GOODS PRIVATIZATION PRODUCTION FUNCTION PRODUCTIVITY PROFITABILITY PUBLIC ENTERPRISES PUBLIC GOODS TAX COLLECTION TELECOMMUNICATIONS TERMS OF TRADE TIME SERIES TOTALITARIAN REGIMES VALUATION VOTERS WEALTH Pritchett, Lant The Tyranny of Concepts : CUDIE (Cumulated, Depreciated Investment Effort) is NOT capital |
| relation |
Policy Research Working Paper;No. 2341 |
| description |
The cost of public investment is not the
value of public capital. Unlike for private investors, there
is no remotely plausible behavioral model of the government
as investor that suggests that every dollar the public
sector spends as "investment" creates capital in
an economic sense. This seemingly obvious point has so far
been uniformly ignored in the voluminous empirical
literature on economic growth, which uses, at best,
"cumulated, depreciated investment effort"
(CUDIE), to estimate capital stocks. But in developing
countries especially, the difference between investment
cumulated at cost and capital value is of primary empirical
importance: government investment is half or more of total
investment. And perhaps as much as half, or more of
government investment spending has not created equivalent
"capital." This suggests that nearly everything
empirical written in three broad areas is misguided. First,
none of the estimates of the impact of public spending
identify the productivity of public capital. Even where
public capital could be very productive, regressions and
evaluations, may suggest that public investment spending has
little impact. Second, everything currently said about
"total factor productivity" in developing
countries is deeply suspect, as there is no way empirically
to distinguish between low output (or growth) attributable
to investments that created no "factors" and low
output (or growth) attributable to low (or slow growth in)
productivity in using accumulated "factors."
Third, multivariate growth regressions to date have not, in
fact, "controlled" for the growth of capital
stock, so spurious interpretations have emerged. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Pritchett, Lant |
| author_facet |
Pritchett, Lant |
| author_sort |
Pritchett, Lant |
| title |
The Tyranny of Concepts : CUDIE (Cumulated, Depreciated Investment Effort) is NOT capital |
| title_short |
The Tyranny of Concepts : CUDIE (Cumulated, Depreciated Investment Effort) is NOT capital |
| title_full |
The Tyranny of Concepts : CUDIE (Cumulated, Depreciated Investment Effort) is NOT capital |
| title_fullStr |
The Tyranny of Concepts : CUDIE (Cumulated, Depreciated Investment Effort) is NOT capital |
| title_full_unstemmed |
The Tyranny of Concepts : CUDIE (Cumulated, Depreciated Investment Effort) is NOT capital |
| title_sort |
tyranny of concepts : cudie (cumulated, depreciated investment effort) is not capital |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2000/05/437638/tyranny-concepts-cudie-cumulated-depreciated-investment-effort-not-capital http://hdl.handle.net/10986/18846 |
| _version_ |
1764441613000507392 |