Books as Capital Assets (PDF)

In 2007, I estimate that authors and publishers created original books with a value of $9.1 billion. These books were first sold starting in 2008, and will continue to be sold for decades to come. Because of their long working life, the international guidelines for national accounts recommends that countries classify production of books and other entertainment, literary and artistic originals as an investment activity and then depreciate those books over time. However, BEA did not capitalize this category of intangible assets until the July 2013 benchmark revision. In order to change the national accounts, I collected data on book production from 1900 to 2010. I then calculated how GDP statistics change when books are classified as capital assets.

To preview, my main empirical result are: 1) Books have a useful lifespan of at least 50 years, with an annual depreciation rate of 12% per year; 2) Nominal book investment has hovered around 0.06% of nominal GDP from the 1930’s until 2010. Therefore, nominal GDP growth does not change much when book production is classified as an investment activity; 3) After 1970, book investment prices rose faster than overall GDP prices. Accordingly, average inflation rises slightly when book production is classified as investment. Before 1970, book investment prices roughly track overall GDP prices.

Rachel Soloveichik