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March 16, 2006

Knowledge investments

When most of us think of investments, we think of putting money in the stock market or mutual funds. Or we think of a business building a new factory or getting new equipment. But Dr. Mike Walden, an N.C. State University economist, says that it may be time to rethink that definition.

"When we are trying to track our economy and ask, 'How much are we really investing?' one of the problems is that the definition of what an investment is and the statistics developed for tracking them were developed 70 years ago, when the economy was much different," says Walden, a specialist with North Carolina Cooperative Extension.

"Clearly an investment is something like investing in a new building or equipment. But what about software? Under those rules developed 70 years ago, of course, software didn't exist. So a business buying software today -- that's not included as an investment. Yet clearly it is.

"Or what about education? We all know that people need to get more education to get ahead in this economy. So if you spend money on education, shouldn't we really count that as an investment?" Walden adds.

"Fortunately people -- economists both in and outside government -- are thinking about this. And actually the government's rules about what are investments -- those rules are changing," he says. "And what we'd expect to see when those new rules come out: We are going to see that our economy is actually investing much, much more than we previously thought."

Posted by deeshore at March 16, 2006 08:00 AM