[hood.roman]

Can the same item be considered both a producer good and a consumer good — for the same person, at the same time?

I understand that one good a can be a producer good for A but a consumer good for B, if they use it differently. And one good can be a producer good for A and a consumer good for him later, if he starts using it differently. But what are the praxeological implications of A believing he is a consumer of his capital?

The use-case I’m referring to is a house. For a landlord the house is a capital good and for a tenant its a consumer good. But a common argument for why it’s wise to own a house (rather than rent) is that it’s an “investment” — it “earns you money” because

1. The value goes up (or is anticipated to), and
2. Every mortgage payment adds to the owner’s equity — a virtual deposit into savings

But the whole time the home is appreciating and equity is building, the owner is living in it — consuming it. Does this mean that home owners have found a silver bullet to skirt an annoying economic law? Or are they fooling themselves to think it’s a capital good if it’s not generating income in the form of rents?

[jmherbener]

Yes, the same item can be both a consumer good and a producer good to the same person at the same time. Your example illustrates this nicely. The classic example is a person using his human effort in a particular task. He can get both direct benefit, the pleasure of the work, and indirect benefit, the income from what is produced. Professional athletes often express such sentiments claiming to play for the love of the game.

There is a general principle involved which is that a person can achieve more than one end with given action. Whether or not a person achieves both a consumptive end and a productive end depends on whether or not the asset he owns generates a capital gain when he sells it. Another example is Jay Leno, who owns a stable of collector automobiles. He loves owning them and probably reaps a capital gain by selling one that he bought previously.

https://www.youtube.com/user/JayLenosGarage

[hood.roman]

Thank you professor 🙂

[Author]

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