For many macroeconomic purposes, such as the study of productivity or the assessment of capacity utilisation, we need measures of the level and growth rate of the productive services that the capital stock is capable of providing. The official estimates of the capital stock produced by the Office for National Statistics aim to be measures of wealth, not capital services. So while they are appropriate for their intended purposes, such as balance sheet analysis, they may not be appropriate for productivity analysis or in measures of capacity utilisation. This article discusses the theory behind a different concept of capital, called here the volume index of capital services (VICS), and presents estimates of the VICS for the United Kingdom—based on both a five-asset breakdown and an eight-asset breakdown—for the period 1979–99. The eight-asset breakdown includes three information and communications technology (ICT) assets: computers, software and telecommunications equipment. The VICS measure has grown faster than the wealth measures, and the divergence is more apparent when ICT assets are included explicitly.
Measuring capital services in the United Kingdom