The Economics of Intangible Capital

Intangible assets are a large and growing part of firms’ capital stocks. Intangibles are accumulated via investment — foregoing consumption today for output in the future — though they lack a physical presence. But rather than stopping with this ”lack”, we instead focus on the actual properties of intangibles that follow — in particular, non-rivalry and the need for storage. We model these properties in a simple way to demonstrate the economic implications, such as scalability and appropriability, that are often associated with intangibles. These implications coincide with a number of important issues and trends in macroeconomics and finance, including measurement of productivity, inequality, investment and valuation, rents and market power, and financing.