Has the definition of a "durable good" changed?

January 5, 2007 8:02 AM

What is the definition of a durable good? I'm looking, in particular, for a defintion tied to the amount of time the good should, um, endure. As I seem to be congenitally unable to ask a pithy here on the green, and if wonky discussions are not your thing, then be warned that there's . . .

I seem to remember learning in High School Economics (back in the 80s) that a durable good was a good that lasted at least 5 years. Now I've been browsing the Statistical Abstract, and the 2006 edition defines a durable good as an item "with a normal life expectancy of 3 years or more" (2006 ed., p. 644).

Now I know what durable good is supposed to mean; as the Statistical Abstract provides, common examples include "automobiles, furniture, household applicances, and mobile homes." My question is thus: shouldn't this be a longer 'normal life expectancy'? Or more to the point, wasn't this once a longer 'normal life expectancy'? Or are years of blowing off my H.S. economics lessons coming back to haunt me?

I'll be browsing through older Statistical Abstracts to serach for data on this question, but I wanted to ask MeFi: when did a durable good become defined as lasting three years or more? Wasn't there a time when a durable good was defined as lasting five years or more? Seven?

I'll welcome anecdotal evidence in response, as well as diversions into what this re-definition (if it even exists) might mean. I mean, we once thought of telephones as durable goods, no? (And I know, it used to be that MaBell owned all those phones.) And nobody thinks of telephones this way now, right? (And now we all own our own.)

And I'm also curious to know if this is in the running for the geekiest question EVAR . . . to that end, forgive me if someone else has asked this here before. I searched and searched, but found nothing on point . . .

And on preview: apolgies in advance for the US-centric nature of this question. I always appreciate thoughts from abroad, but I really am looking for answers that pertain to the U.S. Stats. Abst. and U.S.-based economic definitions. That should make me geeky and jingoistic.

posted by deejay jaydee to law & government (14 comments total)

Hmm... wild thought: the definition of durable good was changed to reflect changes in technology. In the 80's the average company, or industrial plant would have a machine that would last 5 years or more. But as more companies began to rely on computers and other electronics which are now essential to more businesses (than longer lasting heavy machinery like a forklift), but certainly do not last more than 3 years.
posted by stratastar at 8:09 AM on January 5, 2007

IANAEconomist, but here's my possibly related observation, along similar lines to what stratastar said. It seems that more and more, it is becoming cheaper to totally replace certain things than to pay for the parts and labor to have them repaired. Now for the rather large expesive things you mentioned, this might not be the case, but for smaller things - printers come to mind - if you buy a low end model of something, it's often cheaper to just replace a broken one than to buy a new part and pay someone to fix it. Maybe this is lowering the standard for what is considered durable on average.
posted by gauchodaspampas at 8:35 AM on January 5, 2007

NPR always seems to call them "big ticket items designed to last three years or more."
posted by 4ster at 8:40 AM on January 5, 2007

(Which I realize is ambiguous, but I hear it all the time, so I thought I would throw it out there).
posted by 4ster at 8:41 AM on January 5, 2007

Some things (e.g. most services, a baby wipe, a french fry) can easily be put into the non-durable goods category - they are used up at first use and don't yield utility over time.

Perfectly durable goods, on the other hand, are almost impossible to find.

Most goods are durable to a degree, or could be said to sit somewhere on a continuum of durability. Choosing a timeframe of 3 years or 5 years (or even 1 year, which I believe the U.N. uses) has more practical benefits.

The first two comments make sense to me as reasons for that time period being shortened.
posted by KAS at 9:04 AM on January 5, 2007

Hit post too fast..

The Census Bureau's reports on durable goods (used as the basis for other calculations, like GDP, and oft cited by the Fed - the report that the WSJ is talking about when it says "durable goods orders rose [blah blah blah]") comes from a survey of large manufacturing companies - it's a picture of a segment of the manufacturing industry.

If something isn't designed for quick consumption, it likely finds its way in there. There's data included for such a wide range of things - computers, communications equipment, machinery, transportation equipment, etc...

So those numbers you hear aren't life-expectancy based. Three years is the most common standard U.S. Govt. definition now.

Strangely, I would expect a telephone to be *more* likely to be included in durable goods statistics these days, depending on who the manufacturer is now versus back in the AT&T rotary phone days.
posted by KAS at 9:37 AM on January 5, 2007

I thought that a "durable good" was the opposite of a "consumable". In other words, a "durable good" is something that performs its function without being used up.
posted by Steven C. Den Beste at 10:25 AM on January 5, 2007

Well yes, SCDB, but the hole in that definition is the sorts of things that fall between toilet paper, which is pretty much single use, and automobiles, which has a very large but finite number of uses. Clothing, for example, is certainly "used up" more quickly than a car, but much less quickly than toilet paper. Dry erase markers. Shoes. The time limit helps with those cases.
posted by muddgirl at 11:27 AM on January 5, 2007

IANAEconomist, but I did ask a real one.

Definition of "durable good" from said bona-fide economist, without me mentioning a time span:

"Consumer goods that last for a while: washing machines, cars, power tools (?) - I'm not sure of the exact expected lifespan - but about three years before wearing out or being replaced.

Does not include industrial machinery or housing.

Does not include groceries or clothes."

I asked about the three year bit.

"Well, essentially, everything _eventually_ wears out. Even houses and statues. And I think it was three, in my courses. As opposed to one: in accounting, anything that gets used up or fully depreciated in a year is classified as "purchases," while anything that lasts longer than one year is considered an "investment." Or at least that was the case the last time I took Accounting (1974)."

Three years is used in this definition... Three years is also seen here, and it's 'more than a year' here. Three years again from house.gov.
posted by kmennie at 11:44 AM on January 5, 2007

And I'm also curious to know if this is in the running for the geekiest question EVAR . . .

Well, I'm pretty sure this question has you beat.
posted by muddgirl at 12:16 PM on January 5, 2007

Wow, thanks for all the responses so far, HiveMind . . . and yeah, muddgirl, since I can't "do qPCR to detect tetR expression" and I don't know what, let alone how, "the GFP" is, I'm not even close to being geek of the week!

And I'm not surprised that someone else would cut to the chase of my prolixity: KAS noted that "Three years is the most common standard U.S. Govt. definition now." What I want to know is, has this always been the standard definition?

And I find the reasons that folks posted above for a possible change to be, um, reasonable, but I'm more concerned right now with knowing when this definition changed, if it's changed at all. Why? 'Cos I'm an aspiring geek, with a loooong way to go, apparently . . .

P.S.: I really do know how to spell "search." P.P.S.: sometimes I even use preview properly.
posted by deejay jaydee at 1:41 PM on January 5, 2007

I would send a quick email to paul.e.herrick AT census.gov and if you don't get a response, try debra.l.coaxum AT census.gov.

For that purpose, you can just ask if they have always used 3 years, and if not, what was the previous timeframe~ I would include a phone number in your email. (I have a guess as to the answer, but no clue if I'm right - these people will actually know.)
posted by KAS at 5:29 PM on January 5, 2007

KAS:

Thanks so much! You have reminded me, once again, why I joined MeFi. I may email you under separate cover to pick your brains as to your guess, but I'm going to write the census folks, first.
posted by deejay jaydee at 8:34 AM on January 6, 2007

I think you'll find the answer depends on who you ask, which is to say, context. The IRS will have a definition for tax purposes (and dictate a depreciation period, regardless of whether the item is still useful after that period ends). Economists and government in general will have another definition.
posted by Goofyy at 6:51 AM on January 8, 2007