ABSTRACT
This part introduction presents an overview of the key concepts discussed in the subsequent chapters. The part discusses the capital theory approach in their analysis, which also forms the basis for Economic Research Service (ERS) depreciation estimates. It addresses three issues they believe are important in estimating the discount rate for capital theory models. ERS commonly uses American Society of Agricultural Engineers data in these estimates. These values are apparently based on potential life, rather than actual life experienced by equipment in use. Yet clearly ERS is mandated to estimate average depreciation costs across a number of farms. ERS is already using a weighted average of equipment values to estimate opportunity costs for farm equipment. The part provides some important issues and should be given careful consideration. In the case of farm equipment, used asset markets can provide a good indication of depreciation costs and should be integrated into ERS depreciation estimates.
