Assets destroyed by natural disasters and wars are not included in consumption of fixed capital (CFC) in the US NIPA or the UN SNA.
Suppose though that the US decided to start including such asset destruction in CFC, and revised all past NIPA data to reflect this.
Certainly CFC will be revised upwards. My question is the following. Which of the following is correct?
- A: Nominal GDP and nominal gross investment will stay the same, but nominal NDP and nominal net operating surplus will fall by the increase in CFC.
- B: Nominal GDP and nominal gross investment will increase by the increase in CFC. Nominal NDP and nominal net operating surplus will stay the same.
- C: Some mix of A and B.
- D: Something else entirely.
In other words, is the same period investment undertaken to undo the natural disaster's destruction already included in gross investment (option A), or is it counted as intermediate consumption (option B)?
(It does not matter if the investment to undo the destruction does not happen instantly. In the second case, gross investment can end up being negative in the period of the disaster.)
I would have assumed it was obviously option A, but this sentence on the CFC Wikipedia page led me to doubt myself:
Ultimately, the distinction drawn between that portion of business operating expenditure included in CFC beyond depreciation, in contrast to that portion of operating expenditure included in Intermediate consumption may appear rather capricious, rather than theoretically justified.
A reference giving a definite anwer to this question would be particularly appreciated!