It is common for people to believe modern economies are short-termist. Although it is true that investments are often made that yield relatively quick returns, a significant proportion of total investment is tied up in things that provide returns over decades and even centuries. We tend to overlook the significance of these longer-term investments, even though they provide the foundations of our economy and dictate its long-term dynamics. However, the emergence of ambitious net-zero policy objectives both in the UK and elsewhere could require progressive and near-complete scrapping of all long-lived carbon intensive capital in the economy over the next three decades, causing us to take a closer look at these investments and the risks they present.

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The service lives of assets in the economy is a central component of economic inertia. However, macroeconomics has not helped us appreciate this inertia or its impact on transition to net-zero. Investment timescales are invariably hidden behind the language of depreciation, which is paradoxical given depreciation rates are the product of investment service lives and hence asset cohort turnover timescales in all capital accounting regimes. Furthermore, the focus on general equilibriums takes attention away from the explicit consider of temporal dynamics and inertia. However, when we look in detail at capital accounts both nationally and globally we find investments are spread across a very broad range of timescales, with a significant portion of this investment in assets lasting longer than the 30 years left to achieve net zero.

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By far the largest portion of capital investments are in people and the careers they pursue. These careers have mean working lifetimes in the region of 40 years, something that has remained unchanged despite significant improvements in life expectancy across economies. When we include this human capital in an assessment of the inertia of the economy, we find that a significant portion of it is at risk from the rapid transition to net zero currently being negotiated. To date, we have largely overlooked this risk because notions of labour offer a far more fluid perspective than human capital. No doubt people are very adaptable, but perhaps less so than we would want to believe, with the wider social and geographical context providing lock-in of careers to sectors and activities that might not survive a net zero future.

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Although the timescale perspective of investments and the inertia that derives from this highlights the importance of long lasting elements of the economy, it also highlights that the economy is comprised of productive structures that turn over on much shorter timescales too. We observe from detailed capital inventories that this spectrum is near continuous, spanning from days to centuries, blurring the consumption-investment divide. Not only does this raise the spectre of all economic behaviour being a form of investment, it also challenges the distinction between stocks and flows so central to macroeconomics. This is because all capital has a representative timescale, so capital itself could be viewed as a slowing of one investment flow to catalyse the quickening of flows elsewhere. And if the pool of human capital dominates the turnover of the economy, it wouldn’t be a surprise if its turnover timescale of 40 years didn’t provided an attractor around which economies orbited.