The concept was first theoretically analyzed in some depth by the economist Adam Smith in The Wealth of Nations (1776) and by David Ricardo in On the Principles of Political Economy and Taxation (1821).
[1] Ricardo studied the use of machines in place of labor and concluded that workers' fear of technology replacing them might be justified.
They can also be leased, hired or rented, if that is cheaper or more convenient, or if owning the fixed asset is practically impossible (for legal or technical reasons).
Refining the classical distinction between fixed and circulating capital in Das Kapital, Karl Marx emphasizes that the distinction is really purely relative, i.e. it refers only to the comparative rotation speeds (turnover time) of different types of physical capital assets.
This includes plant, machinery, vehicles and equipment, installations and physical infrastructures, the value of land improvements, and buildings.
But the value of land improvements is included in the statistical concept of fixed capital, is regarded as the creation of value-added through production.
[2] Attempts have been made to estimate the value of the stock of fixed capital for the whole economy using direct enterprise surveys of "book value", administrative business records, tax assessments, and data on gross fixed capital formation, price inflation and depreciation schedules.
[3] The "perpetual inventory method" (PIM) used to estimate fixed capital stocks was invented by Raymond W. Goldsmith in 1951 and subsequently used around the world.
[4][2] The basic idea of the PIM method is, that one starts off from a benchmark asset figure, and adds on the net additions to fixed assets year by year (using gross fixed capital formation data), while deducting annual estimates of economic depreciation based upon an explicit service life assumption,[2] all data being adjusted for price inflation using a capital expenditure price index.
Often leasing or renting a fixed asset (such as a vehicle) rather than buying it is preferred by enterprises because the cost of using it is lowered thereby, and the real owner may be able to obtain special tax advantages.