Depreciation Principle

Ownership of a product moves from producer to consumer (or producer), yet neither production nor consumption occurs at that time. The producer hoards the product before the trade and the consumer hoards it after. The product exits and is eventually traded between two people. The terms "producer" and "consumer" are names for the objectives (production and leisure) of the two primary economic actors. The producer intends to create (appreciate) capital, while the consumer intends to destroy (depreciate) it. But the producer's hoard (inventory) depreciates the product just as does the consumer's.

The common use of the term "consumption" conflates interest and depreciation. The fact of a product sale represents investor interest, not depreciation. The depreciation of a product is actual consumption, and represents the extraction of service to its owner (utility). A producer who only owns does not produce and a consumer who does not own does not consume. Only depreciation reflects actual consumption just as only creation reflects actual production. The net proceeds a sale from producer to consumer is interest, even if is capitalized through reinvestment. Only action is relevant to the economic meaning of consumption, not the name of a given role.