For present purposes, I wish to avoid the usual Public Choice paradigm that emphasizes the interests of and constraints on politicians, government officials and voters in order to analyze some of the process of government capital decisions. Government capital assets are essentially inalienable. There are markets for some government liabilities such as tradeable public debts. There are effectively no markets for government assets such as land, aircraft carriers or post office buildings. Because there are no market prices for used government capital assets, there can be no serious calculation that depend on these prices, for example, decisions about optimal maintenance and repair, or buy versus lease decisions.
Governments have no such incentives, here assumed zero.
Thus, winners cannot be used to offset losers. Consider briefly some of the standard elements of the analysis of the private market theory of capital and investment. Later, we will consider how the standard analysis generates optimal private maintenance. To make measurable values at present and different future times, all future values are discounted to their present values by the use of appropriate interest rates. The result is that the current net marginal cost of a capital good is driven to equality to the present discounted value of the capital good's future stream of net marginal revenue products, each element of which is the product of the capital's marginal physical product and its marginal revenue at alternative optimal outputs.