Stock vs. flow (economics)
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In economics, the distinction is often made between stock magnitudes and flow magnitudes. A "stock" is something one has accumulated in the past and has on hand at any one time. It would be measured using simple units (such as dollars or tons). On the other hand, a "flow" is something that occurs over time and would be measured as dollars per year or tons per month or similar. The diagram contrasts the flows of new investment (and of depreciation or depletion) with the stock of capital currently on hand.
A person or country might have stocks of money, financial assets, liabilities, real means of production, capital, and human capital (or labor power). Other flow magnitudes besides those shown in the diagram include income, spending, saving, debt repayment, and labor.
Stocks and Flows are often considered to exist side by side in an economic entity. In project appraisal this gives often rise to a problem called double counting. The same asset is accounted for twice in the economic assessment, firstly as stock (NPV of asset) secondly as flow (depreciation). The diagram very clearly shows that stocks and flows are two different concepts of the main object, literally two sides of the same coin. A certain asset can be considered as stock or flow. beware of adding stocks and flows therefore.
