Learn something new every day
More Info... by email
An autonomous investment is a type of investing activity that is outside the scope of shifts in national income or output, and has more to do with changes in governmental policies or the desire to invest in emerging technologies. Investments of this type often do not have anything to do with the desire to make a profit, although the investor typically does seek to benefit from the strategy in some manner. Many different types of investors engage in this type of activity from time to time, including individual investors, corporations, governments and charitable and other non-profit organizations.
Local, state, and national governments may choose to engage in autonomous investment activity that is designed to provide some sort of benefit to citizens without necessarily leading to any type of revenue generation. One simple example of this type of activity is the decision by a small town to install new street lights in several parts of town. The investment usually triggers the benefits of allowing citizens to feel safer being on those streets at night, which in turn may also mean that more of the citizens will shop at stores located on or near those streets. Indirectly, the activity has the benefit of improving the image of the current government in the eyes of citizens who feel safer and also helps to stimulate the local economy by increasing the chances for after-dark shopping at nearby businesses. While the town does not generate any profits for the investment of installing the new lights, the other benefits make the effort worthwhile in the long run.
In like manner, charitable organizations may engage in autonomous investment that has nothing to do with generating profits or increasing the output levels of the nation’s economy. A local charity may choose to open an after-school program for children of low-income parents, charging little to nothing for the services. This does trigger benefits for the community, such as providing a safe place for children of working parents to gather and allowing parents to manage limited income more efficiently.
The identifying mark of an autonomous investment is the reason behind the activity. Typically, if the investment is made not to generate some sort of tangible profit but to create benefits of some type, it can be classified as autonomous. The paving of roadways, establishment of healthcare and other facilities by charitable organizations and even the investment of funds in the creation of a neighborhood park by those living in the area can rightly be referred to as examples of autonomous investment activities.
@Vincenzo -- true to an extent. Keep in mind that the health care clinic in your example may inflate the value of the community as a whole, but it probably won't help the property values of homes and businesses located near it. That is an unfortunate downside to such facilities -- people love them, but they don't want to live near them because of the reputed "bad element" attracted to them. That might be an unfair characterization, but that's how it is.
Now, there are a lot of exceptions to that rule. If that same charity decided to build a park, that is something that is considered more desirable and makes the entire community more attractive.
Please keep in mind
that I am not suggesting that communities should downplay essential services such as health care clinics for the underprivileged. That's not the case at all. But, there is a stigma attached to some facilities targeted toward helping out the less fortunate and that is a real shame.
One characteristic of such investments is how they do actually increase the value of a community. For example, let's say a charity sets up a health clinic for citizens who have no health insurance. No profit is generated by such an endeavor, but it is touted as a benefit -- an amenity of sorts -- that enhances the value of the community.
That increased value shows up in terms of increased home prices. The community is more attractive because the clinic demonstrates the town is one in which citizens look after each other, and that means more demand for homes and more profit to be made for home owners selling houses, real estate agents, etc.