[OPE-L:3716] Re: Ignoring Revaluation

From: John Ernst (ernst@pipeline.com)
Date: Thu Aug 24 2000 - 10:21:10 EDT

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Hi Michael,

You wrote:

John, the assumption the you can predict physical life into the future seems
unjustified. As a result, I don't think that you can measure constant

John Ernst wrote:

> If a new machine that costs $1000 will have a physical life of 20 years
> and an economic life of 10 years, what is the depreciation
> charge as we compute dM for its first year of use? For me and, I think,
> for Marx the charge would be $100. For you, given no technical change
> in machine production in that first year, the charge would be
> $50.

My response: Hmmm. I do think you can predict the physical life although
the prediction may be wrong. Further, one may be able to get a guarantee
from the maker of the machine for a certain number of years.

Nevertheless, I admit that one can only estimate the lifetimes of fixed
capital -- economic and physical. Again the estimates may be wrong. Ex post
I suppose we know at least the economic lifetime as it would always be
less than or equal to the physical lifetime.



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