[OPE-L:3717] Re: Re: Ignoring Revaluation

From: Michael Perelman (michael@ecst.csuchico.edu)
Date: Thu Aug 24 2000 - 10:50:56 EDT

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John, I was not thinking of the physical life, but I had, what Marx called moral
depreciation, in mind. I have made this point several times on the list. The
estimate of constant capital used during any period depends crucially on the
estimated lifetime. Several times, Marx wrote that the capitalists severely
underestimate the economic lifetime of capital.

We could conclude that Marx was wrong to believe so. Or we could say the
capitalists today are more sophisticated and do not make such mistakes, but I
believe that this difficulty in estimating the amount of constant capital
transferred to final products during any period is an important element of his
crisis theory.

Since I regard crisis theory to the far more important than finding a determinant
solution to the transformation problem, I'm willing to let the transformation
problem slide and accept the indeterminacy.

John Ernst wrote:

> 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
> capital.
> 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.
> John

Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321 E-Mail michael@ecst.csuchico.edu

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