Re: (OPE-L) Re: Negative values in pure joint production

From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Wed Oct 27 2004 - 04:31:57 EDT

Well suppose that electricity is produced this year, but that
the atomic waste has to be held for 40 years to cool and is
then vitrified and buried. this means that the production of
electricity now involves both past and future labour. Normally
one just counts the past labour in estimating the costs and
thus the profit earned on the sale of a commodity.

If one is to deal with the future labour expenditure, then
one has to give this a present value. One way to do this is obviously
to discount the future costs. What should be the discount rate

Then there is the more general problem which affects all
attempts to use a discount rate in theories of  value.
This includes the use of a discount or profit rate
in Marxian and Sraffian price theories and in Samuelsons
treatment of the question. Should this be the real rate of
profit or should it be the money rate of interest. I am
of the opinion that it is unrealistic to use the real rate
of profit in these calculations for not only is the real
rate of profit masked by the current rate of interest, but
it is impossible to predict what the future rate of profit 
will be. 

One could simply take the current interest rate, but that is
subject to the problem that the future interest rate may
be different and so may incorrectly estimate the 
actual cost of borrowing to provide for the final vitrification.

In part this is a subjective problem. It reflects only
our lack of knowledge of the future rate of profit, which
objectively speaking, is just as definite as the past rate
of profit due to time symmetry. But this lack of knowledge
obviously has real effects in that all economic agents are
subject to similar temporal short-sightedness. There may thus
exist an objectively correct 'price of production' for electricity
based upon what the rate of profit over the next 40 years 
will actually be, but it is unlikely that electricity would
ever be marked at this price.

It should be noted that the US electricity supply industry is one
of the few to which classical Marxian price of production theory
seems to apply. When Allin and I did a cross industry study
of US profit rates, the electricity industry came out with
a rate of profit close to the mean, it bucked the general
trend which was for high organic composition industries to
have a lower rate of profit. We put this down to it being
 a regulated monopoly that was allowed to earn the average
rate of return on its capital. 

-----Original Message-----
From: OPE-L [mailto:OPE-L@SUS.CSUCHICO.EDU] On Behalf Of
Sent: 26 October 2004 14:25
Subject: (OPE-L) Re: Negative values in pure joint production

Clearly there would be other forms of analysis for which keeping
track of the waste produced may be more important - for instance
the process of disposal of atomic waste is a very long term production
process and thus has rate of profit implications.

Paul C,

What are the rate of profit implications?

In solidarity, Jerry

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