Re: [OPE-L] calculating the not rate of profit

From: Michael Perelman (michael@ECST.CSUCHICO.EDU)
Date: Mon Apr 02 2007 - 18:23:47 EDT

I have never been very successful in getting people on board with this idea.  Paul
suggests that accountants can evaluate moral depreciation.  I'm not so sure.
Accountants use rules of thumb that reflect past practices.

In addition, when we estimate the c in c + v + s, we're assuming a process much like
an accountant's rule of thumb.  Imagine that you just bought a new 1970 calculating
machine -- for those of you too young to have seen one they were very big bulky,
inefficient, and expensive electro-mechanical devices to do simple calculations.

The rule of thumb might be that such equipment lasts a decade, but no sooner have you
bought one than cheap calculators come on the market.  Ex post the c seems like a
major underestimate.  Just recall Marx's discussion of Babbage's patent net -- I
never knew what they did.

On Mon, Apr 02, 2007 at 05:21:45PM -0400, glevy@PRATT.EDU wrote:
> > Even more difficult than getting a handle on secondhand goods is the
> > challenge  figuring out the value of used capital goods that have not
> > been marketed.  Without knowing the value ( monetary value of course) of
> > these goods to termination of the rate of profit becomes impossible.
> Hi Michael P:
> Good point.  It's also the case that since the *rate of moral
> depreciation*  can't be reliably estimated in advance, individual and
> average rates of profit can not be known _ex ante_.   This is especially
> important when the economy is experiencing a period in which technological
> breakthroughs in means of production abound.  This is not merely an
> accounting problem: because of moral depreciation the rate of profit is
> *IN PRINCPLE* unknowable ex ante.  It can *ONLY BE KNOWN EX POST*.
> In solidarity, Jerry

Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 530-898-5321
E-Mail michael at

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