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

From: glevy@PRATT.EDU
Date: Wed Apr 04 2007 - 12:40:55 EDT

> I agree that the actual extent of moral depreciation is only known ex
> post. But how is it to be known?

Hi Phil:

Do you mean 'How is it known ex post?'?  It would show up on a firm's
balance sheets, I guess.  How this is aggregated to account for a total
figure (i.e. loss in capital values due to moral depreciation) for the
macroeconomy is another question.  Some of it might show up as the
difference between Gross National Product (GNP) and Net National Product
(NNP)?  [Jurriaan and/or Michael might know more about that.]

> I would depreciate according to revenue
> over the actual life of the asset. How would you do it?

That sounds like a micro question.  I'm not in the habit of giving firms
accounting advice, nor am I qualified to do so.  I think the point is that
they _must_ employ some "rule of thumb" since they can't _know_ ex ante
the rate of moral depreciation but they -- and we -- _must also_ recognize
that _whatever_ rule of thumb they use is inadequate in the presence of
accelerated technological change.  In other words, they can try as best
they can to anticipate the unpredictable yet recognize that they can't
really anticipate the unpredictable.  It's a gamble -- they (firms) put
their money down (on constant fixed capital) and they take their chances.

In solidarity, Jerry

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