Re: [OPE] replacement cost and historical cost (again)

From: Anders Ekeland <>
Date: Tue Sep 01 2009 - 01:41:41 EDT

Hi Ian,

from your answer I see that we look at the problem the same way, and
of course - as soon as you get to look at current, "instantaneous"
replacement costs, then of course, it must by definition must be
"replacement costs" and not "labor that *was* expended to make it,
i.e. historical labor costs".

As you (and Marx!) point out - there is a ever ongoing process to
find "some kind of appropriately weighted average" - and the
instantaneous market price (replacement cost) is just that. But as
soon as you have real time in the model, the amount of labour
socially recognised (SNLT) might differ, so there is not one SNLT but
it is a moving target due to innovation - and not necessarily
monotonous decreasing (although that is the general tendency of capitalism).

My point here is that most LTV models I have seen do not model in
anyway the fact that private labour is not socially recognised =
wasted, with often very harsh socio-economic consequences for those
who supplied that labour (no wages paid, drastic reduction of wages -
the US car industry might be a recent example) and bankruptcy and
disaster for the individual capitalist. This waste/destruction is an
argument against capitalism and for a system of planned, collective
economic cooperation, but regrettably not modelled at all.

Hope your model will highlight this destructive aspect of capitalism
- the dialectical "negation" of its creative, innovative aspects.


At 02:10 01.09.2009, Ian Wright wrote:
>Hi Anders (and Dave)
>Thanks for the help.
> > I would say yes - that is controversial as a general rule. Because in a
> > non-static linear (= Marxian, realistic) model the fact is that
> both A and B
> > operates at the same time, efficient (mechanised, automated, very
> low wages)
> > products compete with less efficient (less mechanised, less automated, high
> > wage ...).
>Let's define SNLT such that it takes into account any variance in the
>productivity of labour in the same branch of production, i.e. it's
>some kind of appropriately weighted average.
> > So "replacement cost" is not a well-defined entity when you have multiple
> > technologies and increasing returns to scale for most of them. There will
> > always be technological rents (super profits) - and further innovation so
> > that any equilibrium "long term" replacement costs will never be found.
>Returns to scale are not important when we are talking about
>"instantaneous" (i.e., current) replacement costs.
>I agree that any equilibrium long-term prices will never be reached.
> > But since there is significant scale effects - often the replacement costs
> > will be the benchmark. But the labour that "was" (less efficient or more
> > efficient?) expended will of course try to get socially recognized and get
> > its "fair" remuneration in the market. But but because capitalism
> > revolutionizes the means of prod. - with very, very significant increasing
> > returns to scale and old computer will not get a price covering the labour
> > embedded - if it can be sold at all, i.e. be recognised as socially
> > necessary labour at all - very often things have a very short life cycle
> > from top product to garbage problem.
>But does Marx anywhere say that the labor-embodied in a commodity is
>invariant over technical change? I am hoping the answer is "no".
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Received on Tue Sep 1 01:48:27 2009

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