[OPE-L:425] Re: Value of Constant Capital

Paul Cockshott (wpc@clyder.gn.apc.org)
Sun, 5 Nov 1995 00:33:59 -0800

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John Ernst

If I buy a machine produced in, say, Period I for $500
and that machine "embodies" 50 hours of abstract
labor, then I am ready to begin production in Period II
with my fine new machine. Now, if, as I produce, the
producers of my machine are able to produce it in less
time, say 25 hours, do we then say that I am out $250?
Where's the loss in Paul Cockshott's method of assigning
values to constant capital? Is there a loss? If my
workers only created $50 in surplus value, I would be
short $250 as I gain $50.

Any honest accountant reviewing the company would say
that it was running a loss on capital account.

This loss arises from a change in value conditions
between periods. The correct way to calculate values
should be allow depreciation of machinery only in
terms of its current labour replacement cost. Thus
in the second year, the machine transfers proportionally
less labour to the product.

In practice when working with I/O tables this is what
one is doing since one measures depreciation in terms of
current inter-industry flows, rather than historical

The point at which it becomes important to take into
account technological depreciation is when dealing with
organic compositions and capital accumulation. When
working from national income statistics one should use
replacement cost and should adjust capital accumulation
figures to allow for stock appreciation/depreciation.
In the case of the UK taking stock appreciation into
account has a dramatic effect on the apparent accumulation
figures for some years.