[OPE-L:639] Forms of Tech Change(Digress)

John R. Ernst (ernst@pipeline.com)
Sun, 3 Dec 1995 12:03:47 -0800

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Dear Michael,

Thanks for your example, reproduced below. Let's look at
it briefly.

Assuming that you (the accountant) bought the PC and caught
up with the rest of industry, you are then confronted with others
upgrading to the 286 machine. Are you forced to upgrade?
Why? Because the competition has lowered its price? I think
not. Because you can make more profit using the 286? Perhaps,
but you would want to "cover" your investment on that PC if
possible, wouldn't you? Why not buy a 286, keep the PC and
expand the business? Or wait a year or two and then buy the
286 or jump to the 386?

At any rate, it would seem we need to look at your example with
some prices before you (the accountant) start upgrading for
the sake of upgrading.

Two side notes:

1. I work with 2 non-profits in NYC. Both are involved in collecting
discarded computers, fixing them, and then giving them away to
other non-profits or those in need. To date, firms in NYC are
reluctant to part with their 386's and up machines; we have
hundreds of 286's, 8088's, and 8086's. Almost no Mac's.

2. One of the more popular tax programs, Turbo-Tax, has a version
for tax preparers and accountants. They still (for 1994) make it
for DOS as many in the trade have not upgraded at all.



On Sun, 3 Dec 1995 Michael Perelman <michael@ecst.csuchico.edu> said:

>Here is my understanding of how technical change causes the rate of profit

>to fall. I will use a simple example.
>I am an accountant. To keep up with the competition, I buy an original
>IBM pc. My competitors respond by buying a 286. Even though I have just
>purchased a new computer, I have to scrap it to buy a 386. My competitors

>repsond with a 486. In the end we are all bankrupt.
>I have been working on a history of the U.S. economy in light of this
>Michael Perelman
>Economics Department
>California State University
>Chico, CA 95929
>Tel. 916-898-5321
>E-Mail michael@ecst.csuchico.edu