[OPE-L:640] Re: Forms of Tech Change(Digress)

Michael Perelman (michael@ecst.csuchico.edu)
Sun, 3 Dec 1995 14:37:36 -0800

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> 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?

You are correct that in the real world many people do "overinvest"
in more computer than they need. Even so, what has happened historically
is that you NEED to invest to keep up with current trends.

The computer may be a bad example because it produces "services" rather
than real goods. In many industries in the last century, this sequence
of capital good devalorizations did lead to a collapse in profits.

Michael Perelman
Economics Department
California State University
Chico, CA 95929

Tel. 916-898-5321 E-Mail michael@ecst.csuchico.edu