[OPE-L:820] Re: Valuation of Inputs

glevy@acnet.pratt.edu (glevy@acnet.pratt.edu)
Sat, 20 Jan 1996 07:57:58 -0800

[ show plain text ]

Comments on John's [818]:

> In purchasing constant capital, especially constant capital
> that is to be used as fixed capital, the capitalist must
> be aware of how much of the price of each commodity he sells
> represents the constant capital used up in the process.
> How does he get this number? Let's say that a machine
> costs him 1500 and with normal use would PHYSICALLY last
> 15 years. Using straight line depreciation, the charge per
> year would be 100. We assume there is no "scrap value" of
> the machine after those 15 years.
> However, based on his own experience, he knows that the
^^^^^^^^^^^^^^^^^^^^^^^^^^^ ^^^^^
> machine can only be used profitably for 10 years. Using
> the same depreciation method, he is clear that he must
> charge 150 each year. The difference between 150 and
> 100,50, represents what Marx calls "moral depreciation."

I think the above looses too much of this concept. Capitalists can not
reliably project moral depreciation ex ante. To be sure, they can (and
do) make ex ante forecasts. However, there is no way that they can know
whether these ex ante projections will be determined to be accurate ex
post. Unless one wants to make the rather large assumption of "perfect
information" this must be the case. Moreover, there is no a priora reason
to assume that the "wrong" forecasts will be counter-balanced by "right"
forecasts of other capitalists.

In a period of rapid technological change in constant fixed capital, it
becomes all the more difficult in practice to make meaningful
projections. Indeed, in the recent period (say, the last year) virtually
all of the forecasts regarding price and quality of personal computers
were off-base by a significant margin.

Whether technological innovations in constant fixed capital are
developed internally within the firm through R&D departments or whether
firms purchase these goods on the market from other firms they still have
no reliable way of calculating "moral depreciation" ex ante.

In practice, capitalist firms have a number of different methods of
projecting risk. If anyone is actually interested in what methods are
used, there is a vast literature on the subject written (mostly) from a
business perspective. Two works that will give you a general idea on this
process are:

-- C.C. Gotlieb _The Economics of Computers_, Englewood Cliffs, NJ,
Prentice-Hall, Inc., 1985

-- Wilbert Steffy _Economics of Machine Tool Procurement_Dearborn, The
Society of Manufacturing Engineers, n.d.

Related themes are discussed in Mino's book, _Frontiers of Political
Economy_ (London, Verso, 1991, see especially Section 3.2.3) and Geert
and Michael Williams' book _Value Form and the State_ (London, Routledge,
1989, see sections on capital stratification).

> 1. Book I, P. 404 (International). For others, Chap. 15, Sec 3,
> Part B, Paragraph 5 (Check out the footnote as well)
> 2. Book II, P. 170 (International). For others, Chap. 8, Sec 2,
> (32nd Paragraph in chapter)

Also, see:

1. Volume 3, Chapter 6, Part 2, 4th & 5th pages (Pages 208-209 in
Penguin/Vintage edition);

2. The footnote on p. 209 also recommends Volume 2, pp. 250, 264

In OPE-L Solidarity,