[OPE-L:835] Re: Valuation Of Inputs

glevy@acnet.pratt.edu (glevy@acnet.pratt.edu)
Mon, 22 Jan 1996 17:44:35 -0800

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If the gain in productivity is significant enough, then individual
capitalists *must* purchase new elements of constant fixed capital even
if it means that they have to take a huge loss on capital invested in
older technologies. "Older", in theory, could mean yesterday if they
purchased new means of production yesterday which have been
morally-depreciated by a huge margin between yesterday and today. Of
course, this would be a highly exceptional circumstance.

Paul C.
Substitute last year and it is not so exceptional. <snip>

Is the following an uncommon scenario?

Let's say that a firm replaced its morally-depreciated 386SX computers one
year ago with 486DX2/66 computers estimating, when they purchased the
new machines, that they would have an effective "work life" of three
years taking into account estimated future moral depreciation. It is
now January, 1996. Does that firm now go into the marketplace and
purchase Pentium 120s? Not necessarily. Wouldn't you agree?