[OPE-L:853] Re: Valuation Of Inputs

Alan Freeman (100042.617@compuserve.com)
Thu, 25 Jan 1996 19:39:00 -0800

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Jerry writes:

"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?"

Paul replies [OPE-L:844]

"Probably not, but its accountants write them down to taken
into account the decline in resale value."

and in OPE:846

"The starting point should be an analysis of its effects on the
division of the social working day between necessary and
surplus labour time. Only when that is settled can you work
through to its effects on aggregate social reproduction, and
from there to its manifestation in the consciousness of the

I agree with Jerry's basic point that capitalists don't replace
goods just because they are cheaper. But the word 'estimated'
worries me in the same way that the use of terms such as
'anticipated' and 'expected' worries me in the discussion
between John and Duncan. Again, I agree with the way Paul puts

It is true the capitalists make estimates but we should first
examine their cause and what happens if they are wrong.
Question one is: what *is* the working life of the computer?
Then we can ask: how does this enter the consciousness of the
capitalists? It's a fine distinction but I think it an
important one.

Fetishism being important in Marx's thinking, we should be
careful not to assign a causal role to aspects of consciousness
which are a mere reflection of material reality. 'In
competition all things appear as the reverse of what they
really are'.

I don't think the capitalists or their accountants are free to
make whatever estimate or calculation they choose. These
estimates and calculations are thus *not* a determining factor.

Private capitalists really do have to make provision for
depreciation. It is not their consciousness which discards the
value, but the loss of value which shapes their consciousness.
We have to ascertain exactly what is the process by which this

The 'falseness' of their consciousness arises, I think, in a
different manner: because they believe that their own private
experience also holds good for society as a whole. This is what
is false.

The value lost to the owner of a morally depreciated capital
really is not retrievable by that capitalist. Otherwise they
would sack the accountants and employ others who let them spend
their depreciation allowances.

They lose value because some capitalists *do* buy Pentiums in
January: those whose equipment is already three years old and
have accumulated the reserves to replace them. Initially this
cheapens their outputs, and so force down the price (and value)
of whatever they and the 486-ers are both producing. They make
a superprofit, and the 486-ers suffer a loss in both revenue
and profits, because their sales income diminishes. The
function of depreciation is to compensate for this loss of
sales income. This is, for the 486-ers, a real and not an
imaginary loss.

But the value which the 486-ers lose, reappears in the profits
of the 586-ers. The moral depreciation of the 486 owners is the
source of the technical rents of the 586 owners. The rival is
able to sell her or his product for *more* than its individual
value, because the 486-ers are still around, and the social
value of whatever they make is correspondingly higher. The 486-
ers on the other hand sell the product for less than its
individual value. But society as a whole experiences neither a
net gain nor a net loss of value.

So why should anyone replace anything before it is used up? In
my view because there are actually two distinct aspects of the
competitive advantage acquired from innovation. I frame the
hypothesis that there are asymmetric gains from these two

Source 1 is simply that the 586 is cheaper. To this extent it
acts in production like a cheap 486. The 486 owner can gain
nothing from simply buying what is, in effect, a second 486
because s/he already has one. S/he can continue to compete with
the Pentium owners best by simply using up the 486. The moral
depreciation here fully compensates for the fall in price of
the 486.

But source 2 is that the 586 is itself more productive, and
acts like two 486s or four 486s. To this extent, it raises
physical productivity and is a mortal danger to the 486 owner.
This is what drives backward producers out of business. What
bankrupted the handloom owners was not cheaper handlooms but
powerlooms. What drove handicraft coalmines to ruin was not
cheaper handpicks but power drills. And so on.

Capitalists are *forced* to upgrade their equipment, or suffer
complete ruin, by the phenomenal rises in productivity, in use-
value terms, of the labour-power of the workers using new
technology: not the cheapening of the existing technology as
such. People don't buy Pentiums because they are cheaper (they
aren't - there is an industry dictum that the computer you want
always costs $2000) but because they can do more with them.
Otherwise they would just buy cheaper 486s.

Unless they are among those terminally sad people who just like
to have the latest of everything.

I think the heart of the modern division of the world into
absurdly rich and desperately poor, is the concentration of the
means of producing such revolutions in the means of production,
in the hands of Northern capital.