[OPE-L:873] valuation again

Michael Perelman (michael@ecst.csuchico.edu)
Mon, 29 Jan 1996 17:01:10 -0800

[ show plain text ]

Like Andrew K. and Alan F., I have been working on the idea of constant
capital for more than a decade. I have remained fairly silent on the topic
because of other obligations.

I mostly agree with Andrew's [OPE-L:868], with two minor exceptions.

1. I am still not clear about the correct way to measure value with respect
to the valuation of constant capital. In a "perfect competition world"
[i.e. with no monopoly] the inputs may be valued according to their value
at the inception of the production period (as I understand Andrew to
suggest) or at the end of the production period. I can think of reasons
for either method.

2. Consistent with valuation at the beginning of the period, we can think
of the capitalist as estimating a subjective patter of depreciation. This
information cannot be known in advance. Some of the earlier postings
assumed that it could be.

3. As we move toward a greater reliance on constant capital [where fixed
costs loom large] a competitive economy will make prices move toward
marginal costs. As a result, fixed capital might suffer rapid devaluation.
Under such circumstances, capitalism will not be viable. [Witness the U.S.
airlines] I amplfy on this idea in my new book, The End of Economics
(Routledge, in the next couple of months) and further in a new book in

4. The formation of monopolies and cartels at the turn of the century was
intended to short circuit this tendency toward devaluation. [The End of
Economics, again.]

5. Andrew ended up by denying the importance of monopoly. He is partially
correct. Keynesian economics more or less sustained demand, offering an
alternative method of short circuiting capital devaluation. [an earlier
book of mine, Keynes and the Economic Slowdown].

Michael Perelman
Economics Department
California State University
Chico, CA 95929

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