[OPE-L:880] Re: valuation again

Michael Perelman (michael@ecst.csuchico.edu)
Tue, 30 Jan 1996 17:12:21 -0800

[ show plain text ]

The jump from devalorization to the lack of viability was central to my
End of Economics book. I touched on it in my Journal of Economic
Perspectives article (Summer 94).

When capital values fall, firms cannot cover fixed costs. For example,
most of the U.S. railroads fell into bankruptcy, many fell several times.
> Michael P. wrote:
> > 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] <snip> [emphasis added, JL]
> Could you please explain the connection between the first two sentences and
> that part of the third sentence which is highlighted? You must have
> realized that someone would ask you about this, right?
> In OPE-L Solidarity,
> Jerry

Michael Perelman
Economics Department
California State University
Chico, CA 95929

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