[OPE-L:1406] Fixed Capital and Transformation Problems

John R. Ernst (ernst@pipeline.com)
Sun, 10 Mar 1996 12:05:12 -0800

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Within much of the transformation stuff, there seems
to be a lack of consideration of fixed capital. To be
sure, this starts with Marx himself as he often "abstracts
from" fixed capital in CAPITAL. However, if we are to
carry out the transformation ala Bortkiewitz et. al., it
seems to me that fixed capital with all its nuances should
be in the picture. But how? Let's consider an investment
of $400 in fixed capital that lasts 4 years. Here, we'll
assume a rate of profit of 20%. With some rounding, the
fixed annual payment comes to $155 per year. That payment
consists of profit and depreciation. Below I separate them
and thus in dollars, rounded to the nearest whole number,
we have:

Period Fixed Dep. Profit Total
Capital Recov. Payment

1 400 75 80 155
2 325 89 65 155
3 236 107 47 155
4 129 129 26 155

Relevant Totals 400 220 620

Note that the figures above would be used as prices of production.
Indeed, imagine that all the value created is by workers paid a
negligible wage. Thus, the profit created would differ from year
to year. Yet in each year we assume that the workers create the
same amount of surplus value. Total surplus value could only equal
total profit over the entire 4 years.

What puzzles me as I explore this madness is the following:

1. How do we set up a value side to transform into this?
You simply need a rate of profit or some way to get one.

2. What would be the "value rate of profit"?

3. In empirical studies, how is the amortization process taken
into consideration as one attempts, say, to show the correlations
among values, prices of productions, and actual prices? Must
one assume something about the "age" of fixed capital?

Those are a few of the questions that concern me now. No doubt,
more will follow.