[OPE-L:1946] Re: depreciation, profits, and subjectivity

Michael Perelman (michael@ecst.csuchico.edu)
Thu, 25 Apr 1996 00:21:45 -0700

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Gil says
> But Mike, if you _know_ this, then presumably "the market" does too,
> and thus the capital's value is not subjective, contrary to
> suggestion--no matter what the present delusions of the current
> owners.
> Gil

Michael responds:

I have to disagree with you here. Even if we assume that markets "know" [and
remember that knowledge of the value of a capital good requires the knowledge
of the present value of the future returns from the good], markets only enter
into the picture when the capital is put up for sale. Stocks and bonds are
continually sold on the market; capital goods rarely, and when they are sold,
the markets are thin. Do you agree?

Michael Perelman
Economics Department
California State University
Chico, CA 95929

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