[OPE-L:1966] Re: depreciation, profits, and subjectivity

Michael Perelman (michael@ecst.csuchico.edu)
Fri, 26 Apr 1996 00:14:21 -0700

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Gil wrote in agreement:
> Yes, I do. But if not based on (at least potential) market
> relations, I don't know what the term "value of capital" in your
> original post means. That is: I don't consider an owner's
> subjective assessment of this prima facie evidence. Should I? Gil
Of course, the owner's subjective assessment does not determine the value,
but neither does the market -- at least until the capital goods or the
business are placed on the market for sale.

I was moved to make this point by the discussion by Fred, Andrew, et al.
about the exact moment of capital revaluations. The sluggish valuation
process allows for the existence of fictitious capital.

This fictitious capital -- or what I think of as fictitious value -- can
persist over long periods of time, often until a crisis wipes them out.

Michael Perelman
Economics Department
California State University
Chico, CA 95929

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