[OPE-L:2385] Re: capital stock

Iwao Kitamura (ikita@st.rim.or.jp)
Tue, 28 May 1996 06:23:35 -0700

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Jerry [2373]:
>The value of constant fixed capital depreciates over time. Yet, constant
>fixed capital also has a material side which affects investment. In many
>branches of production, capitalists invest in a group of inter-related
>technologies which have a limited usefulness (e.g. "hard automation").
>Investment in this fixed capital is frequently not incremental since new
>technologies might require an entirely new plant. When they do invest in
>new and better constant fixed capital, the scale of investment frequently
>requires external financing (unlike incremental changes in technology
>which can be generally financed internally). A complicating factor, in
>practice, is where in the presence of oligopolistic markets, oligopolies
>might hold-off on investing in major changes in plant and equipment in
>order to reclaim a larger proportion of the value invested in existing
>fixed capital.


Jerry [2373]:
>However, if the semiconductor
>manufacturer had to scrap its entire plant and equipment, it might *not*
>invest in 16M DRAM process technologies. In other words, while they would
>in the long-run be straddled with out-of-date capital equipment, the
>effective cost of shifting to the newer, alternative technology might mean
>that they put-off this decision since they would have to write off the
>full value of existing plant and equipment.

Yes, might be so. So the problem is moral depreciation. If the manufacturers
of 4M DRAM themselves aknowledge that production of 16M DRAM would lower
the price of 4M DRAM under its current cost (excl. depreciation)and anticipate
its entry time, then they will depreciate the equipments producing 4M DRAM
appropriately to their anticipation. Or we could say the whole value of those
equipments is transfered to the products in that short period if this change is
socially (by capitalists) recognised.
I'm still hazy whether the transfered value (depreciation) is retrospectively
determined or the difference between anticipated and actuall is transfered
over time period (retrospectively).
Of course, there's no need to stop the production of 4M DRAM if its
(cash flow - rent) is positive. And this must be an obstacle to capital
mobility. Probably, this case, especially in heavy industry in practical
analysis, is related to the problem of crisis or business cycle.

in solidairty,


Iwao Kitamura
mailto: ikita@st.rim.or.jp