[OPE-L:3024] Re: Straight & Moral

John Ernst (ernst@nyc.pipeline.com)
Sat, 14 Sep 1996 17:27:24 -0700 (PDT)

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I now see I should have been more explicit in
my stating the assumptions in my example in
OPE-3016. Indeed, I had assumed that the
price of the output fell in such a way that the
capitalist was achieving the same rate of
profit in each period. The depreciation method
used was straight line over 10 years.

Using this method of depreciation, the capitalist
achieves that same rate of profit (15%) despite
falling prices. I think this may be of interest as
it was this method of depreciation that Marx seems
to assume in CAPITAL. To be sure, rates of return
with depreciation are not in CAPITAL. Yet, it would
seem that "moral depreciation" is built into the picture.
Should the capitalist anticipate rapidly falling prices,
he could use a method that accelerates the depreciation
in the first few years of use.

I am making no grand theoritical claims here. But I do
think the manner in which capitalists used various
methods of depreciation as well as the way in which
the various techniques arose in "The History of
Accounting Thought" might be of interest.

The example does suggest that price decreases do not
require that constant capital be suddenly devalued
because of those price decreases. Rather the
example suggests that, using the more or less standard
methods of depreciation, capitalists did anticipate
price decreases.