[OPE-L:3991] Re: Depreciation Query

Michael Perelman (michael@ecst.csuchico.edu)
Wed, 15 Jan 1997 15:36:00 -0800 (PST)

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In reply to John's question, I picked up the dialogue between M. & E. a
few months later in my book on Marx's crisis theory:
Marx read Babbage's estimate that capital equipment turns over
within five years (Perelman, 1987, Ch. 6; Marx to Engels, 2 March
1858, in Marx and Engels, 1983, XL, pp. 278). Engels informed
him that textile equipment was written off over 13 years,
although the rate of depreciation did not indicate the rate at
which machinery disappeared (Engels to Marx, 4 March 1858, in
Marx and Engels, 1983, XL, pp. 279-81). He continued:
Nor does the old machinery that has been sold promptly
become old iron; it finds takers among the small
spinners, etc., etc., who continue to use it. We
ourselves have machines in operation that are certainly
20 years old and, when one occasionally takes a glance
inside some of the more ancient and ramshackle concerns
up here, one can see antiquated stuff that must be 30
years old at least. Moreover, in the case of most of
the machines, only a few of the components wear out to
the extent that they have to be replaced after 5 or 6
years. And even after 15 years, provided the basic
principle of a machine has not been superseded by new
inventions, there is relatively little difficulty in
replacing worn out parts, so that it is hard to set a
definite term on the effective life of such machinery.
Again, over the last 20 years improvements in spinning
machinery have not been such as to preclude the
incorporation of almost all of them in the existing
structure of the machines, since nearly all are minor
innovations. (Marx and Engels, 1983, XL, pp. 280-1)
Marx uncharacteristically disregarded many of Engels' subtleties.
He confused the time required to fully depreciate equipment on
the books with its economic lifetime. He concluded that the
economy follows decennial business cycles that coincided with the
lifetime of the average piece of equipment (Marx to Engels, 5
March 1858, in Marx and Engels, 1983, XL, pp. 282-4).

Michael Perelman
Economics Department
California State University
Chico, CA 95929

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