[OPE-L:4066] More Depreciation Questions

john erns (ernst@pipeline.com)
Mon, 27 Jan 1997 01:42:41 -0800 (PST)

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Andrew (OPE-L 4065) presents me with the following challenge:

What I need from John is the following: assume that all capitals are
identical, in a one sector economy, and that all capitalists know everything
perfectly. But don't just let price changes drop in from the sky, external to
some individual capital. Endogenize them. If all capitals are identical, and
the economy is one-sector, prices equal values. Values are the sum of value
transferred + value added by living labor. Show me how value transfer is
determined under these conditions. If I understand it under these conditions,
I can understand it under other conditions. But I'll never understand it
under other conditions without first understanding it under these conditions.

To which I respond:

Given what I thought we were assuming, you now ask the impossible from
me. That is, we were restricted to "cheaper" machines. There were
no changes in technique within the process that used the machine
itself. Now you ask that I generate cheaper machines in a model --
using only cheaper machines -- given we are operating under the
same assumptions. If this is not true and we are dropping the idea
of considering only cheaper machines, then we need to deal with
some questions prior to constructing any more examples or models.
What are the questions?

1. As we consider "better" machines, we are forced to deal with
value creation. Specifically, as a better machine is introduced
do the workers using it create the same amount of value in a
given time period as those using the older machines? What is
the individual value of the commodity produced? the social value?
the market value? etc. Here I assume no matter what technique is
used the unit price(s) of the output would be uniform in each
period of production.

2. Must the rate of profit for the firm using the new machine be
the same as that for the one(s) using the older machine? If we
focus only on cheaper machines, we seem to be able to avoid this

I think both of us have avoided these questions. I know I did
in my "commentary paper" at last year's Value Conference by
simply assuming constant prices of output as I introduced
"better" machines into the example.