[OPE-L:5034] Re: RRI and The Rate of Profit

john ernst (ernst@pipeline.com)
Thu, 15 May 1997 20:02:09 -0700 (PDT)

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Jerry began:

To refresh everyone's memory, this is what John said, in part, in [5024]:

> For Marx, "moral depreciation"
> is part of the depreciation charges. It is the loss in value of
> fixed capital as better or, simply, cheaper machines are introduced. It
> is a cost anticipated by the capitalists according to Marx. It is not
> at all a surprise to them.

In [5025], I took issue with the last sentence above -- which I believe is
bending the stick too far in the other direction.

Then, in [5026], John, in part, wrote:

> I don't get it. Are you saying that a capitalist knows nothing of
> obsolescence? Does he think his new machinery will last until
> it is physically worn out?

No, what I'm saying is that capitalists can estimate ex ante the rate of
obsolescence AND that those estimates are by their very nature
"guesstimates" which could be proven ex post to be *very far* off the
mark. There is quite a gap, after all, between believing that capitalists
"know nothing" re the obsolescence of fixed capital and the proposition
that "it is not at all a surprise to them." I think that it can indeed
come as quite a surprise to them!

John now says:

Why assume, as is often done, that the estimates of "moral
depreciation" are either zero or too low and hence capital
values must be adjusted after each and every period? I
agree that the guesses can be wrong but I would suggest that as
a starting point we might assume they are right and try to
see how they can go wrong.

I had said:

> You seem to want to impute to me a position I do not have --
> capitalists have perfect knowledge of the future. <snip>

Jerry responded:

I was simply responding to what you wrote in the section I excerpted from

> Do present-day
> capitalists know that the prices of the computers they buy today will
> be lower in the future? Do they allow for this?

They can reasonably anticipate that the prices for the computers will
drop. They can "allow" for this ... but how do they estimate *how much*
prices will drop?

John says:

I'm not worried too much about how they do this. For Marx, "moral
depreciation" shortens the lifetime of fixed capital; I suppose the
estimates would be based on past experience.

Jerry goes on, quoting me:
> Your post goes on about expectations concerning rates of accumulation,
> the wages of work, rent, etc. I have not dealt with any of that as
> it is not part of the concept of "moral depreciation." Why drag
> these other topics into this discussion?

As I explained previously, the question of capitalist expectations also
came up in the "ideal vs. real value" thread (e.g. in the discussion of
market research). If you don't want to discuss those other subjects, so be
it. Yet, I see no reason why you should object to others who "drag these
other topics into the discussion".


The point is that in the case of "moral depreciation" Marx himself
implies that what we call "expectations" play a role in the
valuation and accumulation process. To date, I know of no attempts
to deal with this in any systematic fashion.

Jerry, again beginning with a quote from me:

> The basic question here is: "If capitalists including the
> costs of moral depreciation within their overall depreciation charges,
> are they not expecting some fall in the prices of the already purchased
> fixed capital?"

Has anyone said that capitalists can not (or do not) consider the costs of
moral depreciation or that they don't expect a fall in the prices of the
already purchased means of production? I certainly didn't read Fred's post
[5019] to be suggesting that.


In responding to Fred, I asked him to consider how the evidence he
found in CAPITAL was used by those who construct models purporting
to represent Marx's notion of accumulation. By that I meant that
by revaluing fixed capital after each and every period based upon
the current time necessary for the reproduction of fixed capital,
most think they are simply following Marx's idea that the value
of constant capital is determined by the time it takes to
reproduce that fixed capital under current conditions. This, of
course, ignores any notion of moral depreciation. Thus, Fred
need not suggest this; I would say the whole idea can be traced
back to, at least, Tugan. So I would say that while many would
answer your somewhat rhetorical question with a "No.", we find
the vast majority revaluing constant capital after each and
every period without any consideration of moral depreciation.

To answer our question another way, since I am from Missouri
"Show me."