[OPE-L:5047] Re: RRI and The Rate of Profit

john ernst (ernst@pipeline.com)
Fri, 16 May 1997 12:22:35 -0700 (PDT)

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RE: Andrew's 5045

Much of Andrew's post contains questions addressed to Duncan.
However, in the first part, in a careful fashion, Andrew
differentiates his postion on the transfer of value from
mine and, I would claim, from Marx's.


I consider myself an adherent of the TSS interpretation, but I do not think,
and have never thought, that Marx held that the value transferred to the
product from the constant capital is determined by the historical cost of the
means of production. Rather, I think, and have always thought, that the value
transferred is determined by the cost of reproducing the means of production
when they enter production, i.e., when their use-value is destroyed. In other
words, the value transferred is determined neither by historical cost, nor by
post-production replacement cost, but by the current pre-production cost of
the means of production.


This takes me back to my previous discussion(s) with Andrew concerning
moral depreciation. That is, the difference between what Andrew calls
the "current pre-production cost of the means of production" and the
historical costs of those same means of production is 0 if all the
means of production are used up in each and every period. What then
happens when we bring fixed capital into the picture?

Frankly, I think both Andrew and I have had difficulties with its
introduction. Mine were clearly exposed by Andrew in our "Sheep and
Wolf" discussions a few months ago. I tried to argue that with the
use of concept of moral depreciation, the historical value (price) of
the fixed capital was preserved as the reproduction costs of fixed
capital decreased. Following Marx, I tried to show how this could
occur using straight-line depreciation with returns on investment
measured only by the rate of profit. Andrew clearly showed how this
was impossible. Why then am I reluctant to buy Andrew's entire

Andrew's notion of the "current pre-production cost of the means of
production" allows him to adopt the idea that fixed capital is
revalued at the end of each and every period as techinical change
takes place. Losses due to moral depreciation can be seen as
simple deductions from surplus value. Further, the lifetime of
fixed capital is given solely by its physical properties.

It still seems to me that this does away with Marx's notion that moral
depreciation is part of the overall depreciation charge itself.
In Vol. I, Marx defines moral depreciation in this fashion and notes
that moral depreciation shortens the anticipated lifetime of fixed
capital. In Vol. II, he observes that moral depreciation differs
from those losses which are deductions from surplus value like
catastrophes, insurance, etc. In Vol. III, we learn that the
anticipated moral depreciation may be so great that capitalists
may not invest at all in certain situations. The point is that
nowhere do we find Marx treating moral depreciation as a
deduction from surplus value seen only ex post by the capitalists.

As I remarked in my post to Duncan, I think that the difficulties
I had in trying to use the concept of moral depreciation were due
to my attempt to maintain that prices were computed using only the
rate of profit and not the RRI or any other present-value-type
calculation. As I pointed out, neither the RRI nor any other
present-value-type calulation was known to Marx. Hence, it is not
surprising that Ch 4 of Vol. 3 was left unwritten by Marx since
here he was to discuss "The Effect of Turnover on the Rate of
Profit." Engels version of the chapter does not treat how the
turnover of fixed capital both influences and is influenced by
the valuation of fixed capital.