[OPE-L:6310] [MIKE W] Re: Historical, real and current costs

Gerald Levy (glevy@pratt.edu)
Thu, 19 Mar 1998 11:30:13 -0500 (est)

>From Michael@mwilliam.u-net.com Wed Mar 18 09:21:57 1998

Rakesh wrote:
> Michael, I am interested to determine whether there are age-wise finely
> differentiated markets with standardized prices for second-hand machinery

The PC example concerned not second-hand (used) machinery, but
obsolescent PC parts that were bought up and assembled by a small
firm for sale to customers for whom price was a more binding
constraint than specification (eg students who just need a

> or to put it differently for residual fixed capital as joint product.

So I am not sure to what extent it exemplified this.

> If such a market exists, then it seems that there is an easy and objective
> answer to the determination of the magnitude of capital consumption;

This seems plausible - but it is counter-factual. There do not, I
think, exist widespread markets for obsolescent (let alone
second-hand) capital goods. *Unless* their do indeed exist a wide
variety of advanced capitalists selling off obsolescent or second
hand stock to less developed capitalists?

> would have expected the growth of such a market since "in so far as fixed
> capital is condemned to an existence within the confines of a specific use
> value, it does not correspond to the concept of capital, which, as value,,
> is indifferent to every specific form of use value, and can adopt or shed
> any of them as equivalent incarnations." (Grundrise, 694)

I'm not sure I see the relevance of this. Is Marx here not just
pointing out that it is capital in its money form that is most
adequate to the concept?

> The stronger the foreign market for second hand machinery or the more money
> to be made from the sale of obsolescent machinery, the less the profit rate
> on one mode of investment must fall to render profitable the removal of
> capital from that investment for another more profitable one.

This sounds plausible, if one can argue (as Geert and I do in our
(1989) book) that technological development at too high a rate may
generate scrapping before full amortization of the money capital
invested. Of course, if there is a market in which some proportion of
the intial investment can be recovered (this could be anything from
scrap value, through second-hand value to value as a low spec.
alternative for cash strapped customers), then innovatory investment
can indeed progress at a greater rate than otherwise.

> That is, if
> very little can be made from the sale of second hand machinery, then the
> investment of that scrap value even at a higher rate of profit may reduce
> the mass of profit realized and by thus rendering uneconomical the movement
> of capital to investments with higher profit rates, the profit rate
> remains depressed despite the theoretical possibility of higher
> profitability.

An interesting thought. Of course,such markets would also help the
measurement problem of ascertaining the rate of actual depreciation
(physical and 'moral') that has been exercising John Ernst and

I'm afraid I have no special knowledge about the extent of such

Comradely greetings,
"Books are Weapons"
Dr Michael Williams
Department of Economics Home:
Faculty of Humanities and Social Sciences 26 Glenwood Avenue
De Montfort University Southampton
Milton Keynes SO16 3QA
tel:+1908 834876 tel/fax: +1703 768641
fax:+1908 834979