[OPE-L:6502] Re: Obsolesence

John R. Ernst (ernst@PIPELINE.COM)
Fri, 24 Apr 1998 02:05:30 -0400 (EDT)

Comments on Paul C.'s recent post on obsolescence.

I had written
> Again, you seem to be saying that a given process of production is used until
> it is physically useless. True?

Paul answered:

I would expect it to be used until the current cost of running it rose above
the value of the product, where by current cost I mean raw materials,
maintenance and wages.

My comment:

Thanks for the answer; it is clear. However, I think it is problematic.

Will a capitalist with fully depreciated fixed capital generally
stick with the older technique if his rate of return is 1% and
the general rate is 12%?

Your answer suggests that this might be the case.

When Marx discusses the transition from manufacture to modern or large-scale
industry, there is little fixed capital used in the manufacturing process.
In my example, with fully depreciated fixed capital, in terms of value
there is little fixed capital used in the process. In other words,
the accumulation process reproduces the transition itself via
technical change. At first, it is a matter of simply replacing living
labor with dead labor; in the period of large-scale industry it becomes
the replacement of living labor and older dead labor with dead labor.

To be sure, I am ignoring other factors involved in this choice of
technique problem -- interest rates, rent, profit of enterprise, etc.
My focus is on the accumulation process itself. Indeed, I assume
that as I consider the turnover of fixed capital in the accumulation
process more insights into a Marxian notion of interest rates, etc.
may develop.

Your answer to my question points to the need to examine this transition
process more extensively. That is, at what point is the older technique
abandoned? If the unit price of the output falls relative to those of
the inputs, then the process can become unprofitable. The faster the
fall, the shorter the lifetime of fixed capital. But this links the
process itself to an implicit assumption that the price of the output
is falling relative to that of inputs. However, if we assume a given
set of prices for both inputs and outputs as I did, then the older
technique will always be profitable. Put another way, it will always
be used as long as it is physically capable.

Here in the States, we see some corporations abandoning or giving away
equipment that is in pretty good working condition. To the corporation,
the real market price for this equipment generally is 0 or less. At the
same time, the corporations themselves are producing the same output as
before; in other words, a new process has replaced one that still generates

As someone who works with a non-profit in NYC, I cannot count the calls
we get from corporations to pick up their old working machines at no
charge as well as calls from brokers to take the machinery as a donation
so that the brokers can sell it where input prices (mostly wages) are
so low that the machine is given a new lease on life by going
abroad. In California, a profitable and relative new steel plant was
recently dismantled and shipped to China where the price of labor was
low enough to increase profitability despite the charges for dismantling
and reassembling.