[OPE-L:6505] Re: Obsolesence

Allin Cottrell (cottrell@ricardo.ecn.wfu.edu)
Fri, 24 Apr 1998 08:57:46 -0400 (EDT)

On Fri, 24 Apr 1998, John R. Ernst wrote:

> 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:
> 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%?

Will his rate of return be 1%? Take Paul's example of the
ancient aluminium smelter, for which the prime cost is still
below the market price of aluminium. What's the rate of return
on capital here? Well, what's the value of the capital stock?
At this point it has nothing to do with the labour time that
went, once upon a time, into creating it. Rather, it's
"whatever that stock is worth to a capitalist", which ought to
be the present value of the stream of operating profit,
discounted at the current rate of return. But if that's the
value of capital stock, then what's the rate of return on it?
The current rate of return!

Allin Cottrell.