Re: [OPE-L] calculating the not rate of profit

From: glevy@PRATT.EDU
Date: Mon Apr 02 2007 - 18:30:26 EDT

> In practice one is reliant upon the judgement of accountants
> in quoting figures for capital depreciation.

Hi Paul:

It's not an accounting issue: how can accountants reasonably predict
the rate of moral depreciation?  It's true that there may be certain
accounting conventions, e.g. they may estimate -- based on *past* rates
of moral depreciation -- that computers will depreciate morally over a 3
year period of time.  Technological breakthroughs, though, may come along
and shred whatever depreciation schedules the accountants have come up
with.  You are right, though:  firms come to rely on the expertise and
judgment of the accounting staff.  Even the best accountants, though, can
not reliably predict the rate of technological obsolescence: all they can
do is make heroic assumptions (such as assuming that trends for moral
depreciation from the past will continue into the future) and then wait
and see whether their guesstimates are shown to be on the mark or way off
target ex post.  For the firms it's  a gamble and the accountants are the
odds-makers. Hi Rhodus, Hic Salta.

In solidarity, Jerry

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