P.J.Wells@OPEN.AC.UK
Fri, 22 Oct 1999 18:41:19 +0100
> John wrote:
>
> It seems to me that no matter which rate of profit one uses,
> there is a subjective guess involved. That is, both the
> ARR and the RRI require an estimate of how long, say, a machine
> will last. Further, no matter which you use you've got to
> guess what the returns will be in each of the estimated
> number of periods.
>
Julian replies:
I think the key here is to distinguish between guesses about the
past and present, and those about the future: the former I'd call
"estimates", since in principle you ought to be able to find out what is in
fact the case. *Some* of the latter I'd also call estimates, on the grounds
that capitalism is not so utterly chaotic (usually) that the past gives *no*
guidance about the future: I'd include among these guesses about the life of
machines.
Obviously these won't be such good guesses as estimates about the
past and present, especially if we are talking about the "economic" rather
than "physical" life of machinery. (1)
Claims about future returns strike me as having a status akin to
astrology...
In your earlier researches, did you come across Parker and
Harcourt's compilation ("Readings in the concept and measurement of
income")? In it Kaldor has some (not so) innocent fun with Hicks and other
subjectivists, pointing out that once your notion of income depends on
expectations, even ex post measures are subjective (because they depend on
comparing actual current values of assets with the hypothetical value they
would have had at some past moment, if events in the intervening period had
then been correctly foreseen -- loc. cit. p. 167-168).
(1) In one of your 1997 posts [5754] you mention that you had
earlier rejected the idea that moral depreciation was simply a deduction
from profit. Does this imply that you would account for it by writing it off
as capital loss, or have I missed something?
Julian
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