From: Gerald_A_Levy@MSN.COM
Date: Wed Oct 27 2004 - 09:56:49 EDT
Paul C,
Thanks for the reply.
>>> Well suppose that electricity is produced this year, but that
the atomic waste has to be held for 40 years to cool and is
then vitrified and buried. this means that the production of
electricity now involves both past and future labour. Normally
one just counts the past labour in estimating the costs and
thus the profit earned on the sale of a commodity.
If one is to deal with the future labour expenditure, then
one has to give this a present value. One way to do this is obviously
to discount the future costs. What should be the discount rate
used? <<<
How is the electricity corporation able to reliably estimate
its costs over the 40 year period? Clearly that firm has to
make estimates (read: guesstimates) about a whole range of
cost-related issues including:
a) changes in labor costs, including benefit costs;
b) changes in the quality and price of means of
production directly or indirectly related to nuclear
disposal (this presumes that the firms are able to
estimate in advance the pace, cost, and character
of technological over this time period);
c) changes in the *faux frais* of production (e.g. changes
in insurance, security, and 'hospitality' costs) which
might be very far from being considered to be 'incidental';
d) changes in the cost of real estate and land;
e) changes in the cost of transportation (especially if the
spent fuel is to be transported to another site);
f) changes in the rate of interest;
g) changes in the rate of inflation and/or deflation;
h) changes in state regulatory policy, especially as it relates
to the nuclear power industry;
i) changes in corporate taxation;
j) changes in the demand for electricity;
k) cyclical changes in the level of aggregate economic activity.
Yet, *none* of the above can be reliably estimated. Indeed,
whatever estimates are made may be shown *ex post* to be
_wildly_ off target.
>>> Then there is the more general problem which affects all
attempts to use a discount rate in theories of value.
This includes the use of a discount or profit rate
in Marxian and Sraffian price theories and in Samuelsons
treatment of the question. Should this be the real rate of
profit or should it be the money rate of interest. I am
of the opinion that it is unrealistic to use the real rate
of profit in these calculations for not only is the real
rate of profit masked by the current rate of interest, but
it is impossible to predict what the future rate of profit
will be. <<<
Yes, but it is impossible to predict what the future rate
of interest will be over the very long term (e.g.10, 20, or 40
years hence) as well.
In thinking about individual rates of return for firms,
perhaps it is better to think in terms of rates of return
on investment (RRI) rather than rates of profit.(Recall our
discussions on RRI years ago with John E and others.)
But, I think that the same basic issue returns whether we
attempt to calculate rates of profit, rates of interest, or RRI.
The future is overdetermined. There are far too many variables
to make accurate predictions of what is going to happen
over that (40 year) time period. Hell, there might be
nuclear annihilation! Or, there might be socialism! Ironically,
though, the firms *must* attempt to predict and calculate
the unpredictable and incalculable. (NB: the state must also
make long-term prediction of costs in the formulation of
current state budgets: this can lead to severe budget
imbalances over the long-term.)
In solidarity, Jerry
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