[OPE-L:818] Re: Valuation of Inputs

John R. Ernst (ernst@pipeline.com)
Fri, 19 Jan 1996 21:35:17 -0800

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Hi Fred,

Hopefully, my answers to your two questions will
clarify matters.

Your 1st question

What exactly is your definition of "moral depreciation"
(anticipated devaluation of constant capital?) and how
does it affect the evaluation of constant capital
(reduces the original constant capital invested?)?

My response(s)

In purchasing constant capital, especially constant capital
that is to be used as fixed capital, the capitalist must
be aware of how much of the price of each commodity he sells
represents the constant capital used up in the process.
How does he get this number? Let's say that a machine
costs him 1500 and with normal use would PHYSICALLY last
15 years. Using straight line depreciation, the charge per
year would be 100. We assume there is no "scrap value" of
the machine after those 15 years.

However, based on his own experience, he knows that the
machine can only be used profitably for 10 years. Using
the same depreciation method, he is clear that he must
charge 150 each year. The difference between 150 and
100,50, represents what Marx calls "moral depreciation."
______________________________

Note that for Marx the depreciation is thus socially
determined and is not entirely dependent on the physical
process.

__________________________

Thus, the capital loss that occurs due to innovation is,
for Marx, already included in the constant capital. To
treat this loss in some other way seems wrong. Here,
consider these.


1. To see the capital loss as recurring and deducting it
from surplus value in order to show a falling rate
profit ignores, as Roemer points out, that capitalists
would catch on to this and take it into account as they
consider changing techniques.

2. To introduce fixed capital into models in such a way
that no moral depreciation occurs and to simply revalue
capital as techniques for producing the means of
production improve ignores the capital loss completely.
As constant capital is valued simultaneously, the loss
itself disappears. Here I think we see the danger of
models that determine relative prices in a timeless
vacuum. They ignore the notion that capitalists often
have the value they possess in the form of fixed capital
and that that value's preservation is crucial.


Your 2nd question

Would you please give some references where Marx discussed moral
depreciation? It does not appear to be in the index of any of the three
volumes of Capital or in Theories of Surplus-Value. Which does not
necessarily mean that it is not important(these indexes are not very good).

But it does not that I can't find any references. Just books and page
numbers will do.

My Response

I wish there were more but here are two in CAPITAL.

1. Book I, P. 404 (International). For others, Chap. 15, Sec 3,
Part B, Paragraph 5 (Check out the footnote as well)

2. Book II, P. 170 (International). For others, Chap. 8, Sec 2,
(32nd Paragraph in chapter)
__________________________________________


Note that the degree to which depreciation in general was of
concern to Marx seemed to change as Marx worked on CAPITAL.
Thus, it is not surprising to me that you found no references
to the concept in the manuscripts of the 1860's, written
before 1867.

Indeed, after finishing the first edition of Book I, Marx
wrote Engels asking for information about how he as a
capitalist used the funds prior to the replacement of
fixed capital. (Marx to Engels, August 24, 1967)

Michael Perelman reports that soon after finishing the first
book, Marx got caught up in trying to relate the turnover
of fixed capital to the periodicity of crisis. Whether
or not anything ended up on paper is unknown to me. (Michael,
if you are reading this, do you know?) At any rate, a reference
to this type of relation is in the manuscripts that form the
Book II(see p. 185). It would be interesting to find out if
the term, "moral depreciation", is in the first edition of
CAPITAL. I do not have a copy of that edition here and the
last I heard the NYC Public Library destroyed its copy of the
first edition although it may have it as a photocopy. (It
was Sorge's copy.)


We in the cold northeastern part of USA envy you as a new
cold front approaches.


Cheers,

John