In reply to my OPE 1078, Duncan said:
Wouldn't a rationally planned socialist society also abandon machines if
they couldn't cover their variable costs at optimal shadow prices? Why is
it such a good thing to keep obsolete equipment in operation?
John says:
First, a point of clarification. In OPE 1078, I stated that
capitalists would replace their machines or declare them to
be obsolete when the rate of profit of new machines exceeded
that possible on the old machines even though all depreciation
had been recovered. As Duncan's first question makes evident,
there is no option for the capitalists when the variable costs
(c+v) can't be covered.
Now to the real question. Like Duncan, I do not think it is a
good thing to keep producing with obsolete equipment no matter
which definition we use. In capitalism, there is no choice.
Assuming that the "rationally planned socialist society" is not
in any way competing with capitalism, one might set up the
structure of production model quite differently such that the
optimal shadow prices would vary considerably from the those in
capitalism.
John