[OPE-L:1321] Re: Cheaper Machines

John R. Ernst (ernst@pipeline.com)
Tue, 5 Mar 1996 08:36:46 -0800

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Iwao,

It still seems to me that you are focused on "cheaper
machines." Let me explain. If a capitalist buys a
machine for 100 that he thinks will last for 5 years, it
does not mean that he also thinks the price of new
machines will decrease by 20 each year. Rather he
is assuming that in 5 years it will no longer be of use
to him from the standpoint of profitablitly. The newer
machines produced 5 years from his point of purchase
will be capable of producing a higher rate of profit than
his old machine even though that old machine will be
fully depreciated. Note that no matter how much the
price of the SAME machine drops, it is cheaper for
the capitalist to use his fully depreciated machine. Thus,
as they depreciate machines over, say, 5 years, capitalists
implicitly state that a BETTER machine will be available in
5 years.

Turning to your numbers, I do not see the need to revalue the
machine since the capitalist's assumption was not that there
would be price decreases each year to match his depreciation
charges but rather, again, that after two years he would obtain
a higher rate of profit with a new and BETTER machine after
2 years.



John






On Tue, 5 Mar 1996 ikita@st.rim.or.jp (Iwao Kitamura) said:


>John:
>
>>My point was that if we only consider "cheaper machines" and
>>exclude better machines, the more expensive machines can
>>still be used in production until they wear out physically. If
>>we assume that their physical life is less than their economic
>>life, "better machines" must be part of the picture.
>
>Yes, I entirely agree with this.
>
>>In your example below, it seems clear that the "your" capitalist
>>only takes into account physical depreciation as he sets up his
>>depreciation schedule. He then has to allow for the "moral
>>depreciation" due to the cheaper machine. I am suggesting
>>that in setting up his depreciation schedule the capitalist can
>>only know the "probable life" of the machine and that the life
>>anticipated is the economic or social life. Note that Marx includes
>>an allowance for "moral depreciation" in computing the value of
>>the output. Thus, unlike your capitalist, Marx's would not have
>>anticipated the life of the machine to be 10 years but something
>>less since the economic life is less than the physical life.
>
>Agreed.
>And the problem is that this anticipation of capitalists
>on economic lifetime of machines would not always be correct, so it
>would be possible that value would appear when moral depreciation would
>have been over-estimated.
>Here's my another example.
>At the begining of the 1st year: a machine costs $100 and capitalists
>anticipation of the machine's economic lifetime is 2 years.
>In the 1st year, $50 thus transfers to the products.
>At the begining of the 2nd year: the cost of the same machine declines
>to $80 and capitalists anticipation of its economic lifetime increases
>to 4 years. The productivity to produce the machine has not increased
>enough as anticipated. What happens? The machine should be re-valuated
>to $60 from its book value $50. Where does this $10 difference come from?
>Is this value not created by human labor? No.
>I'm not quite sure but my temporal answer is that this $10 comes from
>the previous period. I think this case only illustrates a case of value
>transfer from period to period. Am I wrong?
>
>in OPE-L solidarity,
>Iwao
>
>----------------------
>Iwao Kitamura
>E-mail: ikita@st.rim.or.jp
>