Alan argues that moral depreciation is a transfer
from the holders of old machines to the producers of new ones.
I have no doubt that one can construct hypothetical
examples in which the super profit of the producers of new
models of machine exactly equal the losses on moral depreciation,
but why should this happen in reality. Why is there any
necessary relationship between the two sums?
Power stations have a planned life of some 25 to 30 years over
which their depreciation is conventionally calculated. In
Britain there has been a large number of new cheap gas powered
electricity generating stations built in the last 3 or 4 years.
These are forcing a number of coal fired stations that still
have several years planned life ahead of them into retirement.
Why should the capital account losses suffered by the owners
of the coal fired stations exactly equal the excess profits
of the owners of the new stations?
Is it not possible that the owners of the new stations, - since
so many are being built at once, will only earn normal profits
on them, giving rise to a situation where only the gas fired and
the nuclear base load stations remain on line.