Alan Freeman
------------
I am worried lest we become too sophisticated to appreciate a
point which depends on no special formula, no debatable reading
of the texts, no contestable models and absolutely no theory of
what might or might not be equalised. The figures yielded by
valuing capital at current costs *cannot* conform to what the
capitalists report. Moreover, the impact of all modifications so
far suggested is to widen this gap. If capitalists choose, for
example, to anticipate or recognise the cheapening of constant
capital by writing their assets down, this will make current
profits smaller, not larger, and hence even farther from what is
predicted by Okishio or any variant of the current cost hypothesis.
Paul C
------
I do not for a moment dispute that technical change can lead to
losses on capital account due to depreciation. One does not have
to accept the TSS definition of value to accept this. However one
must distinguish this cause of a reduction in profits, from that
brought about by an increase in the c/v ratio.
A rise in c/v reduces profit rates by spreading a surplus value over
a larger amount of capital, and as such it can never make profits
negative.
Depreciation due to technical change on the other hand is a direct
deduction from current revenues, and, if sufficiently great can
make profits negative. Furthermore, the greater its impact on the
current profits, the lower will be the resultant c/v ratio.
All this is quite compatible with valuation of capital assets at
current cost.
Alan
----
Once we stop valuing capital at reproduction cost, we can connect
profit, accumulation, and crisis like Marx did. In all static
formalisms the relation between the magnitude of profit and the
growth in capital stock is suppressed. We make $2, we add it to a
capital stock of $2, and lo! it's worth $3. Why does 2 + 2 make 3?
Because capital cheapens. Where does it go? Nobody knows.
Paul
----
Where are the snows of last winter?
The conservation of value over time, like that of snow requires
peculiar conditions.
Alan
----
(a) Current or reproduction costs cannot portray reality;
Paul
----
Why?
Different markets respond with different speeds, but in many
cases stock-holders do have to revalue their assets to account
for changes in current production costs. If a low cost oil
producer like Iraq comes back onto the market, firms which
have billions tied up in oil currently in storage or in transit
will be forced to revalue these assets.
Paul Cockshott
wpc@cs.strath.ac.uk
http://www.cs.strath.ac.uk/CS/Biog/wpc/index.html