[OPE-L:4004] Re: Depreciation Questions

Gerald Lev (glevy@pratt.edu)
Thu, 16 Jan 1997 14:55:51 -0800 (PST)

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John wrote in [OPE-L: 4000] [!];

a) > In CAPITAL, Marx seems to assume that capitalists base their
> guesses on the life of fixed capital based on experience. In
> general, he assumes a machine will last 10 years.

b) > The anticipated
> prices of inputs and outputs are INITIALLY assumed to be those
> that exist when the investment is made.

These are two different criteria: a) guesses based on experience; b)
anticipated prices are initially assumed to be those that exist when the
investment is made. Yet, capitalists know from experience that their past
guesses regarding the prices of inputs and outputs have not been correct
and that if they assume initially that the anticipated prices will equal
the current prices then they are in for a (most likely) rude surprise.
Consequently. wouldn't it be more reasonable for us to anticipate that
capitalists at least *try* to anticipate moral depreciation? The problem,
though, is that simply because they recognize that moral depreciation can
and has occured does not mean that their estimates of moral depreciation
will be shown _ex post_ to be accurate. Moreover in the presence of rapid
technological change, there is no reason _a priora_ for us to assume that
the "underestimates" of moral depreciation by some capitalists will be
balanced "on average" by the "overestimates" of other capitalists.

In solidarity, Jerry