[OPE-L:4036] RE: Depreciation Answers?

andrew kliman (Andrew_Kliman@msn.com)
Wed, 22 Jan 1997 09:17:25 -0800 (PST)

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A reply to John's ope-ls 4011, 4012, 4028, and 4031.

I think John does have some Depreciation Answers. But they aren't the right
ones.

John wrote: "I do think that it is fairly clear that Marx himself was
including some amount of value as "moral depreciation" in determining the
value of constant capital used to produce a commodity. If there is another
way of reading Marx on this, I'd sure like to know more about it."

First of all, the issue is not what determines the *value of constant capital*
but what determines the *value transferred to the product*. Beyond that, I
don't think the passages that John has cited support his interpretation
against mine.

What John has argued is that *firms determine* the value of their products by
determining the amount of moral depreciation transferred to the product. I've
argued that this notion contradicts Marx's value theory because leads to
circularity and contradicts successivism, and because firms would never need
to worry about moral depreciation if they could recoup it. Hence, if Marx is
to understood consistently, John's reading can't be right.

There must be another reading.

There is.

The key is that accounting and value determination are distinct things;
capitalists' decisions and expectations do not influence value determination.
With this in mind, the passages that John cites can be interpreted in the
following way:

(a) CAPITAL, Vol. 1, Chapter 15, Sec.4 Part B. The text does not deal with
value transfer, but with the value of the machinery. A footnote seems to
indicate that capitalists include in their depreciation charges an amount that
is meant to cover moral depreciation. I have already shown how this is
consistent with my interpretation, according to which the value transfer does
NOT depend on how firms keep their books. As I read it, then, the footnote
indicates that capitalists are aware of moral depreciation, and probably that
their accounting reflects their *fear* of it. Indeed, their *fear* is the key
point of Marx's discussion of moral depreciation here: moral depreciation and
the fear of it impels capital to prolong the workday. Likewise, firms are
afraid of property damage, and they take out insurance to protect themselves
against it, but they still pay for it (by paying for insurance) and their
action does not prevent fire, flooding, etc.

(b) Collected Works, Vol. 33, pp 372-73. Marx quotes a Lancashire spinner,
without commenting on the substance of the remark. He does not contest the
quote, however, which he generally does if he finds fault with it. The quote
concerns the fixed costs of the spinner, i.e., the losses he incurs when his
mill is not working. One of them is "allowance for deterioration of
machinery"; part of this "deterioration" is moral, not physical. "Allowance"
seems to indicate that the issue is one of accounting --- how does the spinner
calculate his total loss? Also, since the spinner refers to "reserves,"
another issue may be whether the firms' reserves are sufficient to cover the
fixed costs when the mills aren't operating. The quote says NOTHING about
value transfer. (How could it? Capitalists don't care about value
determination.). It has nothing to do with value determination. It deals
solely with capitalists' decisionmaking and accounting.

(c) Capital, Vol. II, Ch 8, Sec. 2. The key sentences seem to be "After ten
years have elapsed, it is generally possible to buy the same quantity of
carriages and locomotives for L30,000 as previously cost L40,000. A
depreciation of 25 per cent on the market price must thus be reckoned with on
this material, even if there is no depreciation in the use-value." Fine.
Firms know from experience that the stuff costs 25 0.000000e+00ss, and they set aside
funds in the form of "depreciation charges" to take account of this. Again,
this has nothing to do with value transfer.

TAKE NOTE OF WHAT MARX WRITES JUST THREE PARAGRAPHS LATER:

"DEPRECIATION (APART FROM MORAL DEPRECIATION) IS THE PORTION OF VALUE THAT THE
FIXED CAPITAL GRADUALLY GIVES UP TO THE PRODUCT AS IT IS USED, ACCORDING TO
THE AVERAGE DEGREE OF ITS LOSS OF USE-VALUE" (P. 250, VINTAGE).

"BY WEAR AND TEAR (MORAL DEPRECIATION EXCEPTED) IS MEANT THAT PART OF VALUE
WHICH THE FIXED CAPITAL, ON BEING USED, GRADUALLY TRANSMITS TO THE PRODUCT, IN
PROPORTION TO ITS AVERAGE LOSS OF USE-VALUE" (P. 174, PROGRESS).

This is exceedingly clear. Moral depreciation is NOT included in the value
transferred to the product. ONLY wear and tear is included. And what
determines the transfer of value due to wear and tear is the average (degree
of) loss of use-value; in other words, the average TECHNOLOGICAL (physical)
life of the element of fixed capital. This paragraph states exactly what I
have been stating. Those who disagree with this conception are disagreeing
with Marx, not with me.

In one of his posts, John wrote: "I think I follow Marx and claim that, at
least, some of the moral depreciation is recovered by capitalists as they
depreciate
their machinery. In his examples, 'moral depreciation' means losses
to the capitalists."

This is self-contradictory. If moral depreciation is recovered, then moral
depreciation does not mean losses to the capitalists. But John is right that
"moral depreciation" does indeed mean losses to the capitalists. Hence, moral
depreciation is not recovered. As we have just seen, Marx himself says that
moral depreciation is not transferred to the product.

John wrote: "For Marx, depreciation charges like the wage rate are socially
determined within the bounds given by technology."

I've learned to keep my hand on my wallet when Marxists talk about "levels of
abstraction" AND when they talk about "socially determined."

John: "Machines that should last 20 years by engineering standards only last,
say, 10 years because of 'moral depreciation.' The value transferred over
those 10 years sums up to that invested, given that 'moral depreciation' is
part of the reality in which that investment occurred."

Well, as we've seen, Marx disagrees. And were John's conception true, firms
would never fear moral depreciation, never prolong the workday or speed up
production because of it, never suffer losses because of it, since they would
recoup their full investment in any case. This goes directly against Marx's
whole point when he introduces the concept of moral depreciation in Vol. I.

Andrew Kliman