I've dug out from under my end-of-term work enough to go back and read the
exchange on Depreciation from earlier this month, and I have some comments.
1. It's important to put this issue in the context of the competition of
capitals and price formation. The reason that the price of a commodity
includes the value of the constant capital is that capitalists who sold at
a lower price would not achieve the average rate of profit (because they
would implicitly suffer a loss due to their inability to replace the value
of constant capital.) Thus competition enforces the underlying reproductive
logic of the system. But in any particular case, as has been pointed out in
the exchange, capitalists as a group or some individual capitalist, may
misestimate the constant capital by misestimating the actual lifetime of
machines. The result is going to be a "windfall" loss or gain to the
sector.
2. On "moral depreciation", if all of the capitalists in a sector
anticipate a fall in the value of their machines due to technical change in
the machine-producing sector, they will not compete the price of their
product to as low a level, and thus effectively make an allowance for a
larger c, representing the recovery of their capital. This doesn't have to
do with "value", but with "price". The price in this sector will be higher
than it would be if they assumed no losses in the value of the machines
except wear-and-tear, and the profit rate calculated on the historical cost
will be higher than the average profit rate (but their ex post realized
profit rate will be just equal to the average.) It seems to me that the
clearest way to approach this is to consider capitalists in a particular
sector in an economy with a given average rate of profit, and to consider
simultaneously the depreciation accounting and the competitive price
formation.
3. This discussion is a good illustration of the slipperiness and ambiguity
of the concepts of the "total price" and "total value" produced in an
economy in a period, as opposed to the value added, which can be defined
unambiguously and associated unambiguously with the living labor expended
in the period. The problem is that "total price" and "total value", under
realistic conditions of changing technology and prices inherently have an
expectational or subjective element in them. Of course, once an investment
has completely run its course, it is possible ex post to calculate its rate
of return, but there's no reason to think that capitalist competition can
equalize these ex post profit rates in the face of the inevitable
uncertainty of human life. This is one strong argument for defining the
"monetary expression of labor" as the ratio of value added to living labor,
which is unambiguous and operational no matter what is happening to prices
and technology, and gives a transparent system of accounts in which one can
discuss the windfall gains and losses from price changes.
Duncan
Duncan K. Foley
Department of Economics
Barnard College
New York, NY 10027
(212)-854-3790
fax: (212)-854-8947
e-mail: dkf2@columbia.edu