[OPE-L:4196] Depreciation and Financing

john erns (ernst@pipeline.com)
Wed, 12 Feb 1997 17:26:51 -0800 (PST)

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In 4193, Alejandro answers some of Jerry's(4177) concernst
about considering credit and finance as we deal with
depreciation. Here, I am not disagreeing with either
but merely want to point out that financing investments
in fixed capital would seem to follow from the formation
of hoards that Marx's speaks of in Vol. II. That is, as
capitalists depreciate their fixed capital, hoards form.
The hoards themselves become a source of funds for further
investment. The pooling of hoards via a credit system is
not hard to imagine. However, before we take that leap
would it not be advisable to consider the effect of
turnover on the rate of profit? This is the "missing"
chapter of Vol. III. In that chapter written for Marx by
Engels (Chap. 4), all Engels seems to have done
is incorporate Marx's work in Vol. II concerning the
derivation of the annual rate of surplus value into a
formula for the rate of profit. In other words, Engels
played it safe.

Thus, after Chapter 4 of Vol. 3, we have no formula for the
rate of profit given the presence of fixed capital. Instead,
we move forward using formulae for the rate of profit as if
there is no need to consider fixed capital as technical
changes occur. Indeed, when we encounter the problem of
transforming values into prices of production, not only do we
abstract from fixed capital but technical change as well when
we assume unit input prices and values are equal to unit
output prices and values, respectively. Given the presence
of fixed capital we would be transforming values into prices
of production over several periods and would be hard pressed
to argue that techniques must be constant over those several
periods even if the rate of profit were uniform. But here
I'm moving too far ahead. Rather, again, we first need to back
up and establish an expression for the rate of profit with
fixed capital.