[OPE-L:4228] Re: depreciation and demand

Gerald Lev (glevy@pratt.edu)
Sat, 15 Feb 1997 16:33:32 -0800 (PST)

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John wrote in [OPE-L:4226]:

> What difference does it make if I do not know how to calculate the
> rate of profit? In 4222, I suggested two ways of doing it; each
> gave a difference answer. Make any assumption you want relative
> to capacity utilization; look at the prices of outputs; the amounts
> invested; and you still have two ways (there are more given different
> schemes of depreciation).

There are also more given different assumptions about capacity
utilization. Capacity utilization makes a "difference" because it is a
variable that affects investment decisions and depreciation schedules.

It seems to me that you have two options:

1) either specify the assumptions that you are making about relevant
variables (not an unusual or unreasonable demand, no?); or

2) begin with a less formal approach by specifying the relevant variables
and then explaining your logic for how to proceed.

I favor 2) but 1) is acceptable.

Implicit in your discussion is the presumption that it is the
_calculation_ of the rate of profit which is primary. Before one can
calculate the rate of profit or depreciation schemes, though, one must
_identify_ the relevant variables first. I.e. this discussion shouldn't be
about numbers alone, but trying to comprehend a social process.

In your previous post [4224], you suggested that other issues would be
"dealt with eventually." Unless we can first specify the other issues, it
is doubtful whether "eventually" will ever become an eventuality.

I also agree with Mike W's suggestion in [4227] that we need to be more
precise in specifying the level of abstraction that we are dealing with in
this discussion.

In solidarity, Jerry