>Re: Historical Costs (Comment on Duncan's post of 2/9/98)
>
>Previously, I had written:
>
>>Consider the case where there is general price deflation. If each
>>$1000 invested before deflation yields profits of $200, the investment
>>of $1000 in the period in which there is deflation produces less profit,
>>say, $100. Has the rate of profit fallen? It would seem so. But
>>if we revalue that $1000 in that same period or devalue the investment
>>by 50%, then the rate of profit stays the same as the capitalist writes
>>off $500. By depicting the accumulation process using "end of period
>>replacement costs" to value the capital invested in any given period,
>>we see no change in the rate of profit from one period to the next.
>
>Duncan remarked:
>
>Surely the individual capitalist's wealth is affected in exactly the same
>way by a falling rate of profit in production proper and by the ongoing
>devaluation of stocks because of generally falling prices. But it seems to
>me that there is a great advantage in separating these two aspects of the
>situation analytically: one basically has to do with the exploitation of
>labor, and the other with the revaluation of existing assets. (Sometimes,
>of course, capitalists make a gain through the revaluation of stocks, which
>is often the foundation of great fortunes.) The two are connected through
>the capitalist mode of production, since it creates the incentives for
>capitalists to compete through technical innovation, which is the
>underlying force in the revaluation of the assets. But it still seems
>important to separate out the two moments of "ex post" profitability, as
>Marx does.
>
>
>I now add:
>
>I am not going to pretend that I completely understand the separation
>of "the two aspects" but here I'd like to explore the matter based on
>what I now think of this way of approaching Marx. Further clarification
>is definitely in order.
>
>You distinguish between "a falling rate of profit in production
>proper" and "the ongoing devaluation of stocks because of falling
>prices." Here, I wonder if "production proper" includes moral
>depreciation. If so, the two aspects seem to complement each other.
>If not, difficulties arise.
>
Duncan replies:
I guess I see depreciation as an entirely separate process from production.
In production living labor preserves the _current_ value of the means of
production, and adds new value proportional to the living labor time.
Outside of this process many other factors impinge on the valuation of
stocks of existing assets, which amount to _claims_ to value, among them
ordinary depreciation (wearing out) and moral depreciation (devaluation
because of technical change).
Cheers,
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