Paul responded:
>That is not an answer to my question.You were asserting that equipment
>that could go on being used profitably
>would be scrapped if newer equipment gave a higher rate of profit.
>To establish that this occurs you would need to produce some
>empirical evidence.
John now writes:
I think we need to look at the notion that capitalists use a technique
that could be replaced by one with a higher rate of profit. In other
words, the opposite of what you suggest should be the focus of the
search for empirical evidence.
Paul wrote:
>If we take your answer at face value, the response is that the fully
>depreciated equipment has no capital cost. I am sure that at present
>costs it would be unviable for Alcan to build a new smelter using 1911
>hydro-power technology, but given that they have one, and that it
>requires very little labour to run such a plant they chose to keep it
>running. My guess is that old equipment is kept on until the current
>costs of using it become unprofitable.
>
John now writes:
If we assume that the fixed capital is fully depreciated, then the rate
of profit or rate of return that we compute becomes a "maximum" for that
technique with a given set of prices for inputs and outputs. If a new
technique becomes available with a higher rate of reutrn than this maximum,
the question becomes -- What might stop the capitalist from using it?
John wrote:
>> One
>> reason is that the capitalist does not have and can not get
>> funds for the new investment. Note that what I am saying
>> follows from Marx's idea that new techniques are not introduced
>> merely to save labor but to increase profitability or the
>> production of surplus value.
>>
>> In terms of evidence for this, I first point to the computer
>> industry here in the States. Often 8088 machines, daisy
>> wheel printers, etc. can be found in the trash even though
>> they work. You almost have to pay someone to take them
>> away.
>>
Paul commented:
>I think that the computer industry is somewhat anomalous inthis case. The
>old computers work, but they work differently
>in the sense of not being able to run modern software. Since
>the industry is very standards driven, it is wasteful to have
>word-processors etc that use what are now non-standard file
>formats since these will not interwork with modern ones.
>
John comments:
Well, the old computers are all but gone regardless. How about those
printers? They've been replaced generally by laser printers which are
have the capacity for a great deal more output per unit of time.
John wrote:
>> Here, in Manhattan, builders would be willing to take
>> down almost any building under 6 stories if they could
>> replace it with a larger one.
>>
>
Paul wrote:
>This I would suggest relates less to obsolesence than to theprice of land.
>
John comments:
Are you saying that the price of land is increasing? If so, no doubt you're
right since it is increasing. However, at the given price, it still pays
them to knock down older buildings and build newer and larger ones. The cost
per rental unit falls as the price per square foot stays the same. Or, due
to increasing prices of land, the price per square foot increases.
BTW, I think rent and location may be part of the reason that smelter you
mention remains in use.
John wrote:
>> It seems to me that the attitude "...if it ain't broke, don't
>> fix (replace) it." stems from an inability to secure funds
>> to replace it. When a lot of old stuff is still in use
>> in a particular society, it may well mean that there is not
>> enough surplus value to actually replace the older technique.
>> To be sure, profits are still produced but not enough to
>> purchase new equipment.
>
Paul commented:
>This view is totally at varience with the facts.
>Production of surplus value both in the UK and the US is at
>an all time high. The capitalist classes in these countries
>are certainly not short of surplus value. The question
>is what they do with it.
>
John comments:
Ok, let's say profits are high. But relative to what? In neither the
UK or the US do we see a great deal of investment in new techniques and
the consequent jumps in productivity. Why?
1. It may that new and more profitable techniques are not available.
2. The markets for the increased outputs with the new techniques may simply
not be there because of the lack of investments in new techniques.
This is one of the stranger possibilities that capitalism produces.
3. The new techniques may actually be introduced elsewhere.
To get at the empirical evidence that you want, the data we need would have
to be at the level of the firm. Meanwhile, we can consider the situation in
which a firm has enough surplus value to purchase the new and more profitable
technique and ask why it would not do so.
Again, you seem to be saying that a given process of production is used until
it is physically useless. True?
John