John Ernst (ernst@PIPELINE.COM)
Sat, 02 Oct 1999 11:52:25
In his Section 3 of his "Determination of Value" [OPE-L1376],
Andrew examines two passages of CAPITAL which, at first sight,
seem to support the notion that for Marx the valuation of
inputs and outputs takes place simultaneously. Curiously, in both
passages the valuation of the existing stocks of capitals using
cotton increases as the price of cotton increases. Andrew
focuses on the transfer of value when this change takes place;
here, I'll consider some of effects of the rising price of cotton
on the existing capitals that use cotton.
Given that the price increase holds for more than one period of
production, the capitalists using cotton experience windfall
profits. To be sure, this profit must be reinvested by capitalists
to purchase the now more expensive cotton in subsequent periods
of production. But things have changed in another way for these
capitalists. For example, if their initial investments were
$100 and they anticipated payments of, say, $40 per period for the
duration of their investments, then given the increased price
of cotton the payments will be larger than $40. Let's say $50.
For these capitals the rate of return increases given it is
computed on the initial investment. New capitals entering this
sector must invest more than $100 in order to capture those
$50 payments. The older capitals thus earn a higher rate
of return than the newer ones assuming no change in technique.
The older capitals have experienced a moral appreciation since
the amount for which they can sell their capital is greater after
the increase in the price of cotton. How does Marx deal with
the case of moral appreciation?
In Part I of Vol. 3, Marx tells us that we can only understand
the appreciation of capital by using the concept of ground rent.
That is, the surplus profit that the older capitals garner is
to be seen as rent and not as profit in the usual sense of the
term. But unlike rent earned in sectors which are natural
monopolies, this rent depends upon the increased price of cotton.
Indeed, it was due to that price increase that rent appeared.
If the price of cotton or of any other raw or auxiliary materials
rises, then the lifetime of a given investment is prolonged.
The pace of accumulation slows as invested funds tend to remain
tied up in older appreciating capitals.
Can simultaneous valuation take into account moral appreciation?
I don't think so since it ignores the amount of money initially
invested. Indeed, the initial investment plays no role in
determining the rate of return as it is computed simultaneously
with the values or prices of inputs and outputs. In the case
of moral depreciation, simultaneists ignore the losses of
capitalists; with moral appreciation, the gains disappear.
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