John R. Ernst
ernst at pipeline.com
Sat Nov 25 08:57:40 MST 1995
Here we go again.
>2. "Moral depreciation." When capitalists or their accountants
> say that a given piece of fixed capital can be used for some
> period of time as capital, they are, indeed, guessing based on
> experience how long the fixed capital can be used profitably
> by them in the process of production. For Marx, to fully develop
> this concept he would have had to work out the relation between
> the turnover of fixed capital and the periodicity of crisis. He did
> not do this but stated rather explicitly that the turnover of fixed
> capital would form the material basis for that periodicity. (See
> BK II, CAPITAL, p185, Int. Ed.)
At first, John tried to convince us that such thing as the "moral
depreciation" of the capital materialized in the means of production didn't
exist, since it didn't fit into his concept of the falling rate of profit
that he associates with "historical valuation." Now, it seems that he is
telling us that moral depreciation exists even when it doesn't exist.
I have no idea where you get the idea that "moral depreciation"
did not exist. Maybe we are using the term in different ways.
For Marx, it meant that since the economic life of fixed capital
was shorter than its physical life, the length of time that that
fixed capital was to be depreciated over had to take this into
account. Let's take an example. A capitalist buys machine which
his engineers tell him will last for 15 years. The cost of the
machine is $1500. If he were to listen only to his engineers,
he would allow $100 per year for the depreciation of that machine
in determining the costs involved in his production process. His
accountants, however, note that machines generally last about 10
years before they must be replaced since in the 11th year using
machines have not has not been as profitable. Thus, to recover
the cost of the machine, the capitalist must allow not $100 for
depreciation in a given year, but $150. The extra $50 is what
I term "moral depreciation."
Note that "moral depreciation" is used to take into account the
difference between its economic life in capitalism and its
The number of productive processes in which the use-value of a certain
means of production will be used, and therefore, the amount of its value
that will be transferred to the product in each circuit, cannot take into
account even the certainty of its moral depreciation. Such consideration
would mean that the social labor once allocated in the means of production
has to be taken as more social labor now that the means of production are
in use. Reflecting this fact of the general regulation of social production
and consumption, such things as "accelerated depreciation" are ruled out by
the generally accepted principles of accounting. So it is not through moral
depreciation that the turnover of fixed capital determines the periodicity
of a specific type of crisis and, rather, of a specific cyclical movement
of capital accumulation.
Here I have two questions concerning your comments:
1. Does the ever-increasing productivity of labor affect the
turnover time of fixed capital or what I call its economic
2. Do you accept Marx's idea that the turnover of fixed capital
would form the material basis for a theory of crisis?
No matter what your answer is to the second question, I think
we can agree that Marx himself did not complete this task.
>Must accountants see falling
> prices to take into account "moral depreciation"? For me,
> that's not a simple question. I'm still working at it, but, right
> now, I would say they do not.
John tries to deal with something he really has no idea about. He has
already proved it when he showed the most complete ignorance about such an
elementary accounting principle as "cost or market, the lowest" through
which accountants reflect "moral depreciation" in the books and, therefore,
in the reality of the individual capitalist. And he goes on showing it now,
by claiming for "accelerated depreciation." Contrary to John, I do know
that accountants _must_ see falling prices to take into account "moral
depreciation." And I do know this fact for a very simple reason: I am an
accountant myself (motive #1: to avoid being politically pressured or
pushed into the ideological studies and practices of vulgar economy, for a
I let you explain further the various terms of the accounting
profession. The question about "moral depreciation" involves
over what period of time capitalists think they will recover the
cost of a piece of fixed capital. Who determines this the
engineer or the accountant? My moneys on the later. How?
Generally, by past experience.
Note as well. Neither you nor I are practicing economists.
A Remaining issue:
More than a few times, Marx asked Engels how he has as a
capitalist depreciated his fixed capital. At one point,
he was rather explicit in telling Engels that he did not
want any theory but rather a simple description on how it
was done. As you are the practicing accountant, I'll ask
you the same question. If one purchases a folding machine
for a capitalist enterprise for, say, $10,000, how does one
depreciate it? Over what period of time?
Both you and Jim Miller have forced me to think of issues
I haven't dealt with in some time. Despite our rather
harsh words at times, I am getting something out of this.
John R. Ernst
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