One of the things that’s been bugging me about the Marxian
value transformation into prices is the term of fixed capital that goes into
prices.
It’s bugging me because the simplifying assumption is that
this constant capital is thought to be used up in the process, and we know how
much it was worth going in so that is easy to track.
The problem is that is a gross oversimplification, and I’m
not sure if it is straight from Marx or if it is from Hunt’s editing. In
accounting terms there is a way to track this sort of thing. If something is
not automatically used up as supplies and will last a while, it is literally “capitalized”.
This is done because of the matching principal where expenses need to go with income,
and anything longer than a year shouldn’t be directly expensed, but the expense
of the purchase applied over time. This shows how the machinery wears out. Then
you have on your income statement the depreciation which is an expense but not
a cash expense.
The complicating factor is that useful lives of capital
equipment are based on convention. Your capital item may have an actual longer
or shorter life than you plan for when you buy it. In account terms that’s
something you can deal with down the road – write off my supercomputer if Moore’s
law makes it obsolete or have a loom that is abnormally long-lasting so you’re
getting production from it long after it has been fully depreciated. But in
pricing terms, you need to know this beforehand, so that all the labor that
went into the capital item is used up in your period however it is defined. I’m
LTV until I die, but once you put the microscope on some of these things and
start looking they are hard to quantify. I know capital is in itself controversial
from Cambridge to the other Cambridge, but is there a place in Marx where he
deals with such problems?
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