On Sep 4, 2009, at 8:46 AM, Bill Lear wrote:
On Thursday, September 3, 2009 at 18:13:20 (-0700) Jim Devine writes:
Ann Davis <[email protected]> wrote:
Except that the bridge at "10% of normal cost" is only possible
because of
the sunk costs (either the owner or a seller of a 90% complete
bridge), and
discrete vs. continuous production functions.
the historical cost of the unfinished bridge is the sunk cost. But
what's important to the company building the bridge are the expected
future profits, the cost of finance, and the like. The past payment
of
the sunk costs may be historically necessary to the state of current
expected profits, but capitalist profit-making firms don't think
historically. If we're only interested in capitalist firms' behavior,
then Henry Ford was right: "history is bunk." In other contexts, he
was wrong.
No, but debt is history, and if sunk costs were financed through
issuing debt, they would sure as hell care about history.
But debt service is a current and future, not sunk, cost.
However, the bridge example is a bad one--it would cost much more to
remove and scrap it than to finish construction. The builder would
want to declare bankruptcy and walk away--as so many are doing with
the "sunk costs" of uncompleted shopping malls and Macmansions.
Shane Mage
This cosmos did none of gods or men make, but it
always was and is and shall be: an everlasting fire,
kindling in measures and going out in measures."
Herakleitos of Ephesos
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