This has been an incredibly helpful discussion. But I still think we have terrible problems with terminology. It may be useful to post a longer piece with a clear set of definitions and a discussion of these issues, in both micro and Marxian contexts. I had no idea how complex this topic would be.
If I were to attempt a (somewhat elementary) Marxian treatment, I would start with the purchase of a machine with a monetary advance. The machine would be used to employ labor and to incorporate surplus value in a product. Upon sale of the product, money realized from the sale would reimburse the initial outlay for the machine (presumably cash advanced or borrowed). If the purchase of this machine is considered "sunk costs," it seems to me that this initial outlay of finance is still extremely relevant. I welcome clarification from Michael re: fixed and circulating, constant and variable capital. Re: the 90% bridge, I think Michael's example of translating it into a complete bridge for 10% of the normal costs ignores the reality of discrete products, rather than continuously differentiable production functions. This is a point the Goodwin, Ackerman, Nelson, and Weisskopf also make. It seems more realistic to me to consider the money tied up in the partially complete bridge and expended but needing to be returned through sale or completion. Focusing on the financial dimensions seems to make the past very relevant. Cash expended to purchase raw materials or equipment must somehow be returned (or accounted as a loss, or leading to a declaration of bankruptcy). Even mainstream micro has a "shut-down" decision if price is less than AVC (and AFC >0). Comments most welcome and thanks again for your consideration. Ann ----- Original Message ----- From: "Michael Perelman" <[email protected]> To: "Progressive Economics" <[email protected]> Sent: Saturday, September 5, 2009 11:49:33 AM GMT -05:00 US/Canada Eastern Subject: Re: [Pen-l] Presumed "irrevelence of sunk costs" I did not think that I said that. Sunk costs are irrelevant. Economists' confusion about stocks and flows makes microeconomics irrelevant. On Sat, Sep 05, 2009 at 09:34:52AM -0400, Julio Huato wrote: > Maybe I just don't understand Ann's concern. To me, sunk costs are > irrelevant because value -- and, therefore, money, capital, and financial > wealth in general -- is an expectation. And I don't understand what Michael > Perelman says: Is the notion of irrelevant sunk costs wrongheaded because > economists confuse stocks with flows or vice versa? I don't think so. > _______________________________________________ > pen-l mailing list > [email protected] > https://lists.csuchico.edu/mailman/listinfo/pen-l -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu michaelperelman.wordpress.com _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
