On Sep 6, 2009, at 8:44 AM, Simon Ward wrote:
Without wishing to enter into the detail of this discussion, you might want to consider depreciation (plus annual capital expenditure) as an ongoing cost of maintaining sunk capital. It might get interesting when the accumulated depreciation reaches...the value of the sunken capital. If that capital is still generating (in combination with a labour input) value, but is assumed to have passed its lifetime in terms of accumulated depreciation - then what?
In that case, past depreciation had been overestimated (adjusting for any change in reproduction cost)--resulting in an underestimate of (book) profits and thus an inflated cash flow thanks to lower taxes. For the rest of the useful life of the capital asset the reverse will apply--zero depreciation underestimating real capital consumption so that the higher (book) profit will cause higher taxes and thus reduced cash flow. The paradox in this is that if taxes on the pseudo-profit are high enough the still-productive capital asset will be abandoned by a "rational" capitalist because it is costing him money even though its continued use would still produce surplus value for the benefit of all the *other* members of his class.
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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